Imagine an individual “Joe Blogs” living in a home that was worth £300,000 in boom times, now worth £275,000 and a mortgage of £250,000. Joe has a car loan and also a personal loan totaling £20,000. There is also £3,000 on credit cards most of it subject to interest. And lets assume Joe earns £50,000 which is twice the national average but spending all his income every month on himself and his family.

Is Joe wealthy?

In my opinion No and for now we have ignored pensions. But Joe claims to be wealthy and tells his friends about how much he earns and how much his house is worth. The car is changed regularly, the holidays are non budget and Joe dresses expensively and always looks tanned. (we are talking England not the Med!!). He claims to be worth £300,000.

Now lets assume that Joe’s income falls or his spending increases as prices go up, and he starts leaving IOU’s at different shops.

Should Joe continue or change his lifestyle. Joe ignores the question for several years and continues to put more on his credit card and writes a few more IOU’s.

Joe’s response is then to move IOU’s to credit card debts and then to personal loan debt and even to add to mortgage debt. Joe blames his lenders when interest rates go up or they demand higher repayments on capital and Joe grumpily is in denial.

Now imagine that Joe is a country with a national infrastructure instead of a home and the debts are still there, but just called something different. The IOU’s are what we call PFI’s, not really debt according to the statistics and we really do not know how many there are.

High finance at the national macro level is nothing but a simple extrapolation of the household budget and we do not need economists to help us, but they make it sound so complicated with terms like QE, Balance of payments etc.

Joe needs to spend less or to get a better paid job.

As a country we need to do the same. We can attract more companies to our shores, we can encourage enterprise at a local and national level, we should spend on infrastructure in an organised way (eg each rail company has its own design for rolling stock which forces up prices and hampers what little opportunity for exports). But we have to cut back too. The last 10 years of Labour saw an increase of a million in the public sector payroll numbers, and yet the government has pretended to have a 3% per annum target for improved efficiency. In my opinion half of those jobs should go. Maybe all should go but lets not be rash today. There are many other simple practical steps we should be taking but for now we are like Joe, grumpily in denial and blaming everyone but ourselves.