Mervyn's done it again

blown Gordons pmq's denials right out of the water....maybe he will now see sense, though i suspect he is in denial and its the IMF bailout next...

Surprisingly strong words, Nick. I think Brown attempted to explain, but made a royal hash of it. Why can't he just admit to what is plain as day? Why does he think that being a stubborn liar is a better strategy? And how can he talk about reforming politics and bringing about transparency when he obfuscates, blusters and downright lies at the dispatch box at PMQs?
Let's face it, Brown's govt has no interest in trying to fix the deficit problem or the debt problem or indeed any other problem facing the country. They know they're busted at the next election, so it's just a dirty ploy of talking about investment they know they won't be able to make, and then when the Tories or some coalition govt get their hands dirty making the necessary cuts, Labour can crow about what they'd have done and how many nurses and policemen have been lost. It's just a bit pathetic. What a laughing stock our country must look to the world!

Conservatives just want to sell us all down the river and them get as much money out of Britons workers
Conservatives believe that 4.5 million unemployed is worth it if they can reduce the ND now

Has any government failed so spectacularly to react to a modern medium?

Royal families have embraced the radio and television.

Kennedy and Churchill embraced the media.

But Gordon Brown continues to think he can continue with this line if I'm right you're wrong whe the information age can prove him wrong at the touch of a hyperlink.

https://www.ft.com/cms/s/0/8278a416-5f74-11de-93d1-00144feabdc0,dwp_uuid=e70ca99e-a4b0-11db-b0ef-0000779e2340.html

Perhaps Downing Street would be helped by a media advisor who explained to him how other people use the media and not how he can try to manipulate it.

Information is all around us about how indebted we are and how much money te government has wasted; it's not even a matter of opinion anymore it is a matter of public record that efficiency in the public sector has been falling under newlabour.

newlabour are incompetent, complacent and arrogant and this is why the countrt wants an election.

Call one.

So the cat is now out of the bag!

This Labour government is going to have to cut spending and do it in public rather than the stealth method currently in progress.

So much for Labour `investment' and Tory `cuts'.

As a nation we now have to trim our state according to the available funds and they are much diminished.

To maintain what is left of its credibility with its main client base in the public sector and minimise its potential loss of seats Labour has to go to the country early.

So, any takers for an autumn election?

What the electorate don't need right now is a lot of pathetic, childish, school playground name calling from our politicians; we ARE in a financial mess with massive borrowing and a hugely inflated Public Sector both of which have to be reined in. So for Gordon Brown to pretend he is fighting the battles of 1997 is simply astonishing - the man simply doesn't get it; WE WANT HONESTY FROM YOU, NOT POINT SCORING.

I genuinely believe that Labours last chance to limit the damage that the next election will bring them went when the PLP showed themselves to be spinless by not dumping Brown after the utter humiliation of Labours performance in the Euro results. You get the feeling that the electorate has made its mind up over Brown in the same way they made their mind up over Major a couple of Years before the 97 election.

Bye Bye Brown.

3. At 4:17pm on 24 Jun 2009, york1900 wrote:
Conservatives just want to sell us all down the river and them get as much money out of Britons workers
Conservatives believe that 4.5 million unemployed is worth it if they can reduce the ND now

------------------------------------------------------------------------

Could i ask you politely to just expand and qualify those remarks

#3

Whilst no one likes to see 4.5 million out of work, piling on the national debt will undoubtadly result in much more pai down the line.

So: 4.5 million now or 7.5 million in 5 years time? Take your pick

I believe that Mr King, in his ever so diplomatic and gentile way, is carrying on distancing himself from the Treasury....and who can blame him. He knows, we know, every MP in the 'House' knows that public spending has to reigned in from the earliest possible moment...Gordon probably knows too, but is deluded enough to think that if he continues to say that black is white, and says it often enough, that we will all suddenly realise that he is right and everyone else in the country (and beyond as it happens)has been wrong. Dolt.

For the first time in ages I managed to catch the first half of PMQ's, and I really got the impression that the Labour benches were utterly embarassed at the performance of their leader. Cameron made him look a fool. Labour MP's must surely be sorry they didn't take their chance a couple of weeks ago and send Gordon off to the vet. Sad to see really, a once powerful man utterly humiliated.

Brown thinks he is being so clever with his double talk and euphamisms for the word debt and cut backs; but because of all the disasters (all of his own making) that have befallen him since he became PM, no one believes a word he says anymore.

Like it or Cameron has been proven to be telling the truth about the UK`s economy. We are in deep doo - doo and Brown`s massive borrowing, to appease Labour voters, has been shown up to be what it is. A right cock up. We need to stop right here and now and start facing up to the reality of life. Mervyn King is right when he says the government needs to formulate a plan as to how it is going to pay back the mountain of borrowing. Its no good waiting until after the next General Election, which is obviously Brown`s plan A. If we do the country i.e us will be in greater debt. We will have to endure higher taxes and more savage cuts in the public secotr. Better to swallow the pill now, however bitter that maybe, than to be terminally ill later on.

If you had listened PMQ's Mr Brown said that the government had brought spending forward to help us in the downturn

and the figures Mr Brown quoted are correct and if you take them as from now they do decrease over the next 3 years but if you look at the pervious years spending that they forecasted to 2012 you see that they are up on the forecast therefore Mr Brown was right

Mr Cameron just went on the figures from today and tried to make out that government spending was been cut but the facts are that to 2012 the total is increasing

@3, york1900

And what exactly do you think Labour have done?

You and so many others like say "the Tories will do this, the Tories will do that" in effort to deflect from what Labour *have* done. You really think trotting out a load of maybe's and what-if's is any defence against the utter mess Brown and Blair have left?

Devalued exams, target-drive services, immense debt, greater inequality and a society and education system so damaged companies would rather employ East Europeans than native workers.

Thats Labours legacy. It's really hard to see how anyone could do worse, so good luck trying to suggest the Tories would. I suspect the reality of whats going on now will trump any scaremongering you wish to try.

The 30% devalution of sterling is now hitting raw materials. Prices of essentials are rising rapidly, particularly in the supermarkets. The BBC doesn't report these developments. We are facing significant inflation. Brown has ordered the BoE to print two billion pounds every week, to buy up the UK government's debts.

What it means for Joe Public is that, if he's working, his wages are devalued, and he will end up paying much more for just about everything he needs. If he's retired his pension and his savings will suffer in the same way.

And who is to blame? Blair and Brown (together with Bush) for a false prosperity based on spiralling debt. Its incredible that Brown is still in office after such monumental incompetence.

He's there because of a fundamental flaw in the 'unwritten' constitution of the UK - 'parliamentary sovereignty'. A supine body of Labour MPs keep him there because they are afraid to ditch him because they will lose out.

