Saturday, November 22, 2008

Seeing it coming but going along for the ride?

There is a rather excellent posting on the Coffee House by Fraser Nelson noting that not only has Brown finally admitted he was mistaken to say "boom and bust" wa sover, but that the commentariat, in which he includes himself largely failed to spot the trouble coming either and bought into the myths that things were great.

He notes that there were lone voice that were treated like Lear howling at the winds who did spot it coming, Jeff Randell, John Redwood etc, but that they were considered "ideologically-driven mavericks". He is right on that point I think, and whilst I myself would never claim to be an economist, I have to say that I did often say in discussions online with my American friends long before this blog was started that things were going to end in tears.

I can remember as far back as 2001 arguing online on bulletin boards that the line "historically low interest rates" both here and in the US was a dangerous and pointless line to be taking. Low interest rates, the availability of easy credit, coupled with a seemingly insane boom in house prices, was a recipe for disaster at some time in the future. Low interest rates meant no one was saving and everyone was racking up personal debt instead.

Of course, whilst I was arguing this point with people like the guys at The Crossed Pond I was also going along with the ride and doing what everyone else was. Go me! Still, we're now in a situation where the economy is built on debt, and it does seem rather insane to say that the only way out of that is for the Government to borrow even more money in order to inject stimulus into the economy.

The real problem we have though is much more political I think though. The truth is we shouldn't, I think, be borrowing even more to pay for tax cuts today that will have to be repaid back with tax rises tomorrow. What should be happening is cuts in public spending but this is where the political problems comes in.

The last ten years have seen politics framed completely disingenuously by Brown and Blair. Thus a proposal to cut spending by £20bn ends up being portrayed as a "hospitals closing". It's complete bollocks of course. Take ID Cards, a £12bn project that is unnecessary, that could be cut and would pay for a massive rise in the tax-free threshold at the bottom of the income ladder, something which is much needed.

Will it happen though? Of course it won't. Every single penny of public spending is, sadly, considered to be essential for public services. No one really believes it when you take a look at the crappy non-jobs that get advertised in the Society section of the Guardian, but still it goes on. If the Government were to genuinely give people some of their money back people would start to spend it and repay off some of the personal debt they have accumulated in the bubble we've all just been in.

Keynes may be seen as a wonderful soothsayer and master of economics, but we all know where his views led in the UK. Slow economic decline that was managed by the Tories and Labour, both culpable until Thatcher came along and shook it all up. The worst thing is that now we're in this situation there are those saying it shows the failure of Thatcherism, which is simple not true. Britain's problems now are not because of an "ism" but because of failure in economic management by Brown.

Had Brown done as he said with borrowing and made it fall year on year, rather than rise we would not be having a PBR on Monday that proposed jam tomorrow that would be taken away from us the week after.


Barnacle Bill said...

Unfortunately our glorious unelected Leader is such a self serving political animal that he has painted himself into a corner with all his mantra about whatever he does is right.
Common sense would dictate that ID cards be at least put on hold to allow those funds to be diverted elsewhere.
As you so rightly point out dizzy, there are a whole tier of non-jobs that could be cut to free up government funds.
Instead of doing the right thing on Monday we will have the usual smoke & mirrors budget designed to make OGUL look good at the Tories and unfortunately our expense as well.

Cassius said...

While we are at it, why not turn the whole personal data thing around. The more data government collects and stores, the more wasteful uses they find and the more they spend.

If this recession has any silver lining at all, it's the potential opportunity to regain some personal freedoms and turn Government back into the service provider & safety net they ought to be, rather than the Frankenstein dictatorate which Labour have created.

Anonymous said...

"massive rise in the tax-free threshold at the bottom of the income ladder, something which is much needed."

Hear, hear!

By reducing the "wedge" between what employers pay and what employees receive, this would lower unemployment at a stroke.

It would also encourage more civilised hours for more employees, thus improving work/life balance. It would be fairer, since it would put honest poorly paid workers on the same field as those in the black market. It would encourage people off benefits by increasing the returns from working.

Cassius said...

I see someone has pinched my moniker. Let it be known that I am the true and original Cassius (apart from the one in "Julius Caesar").

But I do not have any copyright, dammit, so I'd better assume another nom de plume. Grumble, grumble.

Red Socks said...

But services have been reduced. Not only are there many fewer hospital beds but a lot of hospitals have lost major services to others. The so-called 14 Priority Services means effectively running down or privatising the rest. Are you old and need carers? Fat chance for most. Are you disabled and need extras support? YOu must be joking.

The Wilted Rose said...

What's Brown's election pitch going to be? Vote for him for more disastrous economic policies?

He's got the boom and bust, which he always said there'd be no going back to, and he's heading towards the 3 million unemployed too...

Lola said...

There is a lot to discus in this post. Firstly I want to blow my own trumpet. In 1997 I was scheduled and prepared to give a presentation to a bunch of accountants. It was the day Brown announced the taxation of pension funds. I knew immediately that New Labour was Old Labour and intent on tax and spend and that we were financialy doomed, and so it has proved. Of course no-one listens to me as I am just a small FS bloke from the Styx.

As far as I understand it every goverment except Thatcher but especially Labour has wilfully misinterpreted Keynes. He recommended that extra government spending in times of crisis would be a Good Thing - Labour have intepreted that as being that big government spending was beneficial at all times. Cobblers.

Brown / Blair are / were total politics. Nothing they have done or will do has anything really to do with boosting the UK. Generally their policies and actions have been to do with marginalising the Tories and creating a client state. The whole New Labour 'project' is about creating an impression of competence and persuading the Voter that black = White. And they have been very successful at this.

We now stand at a crossroads for the future where we either head down a road defined by bureaucratic capitalism or we branch off own the more sunlit lane of freedom and liberty.

I have never been more worried in my life that we may end up on the wrong dark road.

Tayto said...

Interesting to note that Darling and Brown want the banks to increase lending.

Now we are told that debt is bad, yet lending is good - can someone explain this for me?

Alan Douglas said...

Phil, I do NOT see where “Brown's admitted his mistake” per Fraser's headline.

Brown said “Yes. Of course politicians make mistakes and I've got to be honest that we've made mistakes.”

Brown has generalised that “politicians” make mistakes. So that is ALL politicians. Nothing to do with him specifically, except insofar as he might also be a member of that tribe.

“I've got to be honest” - a sure sign of the opposite.

“that we've made mistakes” - “we” is NOT “I”. So who is “we” ? Answer : all politicians, which leaves hanging though unspoken “such as Thatcher who blah blah, Major who diddle-di-dum, even Blair who rada-rada”.

There is not a shred of Brown accepting that HE made a specific mistake peculiar only to him, nor of any remorse or apology. And there can’t be - Brown is so delusional that to him it is inconceivable that HE could make a mistake - to do so would shatter him, in effect kill him - he is asserting rightness, as he always has. There is nothing else in his universe.

Alan Douglas

WV : inglogic