Friday, April 27, 2012


The U.K.’s (Other) Euro-Zone Problem

Compares North South Europe to North South UK. "This is important because many of London’s jobless on social welfare don’t have the skills to earn the sort of money they’d need to maintain London living standards given to them by the government." Hey we know already !Points out the massive state spending throttling out private sector necessary to maintain New Labour fictitious pretence for the voters (to be fair doesn't mention NL I put that bit in~). Suggests inflation in the South and deflation in the North as a consequence, like an inverted Euro.

Posted by stillthinking @ 01:21 PM (3523 views)
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4 thoughts on “Ouch!

  • This is the result of a fiat currency. Money printing for government expenditure tends to be spent in the Capital city, as does corporate spending. This is why Capital cities are called Capitals because they attract Capital.

    Back in the days of a gold standard when government could not print money, government was about 10% of the economy so that problem did not occur.

    Back in the days of a gold standard, corporations could not expand from fiat money printing so there were more independent businesses better spread about the country without a fiat funded corporate head office to centralise capital so much in London.

    Back in the days of a gold standard, banks could not print money from thin air, causing housing bubbles so, people were less likely to be priced out.

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  • This article is 100% correct. Fundamentally, money is flowing from poorer regions to richer regions. The poor areas are getting poorer, the rich areas are getting richer. It’s the same in the Eurozone: every time a Greek taxi driver buys a new German car, money is flowing out of Greece and into Germany. It’s the same in the USA: if somebody from New Orleans buys an Apple iPad, money flows from the state of Mississippi to California.

    Without a banking system, the residents of Mississippi would eventually run out of money, and there would be local deflation*. Meanwhile in California, there would be more money in circulation and prices would rise (inflation).

    With the availability of debt, people from Greece / New Orleans / Scunthorpe can borrow money and keep prices high. When the credit tap is turned off, deflation hits the poorer regions.

    Deflation is painful: jobs are lost, mortgages go underwater. The alternative to absolute deflation is relative deflation, a policy which the government and BoE seem keen to pursue. This means national inflation of 5%, with 10% in London and 0% outside.

    (*I refer only to inflation/deflation of wages, and by extension house prices. Imported goods are subject to the whims of the currency market and global forces.)

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  • “a deteriorating quality of general education (anecdotally) and a focus on the wrong sets of skills (media studies rather than lathe operation), as well as the need to shift the economy from retail to manufacturing, from finance to engineering, are just as much a problem.”

    That just about sums up everything I have said about a cr*p education system excelling in producing wanabee celebs and nail technicians.

    In other words we’ve got our priorities wrong.

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  • “And whereas the Bank of England can do something to boost demand, were it to misdiagnose supply problems as demand problems the result would be continued inflation rates at well above the levels it has promised to deliver.”

    I think that sums it up for me. Inflation is here to stay. Might as well climb onto that ladder…

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