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THE BRITISH GOVERNMENT OR HOW TO CREATE A SPANISH KIND CRISIS IN THE UK

Posted on: 25 abril, 2011


Esta es la version extendida de la carta que escribí al London Evening Standard. No se si la publicarán  ni cuando, en caso de que lo hagan. Está en inglés. Seguramente no la traduzca porque, gran parte de lo dicho ya lo he publicado en español de uno u otro modo en las noticias comentadas. 

THE BRITISH GOVERNMENT OR HOW TO CREATE A SPANISH KIND CRISIS IN THE UK

There so many ways of making cuts or spending money, but politicians used to chose the wrong one.In the whole world all governments commit the same mistakes, because they forget that there’s only two factors on economy: supply and demand. When someone try to change one, it’s changing the second one too… that’s the way the troubles starts.

Spanish crisis origins are on the tax credits that people was able to obtain when they bought a home.

If you give all people, no matter how much money they earn, the posibility of save from their tax ammount a 20% of the annual cost of their mortgages, you’re saying to builders you can increase your prices a 25%. That’s the way to return at the original balance. No matter if the real costs of building a home is still the same. The final price depends only on supply and demand… if you increase the demand but the supply is still the same, the price will go up. At first buying a home was the equivalent to spend the whole earn of 8 years of a medium salary. Now the equivalence is on 10 years (as in the UK), but 5 years ago it was up to 12 years. And there’s no rental market available because to rent is usually as expensive as pay a mortgage.

But if prices on housing increase, and you need one, there’s only two ways of get one: by taking a more longer paytime mortgage or by reduce what you spend on other things.

If salaries don’t increse and housing prices increase very quickly, banks will see mortgages as a business and not as a risk, so probably they’ll give money more easier to someone who want to buy a home, no matter the kind of guarantees of refunding the money he provide, than to someone who need to change the machines on his enterprise, so the housing prices will continue increasing. That’s how a mortgage went up to a 60% of the family expenses, or even more.

So, all the money became buildings and so many people buy houses they don’t need to be able to sell them later on a higher price, but people need also food and clothes, If somebody can’t produce them or not as cheaply as you need , because you only have the 20% of your incomings to spend them in that (the other 20% goes on taxes, electricity, water or some other things of that kind), he’ll probably need to fire some of his employees. Then, they probably will not pay their mortgages and the bank will not give him money to change his machines, because it must be sure of having no losses, so he probably need to close his enterprise.

With a lot of people applying for benefits, the country must make some cuts on spends and increase some taxes.

The origins of UK crisis is not the same, but it’s similar to the spanish crisis on its behavior. Spain is not different. Its troubles were, are and ever will be the same: the people who use the national economy to become rich by making the others become poors.

The first spanish mistake was not cut the 20% tax discount to all housing buyers and to giving it only to people less able to get a own house with their incomings. The UK have a similar benefit when you are unable to pay the rent, that’s the reason of the high prices when people try to rent a flat.

The second mistake was cutting on the salaries of public employees when there was a lot of people unemployed… and cutting on benefits for people that suddenly lost their jobs and were not able to find another. These people were the demand on retail businesses. If these people have less incomings, you will obtain a higher supply and lower prices (as its happening now in the UK), so, a lot of the rest workers still working will become unemployed, no matter if they work on retail, industry or financial businesses. If employer earn no money, he will try to make his products cheaper or fire some employees, but if he still loose money, he finally will close the business. The consequence, nobody buy, nobody work and nobody produce whatever to being able to sell it on another country. The UK is trying to solve the situation on a similar way, by firing public employees. The same mistake happens when you cut benefits to all people. The better the government can do is to check up better on people receiving benefit funds to give them to the ones who really need them and make them pay at least 3 times the money they have cheat and make them not eligible for receiving them for at least 3 times the time they were cheating.

The third mistake, trying to re-activate the economy by spending a lot of money on unnecessary roadworks. And here, in the UK, there’s a lot. The same road that was closed for weeks due to unnecesary roadworks (erasing asphalt and puting paving stones on the same place), is open and one week later is re-closed to make something that somebody forgot to make. Is on this were politicians must make cuts. Probably that money shoulded have go to reduce the national debt, but if these works are not made, politicians will not earn the money the great enterprises pay them for let them earn money with unnecesary roadworks.

The forth mistake, give money to banks and bankers to save them. They use it to do not need to sell the properties they have due to the buyers who haven’t payed their mortgages, because that will involve to sell them at a lower price, causing the slump on some of them. Politicians prefer to save them because, on that way, they can obtain better mortgages than the rest of the people and so many other kind of benefits.

The fifth mistake, increase of the general taxes, the kind of taxes all people pay no matter how much they earn. Increasing the VAT, the fares on public transport or the taxes to study on a University, doesn’t help on crisis. They make people to buy less, because they have less money to spend, but the people who have real high incomings do not suffer that. I think that some taxes must be increased, but the real taxes must be increased are the ones to make people pay depending on how much they earn. But politicians, bankers and so many great enterprises earn a lot by not increasing that taxes, cause they would pay a lot if these taxes are increased.

On that way, the crisis doesn’t stop. That’s the reason for what it came back on one way or another every 9 or 10 years. The powerful people do not want to change the way it goes, because they earn a lot of money by making us to pay their bills.

I feel really unhappy when I go shopping and I find another closed shop: it remind me a lot to the start of spanish crisis. I only hope Britons were able to stop it, or all of you suffered what the spanish people have been suffering the last 3 years and what we are going to suffer some years more.

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