United Kingdom 2015 Election

History was written in the recent UK General Elections. There were many historic shocks and yet again the opinion polls were wrong. The Conservatives and Labour were neck and neck in polling however managed to gain a majority. Labour meanwhile have been routed, not only in Scotland but have failed to make any significant gains in England and Wales. The Greens and UKIP despite all the hype only got a seat each. The SNP shocked everyone, gaining near complete control over Scotland and removing the Westminster parties from power. The Liberal Democrats were torn to bits and it remains to be seen if they can once more be a credible third party in UK politics once more, possibly not in this generation. UK politics has become fragmented - SNP in Scotland, England has gone blue once more with the South becoming a sea of blue.

Despite no one predicting a Tory majority I did mention the possibility a couple of weeks back in a recent blog post. Once the exit polls came out it did not surprise me, in fact I still thought they underestimated the Tory vote and decided to blog to twitter to state that the Tories would not only get the numbers claimed would get more and get their majority despite all the coverage still talking of deals. Once the results starting coming in, other commentators started comparing it all to the 1992 election, something I said in my original blog post. What did surprise me was the extent of the SNP vote in Scotland. I knew they would do well - possible 20-30 seat gain, but 50? The swings broke historical voting records, something I just didn't see coming. I thought people like Jim Murphy, Douglas Alexander and so on would retain seats but it appears people just wanted SNP regardless of old ties (I think also the "No" vote to independance would have been split between the various other parties, while the "Yes" vote was concentrated in the SNP).

Of course this was a fascinating election whichever tribe you support. Here are my thoughts.

Conservatives

Strengthened their English vote. Cameron has successfully positioned the party in Center territory and was able to pick up a number of Liberal Democrat seats. People have felt the recovery and it showed as the Tories not only defended their seats but actually increased their majority.

Labour

A bit of irony. For years under New Labour they had moved too far to the right and Scottish people showed their distaste by voting in spades for SNP who have a socialist stance. However Labour actually moved too far left for English voters therefore Labour never made any real inroads in middle England. They were talking of price controls (on rents), "mansion" taxes, more tax on upper earners and scapegoating banks. Obviously the south of England completely rejected these anti-aspiration policies and went Blue.

Liberal Democrats

Annihilated. I don't know where they go from here. Labour swept up any progressive votes they had, the Tories taking the moderate center ground voters. They are traditionally a progressive centrist party but went into coalition with a Tory Government. Its core voters therefore administered punishment. There was also SNP fear in England so many also voted Tory.

SNP

A clear message; Scotland want more powers. This will be interesting and I will discuss below.

UKIP/Greens

Despite all the hype, only got a single seat each. They will both say we need Proportional representation. I've covered why thats a bad idea (I also mention in that post I thought Labour would come to power in this election - however this was before Ed became leader and I thought it would his brother David that would replace Brown at the time, who is more center, and I'm sure would have got more Tory and Lib Dem seats than his brother - already people are saying he should come back to British politics. If Labour want to win the next election, they need to move back to the center ground and elect a leader like David Miliband).

What will happen with the SNP? A lot of people are prematuratly stating that UK parties are dead in Scotland. They could be correct however if I was David Cameron I would offer fiscal autonomy to Scotland. This would be easy to pass as it doesn't affect other UK nations and is what the SNP want but also still preserves the union. He should call their bluff for a number of reasons.

• I don't think they want it. They are a party who have heavy spending commitments due to their socialist agenda but due to the current low price of oil would have no money to fund such spending. Many high tax payers reside in England, thus they would struggle to generate money that way. 
• If they did they would bankrupt Scotland. They would run out of money and it would be clear to the Scottish person that they are inept. There would be no "Westminster" to blame as fiscal autonomy gives that control to Scotland

If this happened I believe many seats would once again move back to Labour/LibDem/Conservative hands and the Scottish may once more wish to not have autonomy over their finances or try to elect the above to manage the budget in a better manner. This move, if Cameron would be brave enough to do it, would preserve the union and discredit the SNP. It would also potentially push Scottish mentality towards a more center right wing stance.

The Liberal Democrats meanwhile were decimated. I'm sure Labour will once more move more towards the center-right a Blairite position once more and the tories are already there which is where the majority of English voters are politically. The party surely will gain some of their seats back over time; I think a number of freak factors contributed to the collapse; rise of SNP, Coalition and other tactical voting.

