“The Invisible Big Kahuna”

Andrew Zak Williams discusses this week’s New Statesman article in which prominent atheists told him

Richard Dawkins, Steven Weinberg, Sam Harris, AC Grayling, Polly Toynbee ... I expect that most writers who have tried to interview an equivalent stellar cast have found that their phone calls went unanswered and their emails were assigned to the Trash Box. But there's something about the perceived irrationality of belief in God which brings many atheists out fighting.

The religious sometimes wonder why anyone would choose not to believe in God. But, as Sam Harris told me, it is they who must shoulder the burden of proving their case. After all, "every Christian can confidently judge the God of Zoroaster to be a creature of fiction, without first scouring the universe for evidence of his absence."

For Harris all that one needs to banish false knowledge is to recognise an absence of evidence. And there is one hymn sheet from which even atheists are willing to sing: that headed "Lack of Evidence". For instance Richard Dawkins told me that he doesn't believe in leprechauns, pixies, werewolves or a whole range of gods, and for the same reason in every case: "there is not the tiniest shred of evidence for any of them, and the burden of proof rests with those who wish to believe."

Particle physicist Victor Stenger added that the God of Jews, Christians and Muslims supposedly plays such an important role in the universe that there should be evidence that he exists. But instead, "there is nothing in the realm of human knowledge that requires anything supernatural, anything beyond matter, to describe our observations."

But it's not just an absence of evidence upon which several atheists relied. Rather, there was perceived to be clear evidence which suggests that God is no more real than an imaginary friend. The clearest pointer seems to have been suffering. No wonder that Polly Toynbee told me that the only time that she is ever tempted, momentarily, to believe in God "is when I shake an angry fist at him for some monstrous suffering inflicted on the world for no reason whatsoever."

Some believers - and Christian philosophers - respond that suffering on earth actually enriches our lives. But as psychologist Richard Wiseman told me, if that were so, it would paint a picture of heaven being a rather miserable place. For other believers, it may be that God has a very good reason for allowing suffering but we can't understand what it is because we lack his divine knowledge. Biologist Jerry Coyne gives this argument short shrift: "If there is a god, the evidence points to one who is apathetic - or even a bit malicious."

Publisher and author Michael Shermer gave me an intriguing overview to the question of God's existence:

"In the last 10,000 years there have been roughly 10,000 religions and 1,000 different gods; what are the chances that one group of people discovered the One True God while everyone else believed in 9,999 false gods?"

When it comes to the God Debate, one can't ignore the commodity to which the religious cling to sustain their beliefs: faith. Several months ago, I carried out an equivalent investigation when I asked many prominent Christians to give me their reasons for belief. Several of them admitted that it must ultimately come down to whether you take it on faith; once you do, you'll experience God's love and you won't worry about having the answer to every intellectual argument.

For many believers, faith is all that matters, shielding them from arguments and evidence which they would rather not have to consider. These are the ones who oppose the Critical Thinking of science and prefer the Critical of Thinking inherent in their faith.

But if you rely on blind faith, what are the chances that you're going to see the light?

For others, their religion satisfies them intellectually. Yet when they can't reason their way past specific problems (say, suffering or biblical inconsistencies), their faith comes riding to the rescue. But faith is hardly a white horse: more like a white elephant, trumpeting a refusal to engage in debate as though it were something about which to be proud.

The atheists that I spoke to are the products of what happens to many intelligent people who aren't prepared to take important decisions purely on faith, and who won't try to believe simply to avoid familial or societal pressures. And as philosopher Daniel C. Dennett put it: "Why try anyway? There is no obligation to try to believe in God."

I could hardly end this piece without mentioning PZ Myers who evidently managed to dig out a metaphorical old joke book from his vast collection of weighty tomes about the God Debate:

"Religious beliefs are lazy jokes with bad punchlines. Why do you have to chop off the skin at the end of your penis? Because god says so. Why should you abstain from pork, or shrimp, or mixing meat and dairy, or your science classes? Because they might taint your relationship with your god. Why do you have to revere a bit of dry biscuit? Because it magically turns into a god when a priest mutters over it. Why do I have to be good? Because if you aren't, a god will set you on fire for all eternity. These are ridiculous propositions. The whole business of religion is clownshoes freakin' moonshine, hallowed by nothing but unthinking tradition, fear and superstitious behavior, and an establishment of con artists who have dedicated their lives to propping up a sense of self-importance by claiming to talk to an invisible big kahuna."

Amen to that.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?