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The world is staring into an ‘abyss of unsustainable debt’ – says MEP

As 2014 looms, the world is staring into the ‘eternal fires than burn in the abyss of unsustainable debt’ and yet party politics still dominate the economies already doomed – claims Godfrey Bloom MEP

As 2013 draws to a close and families take stock of their financial position with a view, perhaps, to the New Year resolutions – it might be fruitful to have a look at families across the world for an appreciation of their debt. For, we live in an unprecedented prison of national and personal debt.

I have spent more than 40 years in the world of financial economics, most of them trying to make sense of where fixed interest and currencies may go in the future to assist – in the main – pension funds. I am sincerely glad I no longer have to earn my living bearing the burden of this enormous responsibility. It is now impossible to actually value financial assets. Money is simply a margin of utility; it has no intrinsic value of its own.

Say’s Law – named after French economist and businessman Jean Baptiste Say – is one of the first benchmarks for the economic undergraduate, yet it is probably the first law the graduate throws aside. Say states “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another”. In Say’s view, a rational businessman will never hoard money; he will promptly spend any money he gets “for the value of money is also perishable”. It is an inconvenient message, particularly so for politicians and central bankers.

Since former United States President Richard Nixon took the US dollar off the gold standard global fiat currencies are, indeed can only be, valued against other fiat currencies. Voltaire put it succinctly many generations ago when he warned “paper currency will always revert to its intrinsic value”. In other words, nothing.

We now see the extraordinary phenomenon of the United Kingdom Chancellor George Osborne boasting in his autumn statement that the British economy is on the road to recover, and with it would seem no sense of irony he has reduced borrowing to £9bn per month. This is awesome borrowing by any standard but add to that money printing in the last three years of £350bn, debts mounting to more than £1.5trillion at 10 per cent per year, government spending at 50 per cent of gross domestic product and the situation is quite obviously out of control.

Add private funding initiatives and public pension liabilities to the national debt, as they should be but are not, and UK GDP debt rations reflect those of Greece. Even supposedly strong Germany has debts at 80 per cent of GDP – €900bn of shadow banking assets, which can never be redeemed and a banking system in dire straights.

But let us look further afield. American consumer debt rose $127bn to $11.28trillion in the last quarter. I will not bore you with more numbers from other economies because the human mind is not actually designed to comprehend the enormity I am quoting; suffice to say the situation is not much better in Sweden, Korea, Japan, Canada or anywhere else. There are economies where the situation is simply less appalling. Let me just shove out one understandable number every single adult in the UK owes: £28,489.

The time has come for an apposite quote. Who better than the great Henry Hazlitt – an American journalist who wrote about business and economics for such publications as The Wall Street Journal, The Nation, Newsweek and The New York Times and is widely cited in both libertarian and conservative circles, and who should be compulsory reading in all schools. Everything we get outside the free gifts of nature must in some way be paid for. The world is full of so-called economists, who are in turn full of schemes for getting something for nothing. They tell us that government can spend and spend without taxing at all. That the state can continue to pile up debt without ever paying it off because ‘we owe it to ourselves. Paul Krugman, the Nobel Prize winning economist, is the prime advocate of this criminal nonsense – in my humble opinion.

The world is staring into the eternal fires than burn in the abyss of unsustainable debt. Yet party politics still dominate the economies already doomed. At a very posh lunch the other day, a retired deputy Lord Lieutenant of my county wobbled up to me deeply concerned that Ed Milliband would replace Dave Cameron as UK prime minster in 2015. Ye gods. Who cares? Really, what is the difference anyway?

Godfrey Bloom MEP is an independent MEP for Yorkshire and North Lincolnshire having resigned from UKIP

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