Labour didn't completely abandon New Labour politics. Ed Miliband was in fact the first Labour leader to actually say he wanted to cut spending but he did move the party ever so slightly left and thus did not gain the middle England vote. Socialism is dead in England (well I'm sure the North East would disagree). Margret Thatcher once said her greatest achievement was "New Labour" (although it was the British electorate that created it). British people took a profound shift the right during her time, nearly killing off the old Labour party. Under Neil Kinnock, then under Blair, Labour continually moved towards the center then to the center-right position in order to eventually defeat 18 years of Tory rule. Blairs first term kept to Tory spending plans and they were the first Labour Government during 1997-2001 to actually run a budget surplus. Labour had also abandoned any notion of tax rises - Blair was ruthless in this agenda removing any of his politicians who suggested such a policy. Thatcher meant that both main parties actually now encompassed Tory values, so it didn't really matter who got in power (hence one reason for recent voter apathy during Tony Blairs rule and the rise of the SNP in traditional Socialist areas such as Scotland).

This is also how I came to my conclusions of a Tory majority and that the polls would be wrong just like the 1992 election, Labour had moved once more to the left and all the "Shy Tory" voters would appear once more (in fact, whenever Labour did this in the post war period they always got a lower eventual vote than the polls suggested). They will no doubt under their next leader move back into the center-right ground. But heres a problem how would they re-gain Scotland if they were to do this? Put simply they can't; its either England or Scotland. I think their best chance is to support any devolved power to the SNP and just watch the party self implode.

England meanwhile is now firmly in the right-center of the political spectrum; Socialism is virtually dead. People believe in aspiration, business, profits, capitalism and so on. New Labour success was built on these principles the center-right ground which David Cameron now occupies. People have felt the recovery, indeed I see it with my own eyes as my own salary has kept increasing during the Coalition Government. Most of all people voted for why I thought the Tories would get a majority - stability. They saw too much of a risk with Ed Miliband, either with the economy or deals with the SNP so opted for the conservatives. Do not underestimate this victory. Not since Thatcher in 1983 has an existing PM increased their number of seats; and to actually increase the proportion of votes we have to go further back.

What are the main conclusions that can be drawn from the election? With all the drama and historic records that were set the actual outcome is quite boring. Its the same PM who wants to keep the status quo and is actually a reflection of the English people. Above all else they wanted stability and I actually applause such an outcome. Its a triumph of the first past the post as all other outcomes would have been fraught with battles from the off - no one would have a majority and there would have been deals that would have never worked for the long term. That doesn't mean David Camerons new Government is solid; far from it. With such a slim majority all those rebel backbenches may think it's time to raise their concerns knowing full well the actual majority has been reduced compared to the coalition. History has once more repeated itself just like in 1992 as I predicted a couple of weeks back.

Political Will, or more the lack of it

David Cameron has recently talked down the recent house price rises as more people are identifying its bubble like nature. He has used the recent 2007 peak as guidance for normality. It seems a distant memory when Mr Cameron was taunting Gordon Brown regarding credit bubbles and debt issues. As stated in the article if we are currently only 15% off the 2007 peak in real terms then we will soon be in real terms back at the bubble price and everyone knows with historical hindsight how that turned out. The Government deficit and debt levels are worse than 2007 and the interest rates are far lower along with Quantitative Easing propping up asset prices. Its funny how politicians when out of power convey the image of responsibility but when they obtain power act in the same reckless manner as the predecessor. I agree with a recent article published on moneyweek, both the Bank of England and the Government have no political will to reign in all these shenanigans and the real cause behind rising house prices is monetary policy, as I detailed in my eye of the storm post.

Any centralised system is doomed to failure, lawful anarchy based on the non-aggression principle is the end game for society. Democracy was a substantial step forwards for human liberty but suffers from mob rule and therefore acts of third party aggression. David Cameron is acting rationally as any democratic leader does. He is using monetary policy to engineer an artificial boom in order to obtain as much of the mob rule to win next years election. There is no reason for the Prime Minister to worry about the fallout. Political will, to do the "right" thing, is an illusion. In reality it never even existed, its all about the majority mob rule. Many just pretend it does.

