1970's Revisited

The twenty-teenies look to me as if they'll be a replay of the 1970's, here in the UK.  No, I don't mean loon pants, two-tones, bad hairdos, glam-rock and tank-tops (but you never know...).

No, I mean Sterling crisis, IMF, rampant inflation and industrial strife.  Think about it for a minute. 

First, just like the '70's, we have the imminent collapse of the pound.  Okay, what we sell abroad is easier to do so at the moment - but then what do we sell apart from the financial services that are in the trash can?  Coupled with the mountain of sovereign debt we'll have to raise and service in the coming years, we surely can't expect Sterling to do anything other than continue to bomb.  Package holidays could become a thing of the past.  Blackpool and Clacton, here we come.  Where's my 'kiss me quick' hat?

Then, just like the 70's, we'll have raging inflation, especially if the Government takes up the option of hosing the economy with 'funny money'.  Pumping money into people's wallets is well-known as a course of action to take if you want to end up using a wheelbarrow to carry money around.  Back in the '70's, we also had high inflation (even higher in the early 1980's), and what scares me is that some commentators are saying this is the lesser of the evils and we'll deal with it later.  If they only remembered what happened to people last time, they surely wouldn't be saying that.  Mind you, at 30% plus inflation, the crippling mortgage quickly becomes only an irritant, if wages go up too (but see below).

I reckon we stand a high chance of ending up in the clutches of the IMF too, just like in the 70's.  This will result from the Sterling crisis above, and the fact that the Government will borrow us into bankruptcy.  The best way of avoiding that, I feel, is to consider what conditions the IMF will impose and actually do those things now - like slimming the public sector, reducing borrowing, and forcing a reduction of the private and corporate debt levels - see below.

This brings me to my last parallel - industrial strife.  At some point, we will simply have to address the massive overhang of public financial waste and that will surely come in the teenies.  I recently read that, even though the unemployment figures were awful last month, they were 'mitigated' to some extent by an increase in employment in the public sector of around 14,000.  I thought the Government were committed to reducing inefficiency, so why did it increase the number of people on the payroll, when it should be doing the opposite?  In the teenies, we will have to reduce the public payroll, keep a lid on pay increases (even when inflation takes off) and tackle the massive pension deficit, and the accompanying overgenerous pension provision in the public sector.  This will come at enormous cost in terms of industrial unrest, strikes and the like.  Coffins left unburied, rubbish left in the streets, anyone?

We'd better brace ourselves for a decade of real pain - even if the country is daft enough to elect this lot in 2009/2010.  One way or another, we will have to pay for the profligacies of the noughties, and a re-run of the '70's is the likely outcome.  It wasn't pretty, as I recall.

 Time to dig out the tank top, I think.