2. stillthinking said...

The UK has just had a deflationary crunch which has been offset by government debt which cannot be extended past next year supposedly.
Here is something I find rather puzzling.
If a wages in the UK would have been forced down by 6%, similar to private sector workers in Ireland, but were prevented from doing so by a wall of money by the government, but at the same time those same workers are liable to pay off the debt, then in what way have wages/prices been maintained?
I.e. If I sell a widget/labour for 90, the government forces the price up to 100, but gives me a repayment debt of 10 to manage, then in what way did I not sell it for 90. The only way would presumably be if either, the government never pays their debt back so I don't have the obligation to repay the 10, or if subsequently -privately held debt- swells by an amount equal to maintain pricing pressures while I pay off the 10 on a slow easy schedule.
But why would this offsetting increase in private debt occur because a) too much private debt already b) everything is overpriced so nothing to borrow to buy c) job losses/cuts in the state sector, tax increases. d) existing UK malinvestment means debt here flows abroad .

So why would there be a recovery next year? Only if the contraction thus far has trimmed the fat off a fundamentally very fit healthy dog which had a bit of chub leaving nothing but a pure sprinter behind, but this cannot be the case. Unsustainable state spending is like a web spreading out and corrupting the real economy through dependency like drug addiction, and of necessity when state spending stops there will be further cuts in the private sector. If everything I wear, most of the stuff I eat, electronics and so on comes from abroad then the private sector in the UK must be fluff.