Recession

First it was Club Med that experienced a relapse of sluggish economic growth with Spain and Greece slipping back into negative growth. The reasons outlined by the 'experts' who caused the original depression were, "The currency wasn't flexible", "There was no devaluation", "Governments couldn't deploy monetary measures", all because such powers had been centralised to the ECB.

Then the UK recently slipped back into recession. Yet it has consistantly devalued, it has consistantly printed more money relative to other Western nations and it's Government has deployed uber loose monetary policies to try and "solve" the growth issue. However the UK has still come a cropper too. 

UK pay in real terms has fallen more then anywhere, inflation is higher relative to other countries, the country is still running a large budget defecit (just as  Keynsians claim this is whats needed), it has printed hundreds of billions, nationalised industry, had historically low interest rates that are very negative when taking into account the current inflation rate and the currency has been  devalued considerably. All of the above are always touted by Keynsians as the solution however it has done the UK no good what so ever. None of this suprises me, nor should it suprise the reader of this blog.

A lot of claims have been made that the UK has fallen back into recession due to the austerity measures. However all of the above does not indicate austerity but reckless government spending, as bad as under the previous Labour government. Cameron and the Conservatives are performing exactly as I thought they would, no spine and all sound-bites. Indeed it is worth repeating:

The Tories may be historically comfortable in this setting but how many grass root Lib Dem supporters are going to swallow the medicine? Defection of many to Labour is inevitable. And remember - "things were going 'well' under Brown". This could cast the Tories in the wilderness for a decade if they practice what they preach. There's only so long you came blame the previous government for the mess. Give it a year and people won't be seeing Labour mess but will instead switch their view to Tory mess. Just like Thatcher. People forgot the Labour mess in the 70's, they just remember the early eighties.

It seems the recent local elections have also reflected this mood (I realise some of the votes will be on local issues, but more commonly its used if people support current policies). Labour regained a number of councils and increased its share of the vote. Cameron is the latest scapegoat, the problem being unlike Thatcher he's not fixing anything and has to contend with stronger opposition with his Government having no ruling majority like Thatcher had. He's reliant on money printing, negative interest rates and a huge Government deficit. There's nothing austere about his politics. Ed Milliband keeps moving towards the center ground, refusing to trip up on left wing questions, such as questions on Union strikes, and maintains a consistent view with Ed Balls re-iterating the need for growth, ie more money printing and fiscal deficits. 

Public opinion in the UK is changing towards running deficits to support growth, a dangerous combination. Individual freedom, free markets and liberty create growth. When a Government tries to create growth it does the complete opposite over the long term. Running deficits, spending money on public works, creating inefficient and wasteful entities, removing entrepreneurship - all this does is stifle societies economic fabric. Socialism will always collapse for that reason. If I was a politician I could campaign for growth. I could promise that I would create employment, create public works projects, hand out subsidies, tax the rich. It's incredibly easy to do but this will never create the prosperity we all desire. 

Unfortunately the UK is slipping into this mindset where Government needs to increase spending once more. So far we have only endured mild stagflation but it will intensify going forward as people once more seem to be seeking for state intervention. Growth is peddled as a solution, but sustainable growth can only ever come from the free market, not Government Spending.

Its not only the UK that has lurched towards the left and away from 'Austerity'. The recent French elections have opted for a Socialist leader, Hollande, who like all Socialists has promised the earth but like any politician has no means to deliver. France already spends beyond its means yet has opted to spend, well, more. Policies will be watered down as market reality hits. 


Greece continues to be rudderless with the elections bringing no clear decision. Extreme parties such as the far left and right have gained at the expense of the  usual popular moderate parties.


I detailed the problems with PR in a previous post and Greece is a classic example of the problems caused. As a student of history it reminds me of many European Countries during the 1930's, similar to Germany, when Hitler rose to power. When crisis hits, people seek radical alternatives. The Greek people went for the extreme right and left, just like what happened in Germany 80 years ago. No one could form a Government, so Coalitions were formed, in Germany's case the moderate right aligned with Hitler's Fascist party believing they could moderate his views and was seen as the only option against the communists to uphold the status quo and form some sort of Government. Well what a mistake that turned out to be.