Sovereignty needs to be put in the hands of the citizens of this country, as it is in most other western democracies.

We're not going to get that essential basic reform, because its not in the interests of either of the two parties. They govern alternately in perpetuity on a minority of the votes. Its lazy politics, leading to the inevitable arrogance and complacency that we're familiar with, and the country and people are suffering because of it.

Does it require a 1789 or a 1917 approach?

Hats off to Mervyn - whop does look a bit like Geoffrey Howe but probably won't rid us of Gordon.

He is not being partisan, so far as I can see, he is thinking of the National Interest.

Gordon does not want to do too much regulation else he confirms that he is indeed partially responsible for the causes (debt bubble/cheap credit and bank regulation).

In fairness to Darling there is a need to consider whether cutting too much too early will be a help not a hindrance.

But to leave the cutting to the next government is irresponsible and shows the kind of failure in political joined-up-thinking that led us to the crash, Iraq, 10p, 42 days, ID cards, collaboration in torture and so on.

Brown does not want to do too much cutting as he sold the Labour Party on ending boom and bust.

Now he is considering the next election and thinks the public are fools and won't work things out - we won't have a painless rebound and a return to things as before we will have a long period of cuts and economic pain.

Shame on Brown!

PS Where is McBride - does he sleep with the fishes.

Thank goodness Mr. King sees fit to intervene on behalf of the British people and apply political pressure to the Government. This in itself is unconventional and unconstitutional, but it is worrying that the Government seem to be putting Labour's interests ahead of the country's with their reluctance to address the debt crisis.

Just look at how quickly the public finances are deteriorating? I've not seen such a stark illustration of where we stand:

https://www.debtbombshell.com/

#3. At 4:17pm on 24 Jun 2009, york1900 wrote:

"Conservatives just want to sell us all down the river and them get as much money out of Britons workers
Conservatives believe that 4.5 million unemployed is worth it if they can reduce the ND now"

Unfortunately they might be correct, a short sharp shock rather than years of stagnation (as Japan endured in the 1990s), and I say that as someone whose family suffered from the recessions and unemployment of the 1980s. National debt levels is going to be a big issue in any future recovery (and I'm not convinced that we have actually hit bottom yet...), reducing it isn't going to be like the early 1950s when the UK had a lot of control over what it could manufacture, export or control and/or tax imports and thus obtain revenue etc.

Not that I'm saying that what Brown/Darling did wrong by increasing ND, you can't put a house fire out without using water, afterwards you still have to clean up and sometimes that can temporarily cause even more distress before things get better - if you don't clear up and repair, the roof leaks and everything just stagnates.

Time to face up to the Labour debt bubble; the discrepancy in pensions between the public and private sectors; the ongoing structual deficit; and the PFI liabilities. The Conservatives do right to wait to disclose their economic policies - it's clear there is a train-wreck as a result of the policies of Brown and his malevolent cohorts.

11 - York

Nice try, but whichever way you look at it Gordon said last week that capital spenidng would increase year on year up to 2012. It isn't. It drops from £44bn - £26bn.

Even his own side, his own cabinet, think he's wrong...as evidenced by the cabinet report DC read out at PMQ's. (Cooper's face was a picture...'Scream' I think it's called... as was Capt Darling's).

No-one believes him, apart it would seem from your good self, on anything, at all. Such a shame that the new Speaker doesn't have the authority to say, 'Prime Minister, you know that's a load of old tosh, try again'.

Public finances are going be under pressure after the next election whoever is in power. End to boom and bust? No... bust in the private sector will be followed by bust in the public sector.
Perestroika is not going to happen any time soon - see https://moralorder.mediumisthemess.com/
New Labour, Old Mirrors

I don't know what Brown is frightened of. It seems as if things are not going to be quite as bad as predicted in some quarters. Public perception magnifies all economic situations, so we were not as well off as we thought in boom years and the bust years are not as bad as people fear.

This autumn the government should make a clear statement of their spending plans, claiming they are necessary to meet with the actions taken to reduce the severity of the (global) recession, challenge Cameron to find out what he would do and watch him wriggle. If Cameron comes up with a coherent account of his proposed spending and its consequences then he has earned the right to be PM. Cameron has proved to be a very effective leader of the opposition (if the aim is to destabilise the government), but that does not mean he has shown sufficient potential to be an effective PM.

There has got to be a time when Brown comes out of his bunker. If he doesn't he is not the leader the country needs. We could then be saddled with a PM who has not even had to work to get into power. Too many people have worked for bosses who were in the right place at the right time to be confident that the result is the right one.

At the very least Gordon should make David sweat.

I think this is Mervyn King's way of reminding our leaders what a disaster it would be if the UK lost it's AAA rating.

In terms of Brown's stewardship of the economy and whether the Tories would have done it better is concerned, the argument's academic.... both the main parties are neo-liberal free market fundamentalists - there wouldn't have been a big difference in where we are now, it's not possible.

The UK will continue it's bubble economics unless there's a political change.

Cameron's statements from the Cabinet by Darling and Cooper make it plain that Brown is still lying through his teeth at PMQs. This is simply not acceptable. When are the MSM and the Beeb going to turn on this man and ostracise him - he is a disgrace, his government is a disgrace, and they are destroying my country.

Bercow had a reasonable début, and his performance highlighted how appalling Martin was.

At least Brown didn't come up with last week - and previous weeks' - lie, in which he quite extraordinarily claimed that 200,000 people were getting coming off JSA each month.

If he really wanted to do the country a service, he would stand down.

"# 22. At 5:33pm on 24 Jun 2009, JeremyP (awaiting moderation)

Where's my comment?All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it."

Uh? New member? I may not post here often, but I am certainly not a new member. Apologise please!

Just watched PMQs on the iPlayer: Gordon Brown shameful, as ever.

As the world and his wife looks on the UK knowing that public spending absolutely must be cut if we are not indeed to go bankrupt, Brown trumpets yet again how he intends to (but, of course, cannot) spend more than the UK can possibly earn from taxes and/or borrow on the markets.

Gordon Brown looked lonely today at PMQs; his front bench sat stony-faced and embarassed. His backbenchers were nowhere to be heard. We really are watching a desparate politician, drowning not waving. How much longer do we have to put up with this? Why on earth is the Cabinet so paralysed with fear in the company of such an appalling bully?

After so much news about the catastrophe that is now British politics, Mervyn King is simply joining those commentators who have been pointing out for some time that political catastrophe is leading inexorably towards economic catastrophe for the UK.

And at PMQs today, yet again Brown proudly beat his chest and bellowed about spending and spending and spending money that he simply does not and will not have. The man's a completely deluded idiot.

The simple truth is - spend more, invest less = less money to support a collapsing economy.

It is the hole in a wet paper bag time, pouring more water into it is not going to fix the hole, it is going to just make it bigger.

