Thursday, January 08, 2009

How long before Brown does a Wilson?

Why is it, when I read the news that the Government is considering the hilarious and opaquely named "quantitative easing" (i.e. printing more money) I instinctively look to the sky and scream "are they truly bloody insane"? Don't get me wrong, I understand why they are considering it, it's because instead of fearing inflation they've switched direction and are crapping their pants about the possibility of deflation instead.

Printing more money would of course devalue the pound (can it go any lower?) and in effect, by politicians making the decision the independence of the Bank of England is brought into question and the pound heads towards being some sort of fiat currency. I presume that the idea is to do it in a manner whereby inflation is kick started and the possibility of deflation is, in theory at least, reversed.

There is however a wider political implication of this, which is that the pound always seems to be trashed to pieces when Labour get their hands on the wheels of power. That is to say that the pound devalues rapidly and then a Labour Chancellor is forced to take action that results in greater devaluation.

I am left wondering though how long it will be, should they really start printing money, that either Darling or Brown find themselves defending the decision and come up with their own version of Wilson's infamous gambit that "it does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."


marksany said...

The presses are already cranking up, according to John Redwood. Pouring petrol on a fire, in an attempt to put it out?

Blue Eyes said...

The pound is already 30% down, massively more than after the ERM exit back in the day. The chancellor is totally mad, this will all end in disaster.

Why did people think this Labour government would end better than all the others?

DavidNcl said...

I thought the term "fiat currency" was used by the Austrian economists to mean currency not directly backed or convertible into gold (or some similar standard commodity). Their use of this term was meant to highlight the hazard inherent in these sorts of currencies.

dizzy said...

It is, I was being deliberately provocative. :)

Unsworth said...

At the time that Wilson made that statement I was fighting for Queen and Country in the Middle East. The immediate effect of devaluation was that our rolls and coffee purchased from a local cafe cost just that much more. Interestingly, those shop owners had calculated exactly what the new exchange rate was - long before we even got hear Wilson on the World Service. So his 'here in Britain' may have been true, but that was to ignore the effect on the many Britons abroad - still they were hardly going to vote for him, were they?

Michael said...

I was at RAF Gan when the Wilson devaluation was announced. The RAF radio station broadcast Land of Hope and Glory before putting on the BBC announcement.

All our overseas allowances were trashed and it took over a month for MOD to come up with the adjustment.

I remember approaching my Singapore landlord for an adjustment in rent. He laughed...........

T England said...

So unelected Brown is thinking of printing money or doing a helicopter as some prefer to call it, are we in trouble or what?
But look over seas to unelected Browns hero Obama!
Yep he's doing the same thing!
Obama is borrowing a trillion to get the ball rolling & then it is said another four or five trillion after that!!!!
America is said to be really slipping into a deep recession, like we didn't know!
America is already looking for ways
to stretch their bottomed out interest rate! what else can they do, not help us or unelected Brown!

It surley feels if Britain needs to helicopter in money we have nearly reached the bottom.
The thing is!
This fianacial mess is not over yet & the bottom could be quite a way down the road!

Who can save us now ;o)

Gannet said...

I was there during the Sixties, not swinging, alas, but struggling to pay the mortgage and feed the screaming kids (what changes?). Compared to Gory Brown and Darling, Harold Wilson and George Brown were economic and financial geniuses. Seriously flawed, certainly, but not barking mad.

Sam Duncan said...

I've compared Brown to Callaghan in the past (if not here, well, I have) but actually that's a bit unfair on Sunny Jim, who at least had a vague clue that sound money might be rather a good idea. Gordo is quite clearly away with the fairies now.

kinglear said...

Sam Duncan - yes I rather agree with you about Callaghan, he always seemed a seriously nice chap who did actually beieve in the pound as we knew it then.
Also, of course, the likes of GEORGE brown enlivened the non-PC atmosphere. I'd rather have him than the present freak any day

judith said...

Yep, I'm another wrinkly who can remember Wilson's broadcase - oh, how we laughted!

Remember Labour's Selective Employment Tax - a instruction manual on how to ensure employers created fewer and fewer jobs?

And Wilson's fake pipe-smoking act? and the sleaze of Lord Kagan of Gannex?

Anonymous said...

The problem is the banks foreign debts, they can't roll them over, nobody wants to lend to them. If you look at RBS, there debts are about 1.2 trillion pounds. Gordon plans to print the cash to pay these off. This is just one bank, Compare that to total national savings of 468 billion pounds, hyper-inflation is coming. Buy gold.

CityUnslicker said...

My thinking for today (it changes alot due to me reading too much) is that we won't get to bad hyperinflation.

The bond markets or IMF are going to be tapping the Labour Leaders on the shoulder before we get there and they will be led away from the vehicle.

Lola said...

I have lived through both Wilson's and Brown's juntas. One of the things they have in common is that they are both inherently deceitful. Wilson redeemed himself somewhat by keeping us out of Vietnam, whereas Brown is fundamentally complicit in getting us involved in Iraq. Apart from that they both lied to me consistently and distorted statistics.

Neither of them cared a fig for wealth creation because neither of them understood it, in practice. Wilson was an economist (I think I recall) and Brown reckons himself one. But essentially they just do not get the whole wealth creation thing. Wilsons statement that he would use public money to pick (commercial) winners shows his fundamental ignorance of investing, and these are phrases echoed by Brown. (So, if they are picking winners they must also be picking losers - so who are they then?). Clueless.

Similarly neither of them understand how high taxation and governemnt spending always and forever leads to fiscal disaster. They both wrecked the currency in the process.

Wilson was ill when he went, Altzheimers it is said. Brown is also ill, megolomania.

My bet is that he will either keep on and on to the bitter end refusing to acknowledge his total failure or he will be wheeled out of No 10 in the straightwaistcoat he so richly deserves.

Thatsnews said...

"How long before Brown does a Wilson?"

What? Seemingly losing his marbles and seeing plotters behind every doorway?

But in fairness to Wilson, he refused to bow to US pressure and allow Britain to be sucked into a conflict that was of no concern of ours. I.E., the Vietnam war. A lesson Blair and Brown would have done well to have remembered.

Jabba the Cat said...

It should not be forgotten that grocer Heath was also a mediocre leader of the Tory party, and an equally mediocre prime minister who did not have the spine to stand up to the unions and stay the distance. For that we had to wait for Mrs Thatcher.

The big question is whether Call Me Dave, the Boy George, the Invisible Hague and the rest of the part timers who make up the Tory front bench have got what it takes to implement the hard cuts in public expenditure and the necessary accompanying cull of public sector employees, together with facing down the resultant strikes that will be called by the unions and backed by ZaNuLab and the LibDims in parliamentary opposition.

Man in a Shed said...

It has to be remembered that inflation is a very attractive way out of this debt crisis for the government.

The only reason for not saying so is that Brown and Darling need a large amount of cash to be lent from gullible lenders before they use inflation to destroy its repayment value.

Its also help destroy the wealth of those Tory voting middle class types and makes them dependant on the state turning them into Lib/Lab voters.