Times have changed, so I think the Greeks will see sense on the second election (although I may be wrong), but PR gives extremes platforms to perform on. Under first past the post systems that we have in the UK, it means people stick with moderate conventional politicians as extremes struggle to field candidates in all seats. People therefore vote for a party that will likely get the local seat. With PR, there is no such check and people can vote for extremes knowing full well there is not a number of seats to win, its a percentage of votes which gain seats, this in turn makes extremes more appealing. Extremes always offer people simple solutions. Problem is that whether its the far right or left, they always endorse catastrophic policies resulting in a complete erosion in individual liberties. Both ends of the spectrum believe its my way or the highway, and persecute anyone who gets in their way.


Greece now has the problem of no effective Government. Just like 1930's Germany, the moderates have to seek help from extreme parties in order to try and form a Government. The anti-austerity parties seem like they will get their way.


Recession. More Government Chaos and no real solutions. Some things never change.

We have no Solutions Yet

"Don't be fooled. Don't fall into the government's trap. Lenders and debtors will sit at the same table, having agreed to skin the people alive."

Aleka Papariga, Greek Communist Party Leader

The ECB and IMF have yet again decided to lend Greece more money in order to 'avoid' contagion which would lead to a tsunami of defaults across the financial world. The Greeks can't pay but who cares, I don't think any Western Government can. 

'Tough talking' British Prime Minister Cameron told Ed Milliband during this weeks PMQ's Punch and Judy show that if Labour were in power, then we would have a Greek crisis. Yet what is the current Governments approach? Inflation is rising. The BoE have now admitted they don't give a monkeys about Inflation. Despite it being more than double their official target they have stated that more QE (money printing) may be 'required'. The rate of inflation is now predicted to stay above target for the next two years. Of course, what they don't say is they plan for it to stay around for the whole decade.

David Cameron is a showman, all talk and no action, a modern day Ted Heath, as I previously said before he came to power. He has been in power for over a year, yet the Government continues to spend more money, 

"During April and May, the first two months of this fiscal year, the Government borrowed £27.4bn according to figures released last week, up from £25.9bn during the same months in 2010."

The majority of people are wrong that Cameron will solve our problems. A valuable lesson in life is that people are not able to see trends. They see the current time-frame, and extrapolate. When Cameron talks of 'austerity' and 'cuts' the public believes we will be back to boom times again soon. Cameron is no Thatcher. The Governments loose monetary policy may inflate tax receipts, but spending will rise as costs always catch up. Thatcher raised rates, lowered spending and let business go to the wall. Until this happens, then the current rhetoric is all fluff.

History is repeating itself again. Britain in the 1970's had some of the highest inflation in the developed world. Fast forward 40 years and its the same again, we are world leaders in the Western inflation league table. Germany meanwhile has less than half our inflation rate, and their earnings, unlike ours, are rising in real terms,

"Real earnings, that is, the price-adjusted gross monthly earnings of full-time employees, rose by an average 2.0% in the first quarter of 2011 on the same quarter of 2010. As also reported by the Federal Statistical Office (Destatis), nominal earnings increased by 4.1% in the first quarter of 2011 compared with the first quarter of 2010. Consumer prices were up 2.1% in the same period. The increase in real earnings was the second highest since the beginning of the time series in 2008, while that in nominal earnings was stronger than ever before in the given period."

Yet Germany imports every drop of oil, and the majority of food, just like the UK. UK wages in real terms continue to decline,

"Average pay rose at an annual rate of just 1.8% a year in April, according to the Office for National Statistics (ONS), while the consumer prices index was running at 4.5%."

Inflation is a monetary phenomenon. Keynesian's will point to the symptoms of Inflation and tell the public that these are the causes, for example increases in workers wages. Government friendly economists state that if wages do not rise, then inflation should be subdued. It doesn't take an economist to work out this is just plain illogical thinking. The above clearly disproves the theory. German wages are rising twice as fast, but the inflation rate is half as much. By any scientific measure this Keynesian law wouldn't even hold at primary level education. 

Now is a time to reign in loose monetary policy, but not for the UK, its time to print more. If history is a guide the UK will have negative wage growth and high inflation for a long time, just like in the seventies. Worse still, we will accept it. Its a culture thing. Similar to the Greeks, as the quote at the top of this article reads, believing their problems are inflicted by others, when in reality it is all their own reckless doing. They wasted money for years.