Less borrowing for businesses so that more businesses go bust and therefore more unemployed.

I am afraid 'York' - Brown's already well on his way to your 4.5million unemployed and he didn't have to become conservative to achieve it - the recession is only just beginning.

D'oh!

13 BrynnTello

I agree. Inflation was going to be a problem before they introduced QE. Suppliers have been running down stocks to bare minimum over the last six months to conserve cash flow but they are now having to restock. Where is the bulk of this coming from. China of course. Because of the devaluation of sterling prices of new imported stock have gone up approx 20% to 30%. Ask any retailer or manufacturer if they can afford to absorb this and not put their prices up. Highly unlikely. So we have imported inflation.

Which country is printing money on top of its huge savings ratio and starting to dump it on the markets again? China of course.

Mervyn King spelled it out in a very subtle way this afternoon that the world's financial institutions must get together and agree how their different policies are affecting the markets. Too many imbalances to be addressed.

Too much liquidity at a time when it should be drawn out of the system means only one thing. The start of hyperinflation and high interest rates.

I can only assume that meetings of Hitler's generals in 1944 & 1945 as he ranted about how soon they would be delivering a mighty blow to the allied forces must have resembled Brown in front of his front bench at PMQs today.

The man has lost it and it's clear he won't stop spending what we just don't have until someone stops him.

This comment was removed because the moderators found it broke the house rules. Explain.

Since this seems to be a Government which listens... eventually, hopefully, Mervyn King's comments will be acted on or at least assessed against the situation we are in.
Whatever the Government does in response to Mr King's comments, It will be flagged up as a U-turn... again... of course.
But we can't have it all ways... we either have a Government which listens to informed opinion and public pressure or we have one which goes its own sweet way regardless... wherever that takes them... and us.

# 25 Maurice Byford

"... the recession is only just beginning ..."

Yes, this is the most alarming point that the overwhelming majority of the British population has yet to grasp.

A small investment in time spent researching and reviewing a few of the more technical, apolitical sources of information to be found on the web will quickly throw up some hard realities about the state we're in. Indeed, the mainstream media reports the nature and scale of the looming problem too (see links below), but it continues to surprise me how sanguine the public seems about our future economic circumstances.

The situation ahead is at the very best uncertain, and at worst we're heading for armageddon. For as long as this Labour Government remains at the helm, the latter scenario grows more likely by the day.

One wonders quite what it will take for the British people to wake up to this one: a surprisingly high proportion of the electorate still think that Brown is the man. Que?

https://tinyurl.com/dj6pgs

https://tinyurl.com/n45yqf

https://tinyurl.com/c5f995

13. At 4:49pm on 24 Jun 2009, Bryn_Teilo wrote:
...Sovereignty needs to be put in the hands of the citizens of this country, as it is in most other western democracies...

Does it require a 1789 or a 1917 approach?...

On both of those occasions at least the majority of the army was very soon on the side of 'the people'. That would not happen here. We also have, in effect, an armed police force which would side with the Army (or the Government in the event of the Army's non-involvement).

It has to be spelled out slowly for some folks, doesn't it?

Gordon Brown is finished. The only person who does not think that is Mr Brown himself.

The economy is in very poor straights and despite all the puff about green shoots is still deteriorating, albeit slower than a few months ago. We all wish it would get better but it is going to be a very long haul. That long haul could be shorter if there was an outbreak of reality now at the top.

The question the political class has to address is that there are going to have to be cuts in public spending, so what are those cuts to be? This is the debate we need to hear; not the `four-legs good; two-legs bad' type of argument that the more antediluvian on the left are shouting about.

It is this discussion the Labour Party seems unable to address. There is a choice here; either a slash-and-burn slaughter of the innocents we would get from the IMF or a carefully costed, radical reassessment of the public sector that maximises value and retains people in constructive work. This is the debate we need to see, but it is just not happening.

If the Labour Party adopted a such a realistic programme now then the time they would be out of power could be shortened and the Tory majority minimised. Are they capable of thinking that far ahead?

I won't answer that question as I fear the answer. What I don't want to hear any more is this nonsense about `Labour investment or Tory cuts'. It is trivialising a very important and critical debate whose outcome will affect us all in one way or another.

Merv's suggestion that we need to reduce government borrowing should come as no surprise. Apart from Brown, most people understand that you can borrow your way out of debt. The question is, why has Merv taken so long to speak out?

It's difficult to believe that Brown and Darling really believe their spend-spend-spend policies are for the best. In fact it looks like a policy of 'scorched-earth', to create as much of a mess for the next government as possible.

Far from deriding policies for cuts in public spending, it may well be the case that people will vote for the party which offers the greatest savings. Everyone wants the NHS to be 'ring-fenced', but there is plenty of scope for cuts elsewhere. Eg Trident and ID cards

31. At 6:00pm on 24 Jun 2009, moraymint wrote:

...The situation ahead is at the very best uncertain, and at worst we're heading for armageddon. For as long as this Labour Government remains at the helm, the latter scenario grows more likely by the day...

https://tinyurl.com/dj6pgs

https://tinyurl.com/n45yqf

https://tinyurl.com/c5f995


Scary.

7. At 4:35pm on 24 Jun 2009, ghostworld
18. At 5:09pm on 24 Jun 2009, middleenglandtim

I have been through a Tory fix it before and it was not nice high unemployment and wages driven down except for top few

And what DC keeps coming up with would hurt us a lot more as Labour are trying the keep all things level

I do not want to go back to the Tory way of fixing it as I am now to old for that sticking loads on incapacity benefit as they are over 55 as employers make redundancies of older staff

The Tory's will make a few quick fix's

(1) Scrap the minimum wage
(2) scrap working hours directive

And doing that we will be back to the Country making a profit again

The dishonesty and cowardice of both Labour and Tories in their utterances on public spending is depressing. Spending must be reduced dramatically or tax increased dramatically. This is obvious to everyone.

The only other alternative - and that can only be temporary - is continued borrowing. But current borrowing levels are unsustainable. Before too long we will find it impossible to sell our debt on affordable terms.

The government's hope is that the economy will at least start to improve significantly before that point is reached. Others, like the OECD, don't. Among these, disturbingly, are the Governor of the Bank of England - judging by his comments today.

The hard fact is that we are going to have to increase taxes AND cut costs AND continue borrowing (at a lower level). The longer we leave it before grasping the nettle the more it is going to cost.

Are we really going to have to stagger on for another year with both major parties afraid to act?

Well, more fool us. There must be dramatic cuts in public spending NOW - whatever the short term damage to standards of living. This government, the current opposition - and in fact the whole of this Parliament - is hopelessly discredited. MPs are the walking dead.

We MUST have a general election NOW!

