We're in trouble. Serious trouble. The Bank of England is going to try to print money to ease the economic crisis. Anyone with even a marginal background in economics knows why this is a disaster. What astonishes me is that I don't see the press howling over this one.
The problem is simple. When the government starts printing money and injecting that into the economy, people have more money. Unfortunately, that means they spend more money. Suppliers raise their prices. Why? They have higher demand and can do that. Even if you think they're being greedy, their suppliers will raise their prices. Lots of people are going to raise their prices and inflation sets in. The more money the UK government prints, the worse the inflation will be.
- So can't the government freeze prices?
So what happens when the price of your goods is frozen and the supplies for those goods cost more? You go out of business.
- So can't the government turn around and freeze those prices?
Not if you have an international economy where many goods and services are supplied outside of your country.
- Ah, but the price of those goods and services aren't affected by our printing money, so they'll stay cheap.
No, you've just trashed your currency and undercut its value internationally. You can't afford those goods and services at the exchange rate for your money. (See Zimbabwe for a delightful example)
- But the Euro means no exchange rate with other EEA nations who've adopted the Euro!
Ah, but we haven't adopted the Euro, have we? And if we did, we'd be taking other EEA countries down with us. This national disaster would turn into an international crisis.
What's worse is that I suspect the Brown government won't stop this ludicrous idea.
The UK has officially gone nuts. No economist would seriously suggest this. As an act of desperation, it ranks up their with going to a loan shark to help paying off your bills. Everyone's going to be screwed. Prices are going to go up much faster than wages and people will struggle even harder to make ends meet.
I am trying to hang on here. I have almost two and a half years before I can apply for citizenship but I'm scared that this government is going to make the intervening time a living hell for me. I just can't believe this idiocy.
You know how to deal with this economic crisis? I'll give you a hint. Somewhere there's a farmer in Tibet saying "there's a global economic crisis"? He raises his own food and keeps to himself. I am not arguing that countries should be isolationist, but they should be more self-sufficient (there's a big difference, but I'll be Rush Limbaugh types won't be able to figure it out). By focusing more on local economies, we can have some level of protection when another economy collapses.
But why won't this happen? Because there's no incentive to. Global financial systems ofter huge rewards and the people who play them have little risk. If they lose a few billion dollars, it's not their money they're losing. And why do politicians allow this? Because there's no downside for them, either. If they play along and let these institutions assume too much risk with other people's money, they leave office for a nice, fat, private sector jobs. And if the economy gets hurt by this? They leave office for nice, fat, private sector jobs. The revolving door of government ensures that they'll do what the business tell them to do.
So the UK government needs to focus on local, sustainable economies and let the economic crisis run its course. There's no way that the UK government is going to come out of this as a island of wealth and stability in a search of financial turbulence. The best we can do is mitigate the damage, work with other countries to repair the damage and admit that they can't print money to get out of this mess.
Is the UK economy going to collapse completely before I can get citizenship? If the BBC were to lay me off (not likely, but you never know), it's not going to be easy to get another job right now. I'm really, really worried about this. On the bright side, I can apply for permanent residency in June 2010, so if things hold together that long, I should be OK.
Hmm ... time to look for a wife (with EEA citizenship, of course :)