The rise of union strikes have also become more prominent. So rather than lacing up our boots to go work, like the Germans, we decide not to turn up to work, compounding inflationary pressures, eroding our global market competitiveness and lowering real term wage growth. Marvelous! I believe people are free to do as they please. Strikes however are always a waste of time and do not raise peoples living standards. It seems to me that their living standards are already quite cushy compared with many,

"The calculations show that a mid-ranking teacher on £32,000 a year will receive a final salary pension that is the equivalent of having built up a £500,000 pension pot. This is 20 times higher than the average private sector scheme, according to figures from the Office for National Statistics."

Rather than sulk, how about they spare a thought for future generations. State pensions will be non existent, despite the fact we pay National Insurance, the greatest ponzi scheme in existence and the new pension standard is to be put on a private contributory scheme (if you are lucky) that is no where near as previous non-defined schemes. 

Previous generations fought a war, underwent rationing during the 1940's and 1950's, left school at 15, worked for 40-50 years and got a paltry state pension, if they lived that long. Meanwhile many boomer's were the first generation that got a free University education, gained greatly from credit booms from substantial asset inflation in items such as houses and to top it off were given gold plated pensions. A generalisation, of course, my mum left school at 15, never went to University and won't have a gold plated pension, but for many of her generation this was not the case. However this is how economies should work, the next generation has it better.

Subsequent generations now have to pay for their University education. They will never see their state pension as it keeps riding on further into the sunset. Private pensions are minimal in comparison. This is not how the next generation should have to live. But hey, that's governments, they take money from the future to buy off present day votes.

Circumstances will improve, the free market will see to that. As the Government creates more problems the only way to solve them will be to expand the price system and allow free markets further reign over the economy. It always happens. The end of this current age of stagflation will result in further moves towards free markets. Just like the last stagflation. In the current climate I see no solutions yet, just more compounding of our current problems. The solutions will come, just not quite yet.

Cuts, its never that easy

Margaret Thatcher, Conservative party Conference, 1980

The subsequent 5 years resulted in unemployment doubling in the UK after this speech. After years of kicking the can a politician eventually got a grip making Britain competitive in the global market place once more. It wasn't easy. It wasn't pretty. It wasn't sadistic. In fact it was political suicide but Maggie held her nerve. 

Talks about public sector cuts with Prime Minister Cameron claiming that not only will the private sector take up the slack within his term - but actually there will be more jobs is ludicrous. Just as I expected, within a month of power I can see David Cameron is no Maggie. The Tories talk the talk, declare swaggering budget cuts but its all soundbites. Clegg, his coalition buddy, meanwhile states that "this won't be like Thatcher, we will do it differently", contradicting the recent budget given by George Osbourne which is much worse than anything Geoffrey Howe had to administer. 

There is no chance the Conservatives will be able to do what they state - they don't even have a majority government which is based on a shaky coalition. Even if they did it will take longer than a term. Back when Thatcher was in office, at the 1983 election unemployment was still rising (setting post war records), the pound was dropping like a rock and the economy was still in taters. It took well into her second term to see the effects of her earlier policies. 

The idea that the private sector will take up the slack is just political wordplay. Its takes years for these things to change, a change in peoples will, a change in peoples expectations. People expect the UK bubble to carry on. So until reality kicks in, people will want the politicians to maintain the mirage which will mean its the market that has to force the people into the correct line of thinking, just like it did with Thatcher. We are a way off this so Mr Cameron will play kick the can down the road until this moment.

What factors are different this time? For one Cameron has to contend with a stronger opposition, and competent at that. People didn't necessarily like Thatcher back in the early eighties, but they couldn't stand Michael Foot and Labour who had increasingly moved so far left they were within touching distance of Joe Stalin and Mao. It was the oppositions weakness that helped Thatcher pursue what she did. Labour was so broken, the party splintered creating the SDP which ripped its support base in two. Thatcher could have campaigned with Adolf Hitler as her minister for for Justice - she still would have won a landslide back in '83. 

