St Magnus Cathedral in Orkney, 1910. Photo: Getty
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Will Self: the Orkney case prefigured our acknowledgement of abuse today

The idea we might be the repositories of buried traumatic memories is integral to psychoanalysis – so the SRA panic had a ready-made audience in people primed to accept notions of repression.

I’m in Orkney again: it’s a micro-society up here off the north coast of Scotland, where the preoccupations are farming, fishing and the sort of intense human interactions that often occur when folk are compelled to rub along together a little too vigorously. True, there is the annual “Ba”, or town football game, wherein a benighted bit of leather is fought the length of Kirkwall’s main street by snorting, roiling gangs of islanders, but overall these sparsely populated islands are not where you would expect to find evidence of the odd delusions that grip humanity en masse.

Except that when I first came here in the early 1990s, Orkney was at the centre of a particularly virulent example of just this. For younger readers, the satanic ritual abuse (SRA) panic of the early 1990s may seem bizarre: over a period of two or three years large numbers of people – mostly here and in the US, although also worldwide – became convinced that there was a network of satanist cults operating among us. In many cases the leaders of these evil organisations were local worthies – priests, doctors, teachers – who put on horned headdresses in order to conduct unspeakable rites. When described by victims, these rites proved remarkably similar: nude dancing in a circle around bonfires, accompanied by ceremonies involving “broodmares”, young girls and women who had been impregnated by the cult leaders and forced to bear babies that were then sacrificed horribly.

The evidence for SRA was threefold: the direct testimony of children who had been abused; the “recovered memories” of adult victims who had been subjected to hypno- or regression therapy; and – in Britain at least – the application of something called the “reflex anal dilatation” test, a method of establishing that a child had been anally penetrated that I don’t need to describe here in detail because it’s all in the name. The SRA panic spoke to deep-seated anxieties that we all possess: the idea that society as it appears to be constituted is in fact a grotesque sham, and that power of a sinister sort is being wielded behind the scenes, is the staple fare of every conspiracy theorist. The specifics of SRA – the child abuse, the devil-worshipping – in my view, articulated very real disjunctions between what we can think of, synthesising Freudian and Jungian terminology, as the latent and the manifest content of the collective unconscious.

In Orkney social workers took 15 children of the “W” family off the island and into care; nine children from four other families were later removed from their homes. Tests were done, statements taken. The picture emerged of a cult operating on South Ronaldsay that held ceremonies in an abandoned quarry. These allegations got out and became grist to the panicky rumour mill, catalysing with the unsettling tales of adults throughout the land who, on the couch, realised that the parents they had thought of as loving had in fact subjected them to grotesque abuse when they were small.

The idea that we might be the repositories of buried traumatic memories is integral to psychoanalysis – so the SRA panic had a ready-made audience in people primed to accept notions of repression and catharsis. For a while, we all were wandering around wondering whether our own histories of abuse were about to bob up from the murky depths of our psyches; it became quite common to have conversations of the form: “I think I might’ve been abused as a child . . .” as a background explanation for whichever current neurotic behaviour was plaguing us.

The bromides that calmed the whole frenzy down were, when they came, quite prosaic: the reflex anal dilatation test was discredited (most anuses dilate when a speculum is pressed against them); both professionals and abuse victims came forward to nix the idea that such memories were repressed – they recalled every element of their suffering; and in the particular case of Orkney, it was pointed out that certain critical elements of the children’s testimony were impossibilities. South Ronaldsay is a notably exposed island; there really isn’t anywhere you could hold a Walpurgisnacht-style gig without it being noticeable from everywhere else.

A local woman told me that some of the children of the “W” family had indeed been abused physically. But any satanic components of most stories by victims of child abuse in general are very obviously confabulated from horror movies they’ve seen. This tallies with something that the person at the NSPCC responsible for investigating child sex abuse tells me: it is, he says, far more widespread than we fear, but the ritual component is always vanishingly small.

So, with the curse of hindsight, it is now possible to view the whole SRA panic as part of the first tentative steps society was taking towards acknowledgement of two distinct but not unrelated phenomena: widespread sexual abuse being perpetrated on children both in institutional settings and in the home by allegedly responsible adults; and a burgeoning culture of febrile emotional lability, stimulated by cod-psychotherapy and hyperreal depictions of sex and violence in film.

In a world in which the old verities are ever crumbling before our eyes, it’s nice to be able to validate an old adage: there is indeed no smoke without fire.

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.

This article first appeared in the 04 June 2014 issue of the New Statesman, 100 days to save Great Britain

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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?