To fully understand Nick Robinson's comment, above, it is also necessary to read the news item that goes with it.

The link below is to the BBC story on Mervyn King's comments to the Treasury Committee. In the story, MK is quoted as saying:

"The scale of the deficit is truly extraordinary. 12.5% of GDP is not something that anybody would have anticipated even a year or two ago, and this reflects the scale of the global downturn."

According to Reuters, the full quote is:

"The scale of the deficit is truly extraordinary. 12.5 percent of GDP is not something that anybody would have anticipated even a year or two ago, and this reflects the scale of the global downturn. But it also reflects the fact that we came into this crisis with fiscal policy itself on a path that wasn't itself sustainable and a correction was needed."


It seems to me that the missing out the second sentence of Mr King's comment changes the sense quite dramatically. The full quote shows that Mervyn King was directly criticising government fiscal policy prior to the crisis.

I (as a practicing professional economist with near-30 years of experience) concur with the criticism.


https://news.bbc.co.uk/1/hi/business/8117388.stm

Mervyn is busy covering his back, maybe he wants to hang on to his job when a new government takes the reins.Brown will be sticking pins in a wee plastic Mervyn at this very minute and plotting with his secret Downing Street enforcers how to discredit the poor wee bank manager. Maybe a sex scandal , a missing million or two , or some family skeleton could be invented to keep the cheeky wee ------ in line.

gordon brown twice said "we are spending billions on subsidised housing".. no one picked him up on this,I have searched but these "billions" are nowhere in the figures.... another lie, just like no cuts, just like he blithely says "we are helping hundreds of thousands of hard working families to stay in their homes... no wonder he was such an appalling chancellor, he has no real grip on numbers!

andy @ 28

The man has lost it

King? ... I wouldn't put it quite as strongly as that ... I do rather wish he'd stick to the bean counting, however, and stop poking his nose into fiscal policy

More (mostly) stealth taxes combined with stealth cuts from NuLab; Tories at least making an attempt at open-ness but who knows what they have planned as well. Neither are covering themselves in glory. So we are borrowed and commited up to the hilt, never mind the whys, it is NuLab that have taken us down this route as the only road to salvation.

Anyone who has worked with or for any form of government knows the complete hash they make of anything they touch; career politicians and their advisors need sacking for incompetence and replaced by solid business men and women and who have the power and authority to sweep aside the 90% of government that it un-necessary, slash waste and drive services forwards. imo whilst we are subjected to such high and increasing levels of government we stand no chance at improving the ecconomic situation, but watch those civil servants bleet.....

.......will never happen, just a pipe dream..... whilst we have incompetent government and mostly incompetent opposition and ultimately of course, the government wins and the only people with any real voice are the media and they bounce from one subject to another in a blink, what a mess

Gordon Brown is clearly following George Bush's dictum that you can fool some of the people all of the time, and these are the people you should focus on. The UK has a debt crisis. It can be resolved, but only by acknowledging there is a serious problem (say after me: my name is Gordon Brown. I'm a borrowing addict).

The OECD has also published a new set of projections for the world economy this week. UK government debt (for one year) is forecasted to be 14% of GDP by 2010, the largest of major economies, and set against a Eurozone average of 7%.

This year's forecast is for borrowing to reach 200 billion, or 500 million a day.

I'm not sure of the funding cost of 1 trillion pounds, but if it's 5% then we will be paying 50 billion a year on debt interest.

So when Gordon talks about increasing government spending remember that this includes interest payments on government debt (and unemployment costs). Soon compound interest will kick-in and we'll be borrowing more just to meet the interest repayments.

Because of this debt interest overhang spending cuts (or tax rises) will be needed just to pay for servicing the debt and this will dampen economic activity for years to come (until 2032 if I remember a recent forecast correctly). This is the legacy of Labour economic mismanagement, but no doubt the people who are fooled all of the time will blame the next Conservative Government for this.

oh, and as for the ongoing half and untruths at pmq; perhaps the situation has changed!!?? but if Cameron can't take GB apart, lets have someone who can and keep everyone aware of these inconsistencies. The media will move on and so will the public because of everyone's fickle nature

# 38 arr-jay

"... but it also reflects the fact that we came into this crisis with fiscal policy itself on a path that wasn't itself sustainable and a correction was needed" (Mervyn King).

Yes and, of course, this unsustainable fiscal policy was all Gordon Brown's brainchild; the Iron Chancellor; the politician who "saved the world"; the "no-more-boom-and-bust" man; the "clunking fist"; the G20's leading light.

If I hear one more reference to the Labour Party's economic genius (yes, there are still some commentators who reckon Brown made a reasonable fist of it ...), I'll be convinced I'm going stark staring mad.

As one who felt from Day One of the Great Project that it would all end in tears, it makes me desparately sad to realise the extent to which the British people were good and truly conned when Blair led his shower of political gangsters into Downing Street.

The fundamental issue here is that the Palace of Westminster has failed utterly. The gang of elected and unelected shysters who roam that place has spent the past decade and more taking the British people for the mother of all rides. Now, we're going to pay for it, and some.

I just hope that sooner rather than later it will be a case of "cometh the hour, cometh the man". Right now, I fear there's precious little sign of saviour.

Gordon is becoming irrelevent, he has no future and noboddy believes a word he says. There is not much point in even having PMQ when you put it in that context.

What use is it?

This comment was removed because the moderators found it broke the house rules. Explain.

#37. At 6:28pm on 24 Jun 2009, CA55ANDRA wrote:

..//..The only other alternative - and that can only be temporary - is continued borrowing. But current borrowing levels are unsustainable. Before too long we will find it impossible to sell our debt on affordable terms..//..

"We MUST have a general election NOW!"

No, what we need now is a change in policy, and that is what needs to be called for by the great British public, it's actually a non party political point that might, just might, get listened to (turkeys don't vote for Christmas and all that...), a general election without a policy change might also just end up with the same policy and a renewed mandate!

So....once again the only voice of reason comes from within the establishment itself, the governor of the Bank of England.
Here is a rare entity indeed. A man of integrity, standing high and placing his head well and truly above the parapet.
You can't but feel sorry for such a man as Mervyn King. Steeped in the ritual of the financial heart of the City of London; one of the club; supposed to be there to maintain the status quo; member of the most exclusive private members clubs in London. A pinnacle of society; lauded by the great and good of the financial district in London.
And yet here he is. One of a few. Standing up and telling the government and the country that you cannot borrow to this extent without consequences. Money borrowed has to be paid back. Eventually someone is going to have to 'pay the piper'.
If nothing else, history teaches us that men of honour do not last for long in the world of politics.
Good luck to the governor of the Bank of England.
Just don't expect your invitation to the House of Lords to arrive in the post any time soon.