Thatcher also had a majority from 1979 unlike the current government. You try and reduce public spending you have another recession. We've only just emerged from the worst depression since the all-mighty one back in the 1930's. People won't warm to this. Then the budget deficit gets bigger. It did with Thatcher - it will do the same for Cameron if this is the path he takes. This would bring into question with the public the competence of the Tories with the economic policies they are pursuing. I know and you probably know that its the right path to take but many who are told the Keynesian way of thinking will not see it that way. 

The Unions are coming, North Sea Oil and Gas is running drier by the day and higher interest rates are inevitable over the next decade. We haven't liquidated anything - just like the Japanese during their lost decade we have propped up the banks and ensured zombie loans are kept afloat. Like a junkie we tell everyone we are good for it - we just need more time. But time is our worst enemy.

The problem with the current coalition is how long will it last with cuts on the agenda? The Tories may be historically comfortable in this setting but how many grass root Lib Dem supporters are going to swallow the medicine? Defection of many to Labour is inevitable. And remember - "things were going 'well' under Brown". This could cast the Tories in the wilderness for a decade if they practice what they preach. There's only so long you came blame the previous government for the mess. Give it a year and people won't be seeing Labour mess but will instead switch their view to Tory mess. Just like Thatcher. People forgot the Labour mess in the 70's, they just remember the early eighties.

The G8 or now the more relevant force the G20, have been putting austerity on the agenda. I think a basic illustration of economics is required to contrast spend and stimulus versus austerity, using the classic economic Crusoe example (there has been many takes on this over the years). Peter Schiff gives an excellent example in his latest book which I will list below. 


If we imagine a desert island with three people. These people all catch fish in order to survive and feed themselves. The problem is they have to use their hands, which is very time consuming so they spend all their time catching fish to live. However one day, one person decides to build a net. He spends a day constructing this, therefore foregoing current consumption and going with no food for that day. He is the entrepreneur within this small community and doesn't know if his endeavour will succeed. For the sake of argument his net is a success and he is now able to catch more fish in less time. So much so that he now has more leisure time and can eat more, thus consuming more. 

A simple example but it perfectly illustrates elementary economics. The current Keynesian thinking is that postponement of consumption is a bad thing but yet as we saw above this was in fact good. It is how society accumulates capital goods, tools, that enable us to enhance our productivity. Savings - the foregoing consumption should be embraced not deterred. The entrepreneurs risk taking has also benefited everyone. We should reward those who figure our how to do things more productively or cost effective, we all benefit over the long term. 

You see our recent solution was for the government to spend more, to destroy capital, to expropriate wealth from individuals. Raising taxes, printing money, raising deficits will never solve the economic question. Just like state planning never did. All it does is take away the net from the individual, remove incentives for innovations such as the net and encourage us to consume more rather than increase our productive capabilities. If the net breaks we can leave it and continue consuming our way out of trouble. That's why no amount of Paul Krugman stimulus will ever be enough because its the wrong thinking in the first place. He is saying we need to run faster just to stay still. I say we need to be leaner and think smarter to run just as fast only this time at a stroll.

The video of Thatcher at the start was right. However the left always like to use slogans of themselves such as compassionate, open, fairness, yet when an individual states they support the Conservatives they are ironically labelled Tory scum - and for what? Thatcher put us back in the global marketplace. She embraced Asia's awakening which enables us to buy many consumer goods for practically nothing. We moved out of mines with many of us into flexible workplaces, hours that suit us, working from home in relative luxury compared to how our ancestors had to work. The fact is the left still can't swallow the reality that Thatcher destroyed their ideological way of thinking in this country. John McDonnell's unwise words regarding wishing to assassinate her was not for her policies but rather that people like himself have no place in politics where 30 years ago they were everywhere in parliament. Was it nice that people had no jobs back during the early eighties? No, but this is the problem with statist elites. They cause the problems, blame markets, then ironically when things get that bad look to markets once more to solve the mess they made in the first instance. We still seem to be looking for state solutions. We have recently had hard talk, yes. But talk is cheap, when action is taken then the backtracking towards Keynes once more will commence. 

