Following on from some perspetive comments on the last post, it is worth further exploring just how quickly the UK is running down its historical wealth.
This has happened to many, many countries in the past - Argentina of the ealy 1900's is always a prime example, but of course Spain was a world power and the Chinese empire's waxing and waning over the millenia offers many examples.
The UK itself nearly fell-off the cliff in 1976. An IMF bail-out at the height of the 'sick-man of Europe' phase. It took a decade of supply-side reforms to drag the country back from the precipice, but was thay forever, or a bump on the road down.
I ask, becuase increasingly no just in the UK but all all over Europe and North America, the feeling is that our children will have worse prospects than ourselves, that life is getting tougher and not better. Some of this is illusory, as we accept massive developments in health care, technology and communications whilst attaching no valuee to these. But in terms of income and GDP, the writing is on the wall.
Perhaps a good example of how a country can decline can be seen in the wealth transfers between generations.
In the UK, property prices have meant that the family home is the man source of savings for the vast majority of the population. These prices have shot up, making older people much richer than young ones. Now we are seeing them want to pass-on this wealth their children, who cannot afford to buy a starter home. So far, so what, the wealth is being shared around. But then, the cost of the bank rentier removes the built-up wealth
But in London I note key affect. English people are selling to foreigners and moving out. No one in my large team at work in the City buys anywhere near central London now, if at all. No on under 30 evens owns a flat. The foreigners are buying up the City. They are bringing in wealth to replace the UK wealth. This then works its way out to the surrounding South East.
However, the parents have to chip in for their children, so the money they have made from the foreigners is expended on bloated house prices elsewhere. The build up of wealth was illusory - but the decimation of it real. The younger generation do not have the incomes, when they in turn come to help their children, they will not have the previous generations pensions or housing gain to support them. The Country will be poorer.
Now, perhaps house prices will crash and the foreigners will sell up, allowing younger generations to buy into a lower market and start the process again. The thing is, this has never happened in the UK and is not the experience of Countries like Japan - where prices stagnate at the top end in an advance economy.
To this story we have to add in the Government deficit and debt crisis, which will entail a spending crunch and poorer services for decades from now onwards for 30 years. The Government is still increasing the total public debt whilst at the same time the private stock of money is being diminished or further poored into housing.
In the end, with the intergenerational stock fo wealth run down, the main hgh priced assets in the hands of foreigners and high taxes there will be a leavening of the living standards or British people - all at the lwo end. Often it is the right wing who agitate for high prices in house and engineer house price booms like Osborne and Cameron have done - but the reaping of what has been sown will prove very painful in the end.