I\’m not convinced

Is spending going to have to be cut? Sure, but I don\’t think it\’s going to be as bad as this:

Allow me to paint you a picture of a country mired in chaos. The unions are in open revolt. Public sector workers have just stomached their biggest pay cuts in living memory; many face losing their homes. In a desperate attempt to bring the budget deficit back under control, ministers are considering slashing child benefit by a fifth – the biggest attack on the welfare state since it was set up in the first half of the 20th century. The government\’s popularity is at historical lows.

A third of teachers in Latvia have been laid off; the rest have endured savage salary cuts, leaving them barely above the minimum wage. Many have seen their pension entitlements slashed by 70 per cent; doctors and police officers face sacrificing a fifth of their pay. According to local reports, the state has cancelled some scheduled operations and hospitals are turning away some sick patients.

The reason I don\’t think the UK is going to get this bad? We\’re not trying to defend a fixed exchange rate. Latvia and Ireland are.

They\’re having to do this cutting because they\’re part of the euro (or at least with a pegged exchange rate to it) and we won\’t have to do that for we\’re not.

Cuts? Sure, but we\’re not going to have to deflate the economy in the same way they are.

7 comments on “I\’m not convinced

  1. Hmm, so where is all the money to pay for everything we can’t really afford (pensions, NHS, social security, etc) going to come from?

    Is there a hidden cornucopia that spews unlimited riches, right along with forever raising house prices that will make everyone a millionaire in their old age?

    (the printing press doesn’t count here… and right now it’s what keeps the UK govt. in business and able to pay civil servant’s wages, but that won’t work forever.)

  2. The pain is still there when a currency falls: it’s paid by people who have savings in that currency. Old people mostly, and they’ll be dead soon anyway, so it’s a politically more acceptable approach (well, would be if massive political capital wasn’t invested in pegging the currency).

  3. I first became news and politics conscious in the 1960s. So much of the news and politics revolved around the travails associated with a fixed, or high exchange rate for Sterling.

    That nightmare finally ended in 1992, and good riddance.

  4. Kay, it’s not just the old who have savings who pay.
    It’s anyone paid in that currency, which means the cuts in purchaisng power fall on the rich disproportionately.
    A floating exchange rate hits the poor less, as they buy fewer imports.
    It means less inequality.
    The euro-zone protects the rich, and will gradually impoverish the workers who have to cut wages to compete.

  5. “It means less inequality.”

    Oh that’s nice. We’re shagged but now we are all equally shagged. The works of socialism are a wonder to behold.

  6. Well, Kay, I never thought of it as socialist; but a currency system that hits the rich and protects the poor probably does have a social benefit.
    So why did Europe want to abolish floating exchange rates?
    Apparently an entire history of the exchange-rate mechanism – the precursor to the euro – was written without explaining why fixed rates were a good idea.
    I suspect that the reason was simply that they were national identities, and therefore had to go.
    Bernard Connolly’s book on the subject is very good.

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