Vote for Gordon

"Deflationary policy is costly for the treasury and unpopular with the masses. But inflationary policy is a boon for the treasury and very popular with the ignorant. Practically, the danger of deflation is but slight and the danger of inflation tremendous."
Ludwig Von Mises, Human Action

The prospect of a hung parliament. The prospect of a Labour victory. The prospect of divided politics once more. With the British polls showing a narrowing between the Tories and Labour, markets have begun to get the UK jitters once more. David Camerons indecivness on issues such as the deficit and the inflationist policies of the current Government have casted doubts in the British peoples minds. With so many of the populace aboard the Government Gravy train, do we really want cuts? Maybe the government can inflate their way out of this mess resulting in us all obtaining our free lunch, living in endless prosperity? I'm afraid the laws of economics are the same as the laws of gravity. It doesn't matter which way you jump off a cliff, or in this case how the government chooses to inflate, the end result is the same, just like gravity pulling you towards the earth the free market demands the required correction. All the government can do is lower our standards of living for the long term. The more it fights the free market, the worse the end correction will be.

Vote for Gordon may seem like an odd title, as Gordon Brown and the Labour party are carrying out the worst policies listed above, a contarian view if you may. It's important for me to state that I have no political affliation. All parties are as clear as mud, all with agendas to infringe on peoples liberties, distorting markets and impovishing people. Get rid of Government I say, but that is seperate topic for discussion. We need Labour to win the next election. We need another term to discredit statist policies. I fear if the Conservatives win, the UK will be in serious problems.

If, as the Conservatives say, they will cut spending as should happen, this will spark off a further deflationary collapse. This is the required medicine, however the majority will not see it this way. As Ludwig Von Misses states above, "...inflationary policy is a boon for the treasury and very popular with the ignorant". Another quote that has stood the test of time. Recently it has been stated in the news that the UK may not need to borrow as much as initially forecast. 'Economists' talk about the recovery, people say the recession is not that bad, the malinvestments are proped up providing the illusion that its business as usual, all of course are the product of an inflationary mirage. Governments have convinced themselves that all we need to do is drive down interest rates as low as possible and print money to fix our problems. We can avoid the required adjustments by simply trying to continue consuming and borrowing, the exact measures that created the problems.

People have very short term memories and short term outlooks which I have witnessed throughout my life. For example people always state what a disaster Thatcherism was, as they looked at the short term effects, high unemployment, less government support for individuals, the acceleration of industrial decline. Over the long term of course, it was for the benefit of Britain, my generation are all Thatchers children. We all benefit from goods that we used to make, that are now made in China at a lower cost. We have all moved into other areas of employment, better jobs in many cases.

Its peoples short term memory that is dangerous. If the conservatives win at the next election, will the squeeze provoke the public to turn to the left? "We were doing fine under Brown before he left?" - remember "people say the recession is not that bad", the required corrections would be painful. There is so much imbalance, I don't think the Tories could correct the mess in one term. I also think they don't have the spine or the conviction to go through with the required medicine. The temptation to eventually inflate after initial cuts will be too great, the short term benefits will give the government room for manove. This in turn would confuse the people, believing that cuts are the last thing we need, we need further Government action to solve the issues. A resurgance of left wing politics once more could take place. The free market will be blamed once more for the problems.

However if Brown were to win a second term, cuts would not be on the agenda nearly as much. Further inflationist policies will be carried out as the Government spends its way to popularity. The market would not tolerate this, instead capital would flee, interest rates would rise, currency instability or a full blown currency crisis would occur. Its better that this happens on Labours watch rather than the Tories. People would have a clearer picture of what caused the mess - continued Government intervention - "We need the free market to solve our issues, no matter what the cost".

You see the Tories are a classic scapegoat, they generally tell people the truth, that we need disipline. Labour are the weak parent, who give in to their children and let them run riot. We need labour to continue in power so that the Tories can say "Told you so". The end game is a deflationay collapse, hard times?, sure but good for the moral character. The only other alternative is the quote at the top of the blog, monetary collapse.

How likely is Hyperinflation?

It's a topic that comes up in various articles, with authors proclaiming its just around the corner, weeks or months away. Truth is Hyperinflation will happen if we as a nation wish it to happen, which is exactly the path we are walking towards. An excellent article has been published by Dr. Krassimir Petrov detailing the road to hyperinflation. It is only a road and at any point we are free to turn off it, but only if we wish to do so. Vote for Brown, it will build the moral fibre we need to avert such a situation and as Dr. Krassimir Petrov points out, buy some Gold in the meantime.