I feel that there is an assumption that Tory cuts will only put other people out of work, and that my job will be safe. The experience of the 80s was that reductions in public spending, on a large scale, affects even middle earners just as much.

The beneficiaries are those with large pots of cash stashed away, waiting for the home repossessions so as to pounce. They increase their property portfolios and there is a need for housing caused by the repossessions.

I know I have banged on about this issue, but I do believe that the introduction of a maximum wage will help reduce inflation, which is the single cause that most be fought for. Not only that though, a maximum wage will stop all this greed justifying any business practice, as long as it makes a profit. That is what has caused this economic crisis. We can blame GB for not putting in place a regulatory system that was able to forsee this situation developing, but the Tories will go back to a winner takes all philosophy.

The Tories also seem to put a lot of store in the BoE being able to manage the regulation better. It didn't seem to stop three recessions in the first twelve years of the last Tory government.

The talk from Mervyn King, always defying the Government's position can be seen in context to-day, as Gideon now has shown his hand over the passing of the majority of regulation back to him. How long have those talks been going on?

It seems to me, we do have to be ready to look at the capitalist model and fix it, before we consider which party is better at running it.

Before we all rush to judge GB I think we should ask ourselves how much of my job depends on Government investment?

Hummmm

Darling is stating that his budget shows that he is increasing public spending overall and is reducing public debt by 50% in the next financial 3 year period...

The Conservatives are stating that goverment spending (IF Health is ring fenced) will fall by 10% accross all other drpartments.

Brown is repeatedly stating that goverment spending is increasing and the Conservatives will slash departemts spending by 10%.

We are in a ressision so Unimployment spending will increase, Darling is saying debt repayments are shooting up, so Brown is probaly correct is staing Goverment spending is increasing......

BUT of indervicual departments IT MUST be cut as we transfer the spending to Unimployment costs and debt repayment!

Gordon and Alistairs spend spend spend policy will not affect one segment of the labour force - the inflation proof pensions of the public sector will keep them in the manner to which a vote for Nu Labour will guarantee.

For the rest of us, pay your taxes and keep quiet.

Comment 41 : Sagamix

King? ... I wouldn't put it quite as strongly as that ... I do rather wish he'd stick to the bean counting, however, and stop poking his nose into fiscal policy

You're entitled to your opinion, but I hope in the fullness of time you are humble enough to apologise for it. Mervyn King is to Gordon Brown as Werner von Braun is to Sir Richard Branson; the problem we are facing is that we are stuck on the moon with no rocket to get home; and people like you, and others who don't know their base from their apex, are trying to impose Branson as chief of the design team because he's more compatible to a culture of glorified ignorance than is von Braun.

If you prevail we'll be back in caves before you can say knife.

#50 wasowenright wrote: Before we all rush to judge GB I think we should ask ourselves how much of my job depends on Government investment?

Not sure whether you mean investment in the traditional sense of the word, or just spending (unfortunately, following Orwell's warning, Labour have corrupted language for political effect).

The subject matter of this blog was Government borrowing. I see little evidence that the Government is investing in the rational expectation of making a future profit for the UK taxpayer.

However, if public sector employment depends on increasing levels of borrowing then I would suggest that these jobs have never been and never will be secure. At some point, under any Government, expenditure will be cut, debt will be repaid, aggregate demand will fall, and any jobs dependent on it will be lost.

Finally, is anyone actually rushing to judge Gordon Brown, as you suggest? We've watched him for 12 painful years; do we have to wait another 12 before passing judgement?

excellence @ 53

come off it, King is just another "banker" - don't be fooled by the double chin, the modulated voice, and the wavy, grey hair - he has no clue what he's talking about - you only like him because he's making trouble for Gordon

This comment was removed because the moderators found it broke the house rules. Explain.

#50 wasow:

I know I have banged on about this issue, but I do believe that the introduction of a maximum wage will help reduce inflation, which is the single cause that most be fought for. Not only that though, a maximum wage will stop all this greed justifying any business practice, as long as it makes a profit. That is what has caused this economic crisis. We can blame GB for not putting in place a regulatory system that was able to forsee this situation developing, but the Tories will go back to a winner takes all philosophy.

----------------

does that mean that as I am self employed that I can decide to work 'all the hours God sends' to better myself and my family but have to cap my earnings?

---------------------

#50 wasow:

Before we all rush to judge GB I think we should ask ourselves how much of my job depends on Government investment?

---------------------

none of my work relies on Government spending, does that make me bad for wanting to earn a good crust and still think that government/local councils need to have a better insight into how to run things profitably.

---------------------------

Sagamix - I know you will think that this makes me a 'Tory' but i have never actually voted the same twice and still cannot fathom which party is best for me and the country! I wish the two together could exist. However I do not think robbing peter to pay paul and sticking it all on the never never is the right way to go.

comment 4 has it right..... But taking that point on a little; Peter Mandelson was brought back (Labour creates Lord of 15 titles just to get unelected guy back into Govt. ...!??) because he 'knew this stuff'...but he doesn't... not really....not now

1997 isn't that far away but the 'stuff he knew', the media, has just moved on--these days the velocity of change is incredible ... Mandy is working away with the old fashioned media (papers, lobby, broadcast) but they don't hold the line anymore.... and GB and PM just don't 'get' the new media world.

It's a bit like bringing on Scholes and Giggs in 2009/10...they ARE great players, but not QUITE still the players they were..... and in football, political judgement, or manipulation of the media it's not the 98% of stuff you do as well as you used to do that makes the difference...it's the 1 or 2 % you just can't do anymore ... it's the 'quite' that matters more than the 'still the players they were' part.

Lord Mandelson wasn't brought back to run 'Business' (what businesses has he ever run or worked in ..?) He was brought back to spin well...but 20%> of the vote in the recent polls shows the spinning isn't working...

IF GB had gone with his instincts it couldn't be worse and would probably be better.... the arguments and squabbles now are just political positioning.... Mervyn King is speaking to a post-election agenda ---he's getting his alibis in early

Why should'nt the prime minister repeatedly refuse to explain or apologise for his inaccurate claim at last week's PMQs that capital expenditure was going up between now and the Olympics?

Why should'nt any politician refuse to explain or apologise for taking any position on any subject, sometimes totally contradictory positions on the same day, depending upon the audience in question.

Yes, those of us outside of professional politics who have taken some time out to study the subject now realise that in politics, literally anything is possible.

It is a very weird game indeed but anyway, well done Mervyn King for belatedly saying, in the nicest possible way, we're going broke so you politicians need to come up with a convincing plan sharpish or the IMF will be soon asking some very awkward questions (again).

Post 53 Excellencefirst...spot on...... King knows the next 11/12 months aren't 'outcomes neutral'; the build-a-boom(let) policy isn't a harm free punt..... it could make things very much worse by late spring next year.

