The triumph of the Wonga Economy
From Brother Ivo:
Students of irony must have enjoyed listening to the news on Thursday as "Credit Union Day" stories sat back-to-back with reports of "sanity breaking out on Capitol Hill".
The iniquity of escalating debt was recognised in the context of individuals and families falling into the clutches of payday loan companies like the much derided Wonga, and Brother Ivo will be supporting his local credit union to do his bit for Archbishop Justin's plan to offer a better alternative. What was odd was the apparent inability of news editors to scale up that mode of thought and to apply exactly the same principles on the macro level when reviewing the American "moderate" Republicans' emulation of the Grand Old Duke of York.
It is worth recalling that the United States adopted legislation to control public debt in an attempt to constrain the spending proclivities of politicians, and to impose some degree of discipline, making the Government live within its means. It is very easy to buy popularity today with tomorrow's money, especially if you bequeath that debt to your successors. You leave them to grapple with the problem and you dissolve the potency of the debt you inherited by degrading the currency.
Here Brother Ivo's love of paradox returns.
Two groups of people benefit from this. In the first group there are those who depend upon the state, either as supplicants or contracting parties. Such people can lobby for inflation-proof rises, and as they are a significant voting block, they will be listened to.
In the second group we find the investment community and their dependent infrastructure. If you can talk up "market confidence", the fear (and certainty) of inflation will encourage market activity. If you can make 5% against 4% inflation you will be able to afford next year's BMW.
So far, this political three-card-trick seems to make everyone a winner. Except it doesn't. The saver, the pensioner, the trader and his employees in a market sector whose customers are not blessed to be within reach of the magic porridge pot, are the folk who are not able to join the party, so they form their own - the Tea Party.
Their "insanity" - as the media frequently describe it - lies in an awareness of historical precedent, and taking seriously the iniquity of unpayable debt.
Inflation ultimately destroys economies and countries, as the Weimar Republic demonstrated. Borrowing more eventually breaks the imprudent individual Wonga borrower, and even if a nation state does not borrow at those catastrophic rates of interest, it follows the same path when the increased borrowing has been spent but the proportion of future income servicing the debt has increased.
The US legislation to require the Government to at least look at the problem before raising the debt ceiling was not ignoble. Unfortunately for the USA, its friends and dependants, the progressive movement has, for now, captured the legislators and the media narrative. Anyone suggesting that the passing of the last "debt ceiling" is problematic is portrayed as reckless, which raises a simple, perhaps naive question.
If the debt ceiling is to be routinely and unhesitatingly increased, why have it? Why not repeal it? Why not go to the voters and simply say, "We can borrow, print money and spend indefinitely, my friends, because tomorrow never comes"?
There are, of course, the inconvenient examples of Greece, Portugal and Spain to demonstrate what happens to economies, unemployment and public services when such an approach is adopted, yet still, it is the sceptics of progressive economics who receive the bad press and not the proponents of Wonga Economics - on Capitol Hill or within the Westminster bubble.
We in the UK are in no position to gloat. We have not yet balanced our budget, still less begun to pay down our debt. Although Brother Ivo may sound US-fixated, it is the contemplation of their woes that leads him to warn of our own.
The BBC spoke of the US Government being "paralysed" by the debate. In truth, 85% of government continued: in its own language, it was the "non-essential" workers who were laid off. Tellingly, those on the public payroll will have their lost wages made up - they always do. It is the little folk in the private sector who will have lost - they always do.
Contrary to the rhetoric, the US was never going to default on its bond repayments. The US takes in something like $250bn a month in tax. The IRS was still working. The debt interest is currently running at approximately $20bn per month. That would have been paid. It was other expenditure which would have come under scrutiny - and that was the point of the exercise. If you are in deficit on current expenditure, is this really the best time to take on the additional massive unfunded debt that is Obamacare?
Whether one scales down the problem from US debt to payday loan, or scales up from the worker imprudently succumbing to the temptation to live-now-pay-later, the issues are much the same.
We have heard our bishops raising their voices against the payday loan culture and calling for a more sensible approach to debt. Please God, we shall hear one or two speaking out against the Wonga Economics of those entrusted - or hoping to be entrusted - with the government and future economic security of our country.
Brother Ivo is the Patron Saint of Lawyers