Green bananas. Photo: John Moore/Getty Images
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Jack Monroe on Ed's two kitchens, leaving Labour – and why it's time to go bananas

Labour’s last straw was the “immigrants and benefits” scaremongering in one of its national leaflets. That’s not the party I joined. But it’s the party I left.

It’s banana season! It’s technically always banana season around here but according to my desktop seasonality calendar, which I check with alarming regularity these days, March is banana season proper – and that’s fine by me. At the Fairtrade Fortnight conference last year, we were told that there were hundreds of varieties of bananas being grown in the world but only one kind was sold in supermarkets. I wistfully remember Asda flirting with some fat, red-skinned bananas in my youth but they were short-lived. These days, living in Hammersmith, I can get socking great plantains cheaper than bananas. I recently had mole-drenched short ribs at a branch of the Mexican restaurant chain Wahaca, with a silky-sweet plantain purée to offset the sauce’s oral assault of heat and bitterness, and immediately bought some plantains afterwards as a reminder to make my own. They ended up as chips for the kids but the intention was there.

The most important thing about bananas is to buy Fairtrade ones. Some of the major supermarkets have Fairtrade bananas in their value ranges now, so there’s no excuse not to buy a banana from producers that pay a fair wage. Why would you want an unfair banana glowering at you from your fruit bowl? It just feels unfriendly. I feel as I type this that it may be one of those things I’m disproportionately passionate about. Congrats if you’ve read this far. I’ll move on.

 

It’s not me, it’s you

Speaking of bananas, there’s certainly some rubbish that passes for insightful commentary these days, generally of the 140-characters-at-a-time variety. “Reactionaries [are] relentlessly obsessing in the white noise of the internet,” as I put it in my Guardian column, explaining a few of my reasons for stepping down as “Miliband’s poster girl” (order-order.com’s accolade, not mine) and hugging the Green Party instead. In 2013, I met Ed at a party conference and asked him what he was going to do about food banks and zero-hours contracts and the correlation between the two. His reply started with: “If we get into government . . .” I shouted at him: full-on, temper-lost shouting. It’s a disgrace that families have to go hungry for a day in the sixth-richest economy in the world; advocating the idea that they have to hang around for 20 months and hope that Labour gets elected before anything changes was unbelievable. A bit of me died that afternoon. The relationship started to crack, like a chip in a favourite teacup you carry on using anyway, knowing that one day it will shatter in your hands and scald you.

At Glasto’s Left Field later in the year, I described my loyalty to the party as akin to my relationship with my four-year-old son: they can be a little shit sometimes but you love them so you stick by them. My son listens and modifies his behaviour when he’s in the wrong, which is fortuitous as, unlike the red-for-Green exchange, I can’t just cancel my direct debit and get a new, slightly better-behaved one. Labour’s last straw was the “immigrants and benefits” scaremongering in one of its national leaflets. That’s not the party I joined. But it’s the party I left.

 

Dancing queens

On to lighter matters. A friend called to say that she had tickets for Nile Rodgers and Chic at the Roundhouse in Camden and to ask me if I wanted to come disco dancing. Being 27, I wasn’t the intended audience, but instead of asking, “Who?” I had a listen online in the days before. The wonders of modern technology: no more hovering around the radio all afternoon, waiting for a song to come on so we could push down the play and record button simultaneously and impress it on to a cracked old cassette . . . It’s just a quick search away now, which is more efficient but somehow less thrilling.

We went along in our band of four, in luminous shirts and flat, sensible shoes, quite unlike the ones I went dancing in during my heyday as a shots dolly at a local nightclub (there are photos somewhere, but thankfully I don’t have any and nobody would believe it was me anyway). It was a hoot: a happy-go-lucky, shuffling, disco hoot. We managed to be out by 11pm, too – it really wasn’t like that in my day.

 

Ministers in flight

Kitchengate – Sarah Vine v Ed Miliband – is rumbling on, with a brilliantly clear photo of a Private Eye column doing the rounds on Twitter. In this way, a good barney can rumble on for weeks as it drifts back again and again into the consciousness of the chattering classes. I was heartened to see the rambunctious Jay Rayner getting involved, querying the brass neck of Mr and Mrs Gove reportedly having the taxpayer fund a £750 Loire table and £66,000 of home decor and calmly facing down Vine’s bleating about being “trolled” (loosely interpreted to mean “publicly asked awkward questions about where the taxpayers’ money went”).

Mind you, Michael Gove is a man who gets a £110,000 limo service to take him from Downing Street to Westminster, a distance so pithy that I could probably hammer-throw him from A to B myself. I imagine I wouldn’t be the only one volunteering for this new, green, low-cost mode of transport: MP-hurling, better for congestion, the purse strings and the environment. I’ll put it in the Greens’ suggestion box.

 

This charming man

Finally, I was deeply unimpressed to open the Guardian one morning to see Kelvin MacKenzie gurning out of it with a byline. I still feel a little grubby from the time he sat next to me at dinner before BBC Radio 4’s Any Questions? last year. His charming opening gambit was something along the lines of: “I’m sorry I don’t know who you are . . . but then I’m not very interested in girls who look like you.” This came with a disdainful hand gesture at my lumberjack-shirt-and-vest combination and the sleeves shoved up to show off two arms full of tattoos. I chalked that one up as a barometer of decency. Given what I know of Kelvin’s interests, I’m relieved not to be one of them.

Jack Monroe is the author of “A Year in 120 Recipes” (Michael Joseph)

This article first appeared in the 27 March 2015 issue of the New Statesman, Easter Double 2015

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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?