King's saying--( I feel) 'I told him we should have started the policies in Summer 2009..not just started TALKING about starting....the policies then'

Maybe Mervyn King should step in for Cameron at PMQs and ask Brown some pertinent questions relating to his plans for a continued spending spree at a time when we are deep in debt? Brown doesn't listen to The Opposition. Perhaps he'll take heed of the top money man in the city in a direct head to head confrontation.

People with long memories will recall that I regularly get emails giving me Labour's "lines to take" for their registered bloggers (or covert astroturfers, depending on what you choose to call them). One of this evening's little gems is that people need to be reminded that Mervyn King is a banker and as such not qualified to give a running commentary on national economic policy. Leaving aside the logic (or lack of it) of the argument, I just thought I would comment that I am sure it is only coincidental that this theme has cropped up on this blog today.

Here we go again, current financial difficulties have, as I understand it, been largely generated by miss management within the 'private' sector - support provided or offered through government funding; so lets squeeze the 'public' sector to try and help balance the books. Individuals largely protected from the decisions they make are likley to cause furthering suffering to many of the people who operate in or rely upon the public sector. I'll wait to see what this means for University provision. I'm guessing further cut backs, including reductions in the hours that staff can actually spend with their students who may well be asked to pay more for this reduced service.

... and let's not forget that we have just had to spend face crunching amounts of taxpayer money bailing out the Mervyn Kings of this world - there is no reason whatsoever to take anything he says seriously - as the wise mister toe says @ 58, King's agenda is essentially self serving

There are many in the Labour Party who try to tell him; there are many in the other parties who try to tell him.

The people in the country are trying to tell him.

And in the end it will be Peter Mandelson who will tell him.

The game is up.

There is no 'nice' way to get out of a recession; it involves pain whichever way you deal with it.

You can either do it quick and cause a lot of pain or you can do it slowly and cause a lot of pain.

Quick pain or slow pain?

Slow pain or quick pain?

Labour would like 'nice' slow pain.

The Tories would like apparently 'not so nice' quick pain.

Over the last 12 years, Labour have inflicted the pain, way way beyond what the normal cyclical recession would have bought; the Tories have not.

The electorate in the end will decide how they like their pain.

Personally I would like my pain quick, get over it and move on.

My reason?

Because I like a lot of fellow bloggers belong to the generation of this government. We are the ones who are all accountable; we are the ones who are all responsible.

Our children are not. Our childrens children are not. And their childrens children are not.

To all you Labour supporters out there who can see into the future beyond the joke that is our present administration, just what are you going to tell your grandchildren and great grandchildren in the years to come as you put them to bed before you go out on your nightshift to pay for your working retirement?


"You will never have it,.....

.....so.....

.....good.....









.....night".

(Blows out the candle; the electric light bulb fizzled out years before)

This country as a whole and this despicable government needs to grow up!

Stop the self denial, admit the mistakes, have a GE and whoever wins, I'm beyond caring now, just sort out the problem.

Now!

Well everyone the interesting news is that the Governments "efficiency" measures have been communicated to the NHS. How about 20% efficiency on buildings next financial year!! Bunk beds for hospitals I assume.

sadly @ 57

I know you will think that this makes me a Tory

absolutely nothing wrong with being a Tory, desk, just so long as you don't do anything silly like voting for them!

and jrp ... do stop it ... as if

#64 sagamix wrote: King's agenda is essentially self serving

That's right, play the man rather than address the issues.

King is only saying what almost every other financial institution or commentator is saying, be they the IMF, the OECD, or the IFS.

Of course I realise this won't suit your agenda, so I'll write your reply for you: they're all suits, clowns, middle-class, males etc. etc.

By the way, the Bank of England wasn't bailed out by the Government so I don't understand your comment about King receiving crunching amounts of money.

Some bloggers who take an interest in macro-financial matters will have observed that the major banks have been boosting their Tier 1 capital ratios in recent so that they might be better placed to withstand future shocks (that was the main point of bank stress testing).

Some political bloggers may recall the rather trite saying 'they should have fixed the roof when the sun was shining', referring to the Government ability during 'good times' to pay down Government debt.

Some may now see a connection between these two points.

That is, the Government really should have paid down national debt as much as possible when it was feasible to do so, which would then have cushioned this country, to some extent, from the world-wide financial shocks that have occurred.

Indeed, I believe Brown did get the national debt as low as £298Bn, after the mobile phone companies stupidly handed over some £22Bn for 3G mobile phone licenses.

However it is now somewhere north of £600Bn and as Mr. King indicated, we are now drowning in debt and need to see a plausible plan for getting out of it.

People should be able to understand that the Government have not been very sensible with their income over the past decade and because of that, the econmic pain, which actually we suffer, not them, is now so much worse than it should have been.

#63 jwill5 wrote: current financial difficulties have, as I understand it, been largely generated by miss management within the 'private' sector

Yes, you're right, the immediate financial crisis was a result of systemic failure in bank management, market risk models, and banking regulation.

However, the UK is in a worse position than most other countries because this Labour Government ran a significant budget surplus in the latter boom years. So when the recession eventually ends and unemployment falls the UK has a structural deficit which will not be cured by economic growth. This is exactly the point that the Governor of the Bank of England was making in his speech.

A chosen few have benefited, but ordinary workers in the private sector have suffered under Labour as a result of the trashing of private pension schemes. Over 50 billion pounds has been taken in tax to fund current expenditure since 1997. Gordon has been running a financial scam for 12 years and only now has the majority of the people woken up to it.

finally @ 65

despite sitting here typing this wearing one of my large collection of Chairman Mao teeshirts, I yield to no Tory ... except maybe Robin ... in my concern about our debt crisis - and it IS a crisis, no question about it - to be fair, however, it's mainly due to the global credit crunch and the banking bailout, for which we can't in all honesty blame the government - and as to fixing the problem "Now!" well I dunno, what do you suggest?

Comment 55 : Sagamix

"come off it, King is just another "banker" - don't be fooled by the double chin, the modulated voice, and the wavy, grey hair - he has no clue what he's talking about - you only like him because he's making trouble for Gordon

What do you think we are on here? Idiotic attention-seeking schoolboys?

There are some people, not many I'm afraid, who take political stances that they think are right, full stop. Not right for them, or right because they're held by someone to whose mast they have nailed their colours, but right, full stop. All the major "political" parties, because they have abandoned politics for managerialism, have very little in the way of policy that should be described as right, full stop. But Labour's economic policy since 1997 has been the most grotesque mistake that has been imposed on the British people, short of war, since records began. It really does take the biscuit.

You, Sagamix, may think it a bit of a laugh for the running of the country to have been taken over by a bunch of people who've never grown out of the oozing self-regard that came from "winning" their first student debate. Strutting about while other, wiser heads looked on, fearful that in tomorrow's world, this abandonment of reason for emotive and deceitful claptrap might be taken by the public as the new wisdom.

