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Thirty Something

There was an episode, in that classic political television satire, 'The New Statesman', when the Government was trying very hard to lose the next election, because it knew, the country was in such a mess, that the best option was to let the opposition take the blame for trying to clean it up. It would then make a swift return to power at the polls in five years, once that same opposition had become unelectable as a consequence.

I rather suspect that's the position that the Government finds itself in today. There's certainly talk among people I know, that a change of Government would be a 'poison chalice' for the Conservative opposition, with the economy on its knees and a legacy of ten years of misguided experimentation which has caused such damage to the fabric of our society.

The media are headlining a new warning from the Bank of England today which reports that the country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month.

The Bank says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The report suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

Britons’ total personal debt – the amount owed on mortgages, loans and credit cards –now stands at £1.46 trillion, more than the value of what the country produces in a year.

Total personal debt has risen by 165 per cent since 1997 and each household now owes an average of about £60,000.

The Conservatives claim this is the highest personal debt level in the world but our Government may claim that it's worse in Zimbabwe, which is comforting!

Elsewhere, I'm seeing real fear among businesses as trade shrinks and more people I know are worrying about their future and that of their families as Government desperately tries to plug the gaps in the economy with more money.

I really hope that a collective effort on the part of the G20 Finance Ministers works but I suspect the pendulum of financial chaos has now swung so far in one direction that it will not rebalance itself to a point of equilibrium for a matter of years. By then, I'm certain we will have a new Government that will have to take all the blame for puttingthe economy and our broken society back on its feet again.

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