How right the onlookers were, eh?

j harris @ 68

Of course I realise this won't suit your agenda, so I'll write your reply for you: they're all suits, clowns, middle-class, males etc. etc

you know me so well, John ... hey, what about vacuous poshboys? ... seriously though, one of the biggest lessons I've learnt over the last couple of years is not to take people like Mervyn King seriously - as to the rest ... I say global CC and BB, you say profligate public spending, I say yes but that's on the margins, you say come off it, we were heading for the rocks in any case, I say we weren't, you say we were, I say no we weren't, you say yes yes we WERE, I say, you say etc etc ...

Comment 70 : John Harris 66

"Yes, you're right, the immediate financial crisis was a result of systemic failure in bank management, market risk models, and banking regulation."

Well this is a matter of opinion, I think, Mr Harris. There would be some who would say that the fundamental cause for this crisis was the deliberately engineered disappearance of moral risk, in that too many institutions were encouraged to become "too big to fail", they knew they were too big to fail, and, critically, they knew there were others also which were too big to fail.

This changed the rules of the "game" they were playing. Firstly, no longer was it correct business strategy to assess risk including potential failure. By doing so, your institution would not keep pace with everyone else, would be swallowed up by one less cautious, and you. personally, would be put on the scrap-heap.

Sure, the Masters of the Universe made the decisions that got us here, but these weren't the first decisions in the chain. Those were taken by the politicians who saw a popularity fix in setting off the finance and financial services Ponzi scheme of the last 15 - 20 years, and have been, and are now, unwilling to take the cold turkey to get off it.

#71 Saga

....and it is nothing to do with the government spending off the back of a credit bubble?


You need a good economist to argue this one with you.


Susan where are you?

excellence @ 72

Labour's economic policy since 1997 has been the most grotesque mistake that has been imposed on the British people, short of war, since records began

not sure I agree with that but I guess one can can't form a proper judgement for a while yet - as a matter of interest ... because I am interested! ... what proportion of the blame for our govt debt crisis would you attribute to the global credit crunch? - and then what proportion of the blame for the global credit crunch would you attribute to the policies of the UK Labour govt since 1997? - just approximately I mean, no need for decimal points or anything

'There will certainly need to be a plan for the lifetime of the next parliament, contingent on the state of the economy, to show how those deficits will be brought down, IF (my capitals) the economy recovers, to reach levels of deficits below those which were shown in the budget figures.'

The above is from an article in The Guardian this evening. Can I suggest that you actually quote King correctly instead of towing the party line.

Just to make it plain. King is actually suggesting there may not even be a 'recovery'. I'm afraid I agree with him. We really are in very, very dangerous waters and the population of this country deserve much better information than is currently being provided by the Brown Broadcasting Corporation.

Mr King the UK banking expert has spoken up. The UK is in deep financial trouble, and it is time to fix this problem. We would surely be the most despised generation of Britons if all we do is pass our problem on to the next generation to resolve.

This will not be easy, and there will be a lot of financial pain along the way. It will be much harder for many of us as we have lived soft and pampered lives.

Parliament must stop looking inwards and act for the benefit of all the people of the UK.

So all you elected Parliamentary MuPpets, its time to stop worrying about Joe Public finding out about your duck houses and second home flipping scams. I think most of us are aware now.

It is time for honesty. (No spin, or lies or angles or useless slogans I think we can all see through you now)

It is time for policy debate, (thats cross party debate, not your know it all dictatorship style decisions Mr Brown) for sound planning and good leadership, for justice and fairness. The colour of your party is no longer of any importance. There is important work to be done. If you have to burn the midnight oil to formulate a robust and workable solution to this mess you have created, then so be it. Look at many of the policy ideas on this blogg, they are honest opinions and beliefs, worthy of fierce Parliamentary debate, and may just offer us a way out of this trap you have set us.

And then it is time for action.

If youre not up to it, then get out now. I hope that, as has been already said, cometh the hour, cometh the man. The hour is upon us.

coats @ 75

Susan? ... No!

excellence @ 74

I agree with you looking for root causes beyond poor Regulation ... a red herring in my view ... but the ones I'd go for are overly lax monetary policy from the Fed, plus the warped "one way bet" remuneration policies in the banks - a truly toxic combo - you, I think, are over estimating the power of politicians in the global free market - over estimating their intelligence too - clueless is more the mark, not Machiavellian puppet masters

I can say, having spent more of the weekend than I should have done arguing these exact points on an earlier thread in this blog, that what Mervyn King has said today is correct. I'm not going to rehash what I wrote before, but it is perfectly possible to go through a sound set of economic arguments that yield conclusions for which the quotes from King on this thread are the headlines. In short, we are over-borrowed, the credit crunch merely accelerated a direction that our economy has been headed in for a decade, and action is required in the short term to aleviate a major national economic crisis.

The action that is required is a switch of priorities to debt repayment. For a variety of reasons, there is little scope to achieve debt repayment by maintaining current expenditure while increasing taxation. We also have no serious assets left to sell. Therefore, the only course is expenditure reduction.

I do not say this for fun. Really, if you read some of the posts here and in the earlier threads, you would think that economic realists seek to cut government expenditure for sport. The route is, in fact, nothing like across the board 10% cuts as per government misrepresentation of Tory policy. It is about addressing sectors of expenditure with some care. There are some areas where cuts would put a lot of people out of work, and where, aside from the human consequences, overall expenditure reductions would not be achieved because of the massive extra benefits outgoings. To create sudden massive joblessness cannot be a sensible policy. But on the other hand, there are major projects in government where expenditure per UK national employed on them is extraordinarily high, and these have to be the target area. Various computer projects such as the ID register are shining examples of this. So are (though you would struggle to realise it if you merely listened to Brown's random outpourings) a number of major construction projects.

Intelligent, targeted, selective cutting is the only sensible way ahead.

Shock horror - our PM tells lies!

Even the BBC has to report the "discrepencies" in Gordon Brown's statements.

The moral compass taking another beating

GB reminds me of those *Debt Consolidation* ads: "Now you can borrow enough to get out of debt!!!

The problem with plucking unemployment figures out of the air is that it is a risky game of statistical truths.

Current unemployment stands at 2.2m and the Government state that "new claims" have fallen for two months running (they are still rising but at not such a steep rate). Even this is potentially fallacious given that this time of year is notorious for slackening claim rates.

Talk of 4.5m out of work now or 7m in a few years time are okay until one looks at what the Government's bail out of the banks has not achieved. Nothing positive has happened from the banks and it is public investment that is not doing what is needed - creating jobs that will at least generate some economic movement and hold off increasing unemployment. The row over the economy is a part of the "Gentlemen's Club" battle of words - it is not a realistic attempt to get to grips with the UK economy by being innovative. We have a serious shortage of housing so why are we trying to prop up property prices by failing to build new houses or change the use of the many commercial properties that now lay idle?

The "money men" didn't see the recession coming so how far can we trust what they say now?

"The governor of the Bank of England has said that government borrowing needs be reduced faster than ministers are currently planning."

Why? Something to do with today's OECD report, according to which the UK's budget deficit will hit 14 per cent of GDP next year - the biggest of any of the OECD's 30 member states? To improve stability, the OECD says, the UK government should continue to develop a concrete and comprehensive plan to ensure that debt is on a declining path once recovery takes hold. Not dissimilar to what the governor of the Bank of Blighty has been saying.

The UK's crushing debt problem will not benefit from the fact that the OECD is now forecasting a contraction in the UK economy of 4.3 per cent for this year, the biggest one-year fall in output since 1945 and worse than the Chancer of the Chequer Board's budget forecast of a 3.5 per cent decline. Previously, the OECD had pencilled in a 3.7 per cent contraction for Blighty this year. Oh dear, and rapidly rising unemployment (up to about 10 per cent in the UK in 2010) will drive down tax receipts and drive up government spending too, of course.

Could it be that Mr King sees a letter 'W' before his eyes and fears the worst, as many economists - or voodoo practitioners, as some are calling them these days - are predicting? What are they predicting precisely that could have anything to do with the letter 'W', and what has it got to do with the public debt that Mr King is apparently so concerned about? Are you sitting comfortably?

You may remember that a couple of weeks ago you were being invited to believe that green shoots were appearing that signified that the sick man of Europe was transforming himself by means of gross indebtedness into an island of blissful prosperity in a sea of troubles in the space of several weeks since the memorable Euro-parliamentary speech delivered in the presence of the UK PM by Daniel Hannan, the Tory MEP for South East England.

One recalls that on March 24th Mr Hannan denounced the UK PM for having "subsidised, where you have not nationalized outright, swathes of our economy, including the car industry and many of the banks", referring to the fact that the UK was in the worst economic condition of any G20 state. Could this miraculously no longer be so? One thinks of rabbits being pulled out of hats. A nice trick if you can manage it, but you know and even the rabbit knows that it is still only an optical illusion.

The fact of the matter, as Mr Hannan insisted, is that other states used the good years to pay off debt while the UK failed to do so, which is why the UK economy is burdened with unprecedented and dangerously high levels of government debt now that bad times have come. Squeezing "the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit" is how Mr Hannan characterized the Labour UK government's stewardship of the economy before proceeding to condemn its desperate attempt to "spend its way out of recession and borrow its way out of debt".

As for Mr Brown's claim that the UK was in a better economic condition than other states, Mr Hannan dismissed it contemptuously to rapturous applause up and down the UK and beyond: "You know, and we know, and you know that we know that its nonsense!"

As for the present position, one gathers that the CBI director-general, Richard Lambert, has let it be known publicly that he anticipates that the UK economy will contract by 3.9 per cent over 2009 before a slight recovery may be tentatively envisaged for next year, when the UK economy may be expected, however, to begin to be hit by the horrendous government-debt crisis that is being confidently forecast and which may well be as difficult, if not more difficult, to cope with than the original financial crisis which gave rise to the current phenomenal economic one.

Mr Lambert is evidently not alone in warning people against getting carried away by talk of 'green shoots' in the economy. May it not be far better to face facts and to place them within the context in which their true significance can optimally be discerned? This is self-evidently a rational approach, from which one should not allow oneself to be intimidated into deviating, as we witness the mud-wrestling between the champions of two opposing schools of thought. One perceives that the ringside spectators are arriving, breathless with anticipation, as Labour and other anglo-unionist spin-merchants deny that economists know anything about anything until they espy one who can be counted on, from past experience, to see things their way, at least in some respects, if they select from his words carefully, and then the fun begins.

Before this economist speaks, Professor Niall Ferguson, of Harvard, an historian, if you please, writes in the Financial Times that it is all quite simple essentially: the authorities are spending thousands of billions of dollars without really knowing what they are doing. Gasp! Quick intake of breath, and the markets begin to wobble. If these authorities borrow money to stimulate the economy, all they succeed in doing is to withdraw money from the private sphere to divert it towards public expenditure. There is no point in doing this, he argues.

Then the voice of Anglo-American casino-capitalist vested interests is heard, thundering across the Worldwide Web. In his blog, Paul Krugman accuses Ferguson - what with being an historian and all - of living in the Middle Ages of macro-economics, whatever that is supposed to mean. He explains that Ferguson is forgetting about the "proof" advanced by Keynes that supplementary government expenditure is an additional factor for the economy, so long as there is not full employment. As soon as there is full employment, on the other hand, then it is a different kettle of fish, he argues. It is, he suggests, in those circumstances that government borrowing merely stifles private borrowing.

What does all of this mean, and what has it got to do with what Krugman has been saying about the UK economy? Well, what it would appear to mean is that governments all over the planet, led into this by the USA, have been spending trillions with a view to preventing what could be a terrible Depression. However, the theory upon which they have been basing their hypotheses is of such slender substance that major theorists, including the German chancellor, who is nobody's window dressing, seem not to be able to support it.

According to the FT the other week, the Keynesian revolution was no triumph of science but was no more than a triumph of common sense. Many would agree, apparently, that there is no science in Keynes' work but would disagree that there is common sense in it, Keynes' "proof" proving to be defective. He merely claims that, when governments borrow and spend during a recession, they cannot stifle private borrowing without also increasing economic activity, which he considers to be advantageous.

At this point it may be best to put all of this abstruseness to one side and conceive of the matter differently. Another way of looking at it would be to imagine a town in which people have borrowed too much and spent too much. Faced with unemployment and a slowing down of economic activity, the council borrows money to build a new town hall, thus putting "unused" resources to work. This does not stifle private activity, because private citizens are sheltered from it and are busy trying to repay their debts. They save. They lend to the council. Private borrowers have no better use for the money. That is the theory. On the face of it, it seems as if the stimulus plan of the council may be a great success, as people are soon getting back to work, money is changing hands again and the new town hall is being built.

What is actually happening here, however? The citizens will have a new town hall. This is, however, a building that they did not particularly want when everything was going well. Now they also have their share of the debt that the council has committed them to in order to have the said town hall built. So, while the town may seem to be more prosperous, with people employed in the new town hall, drawing salaries and spending money, this prosperity, is, however, artificial, just like the original prosperity that was based on debt and over-spending. So, instead of solving the problem, another one has been created, which means that, whereas formerly there was one problem, now there are two problems, the second one being more intractable than the first, because it derives from it and from a failure to resolve it. (This is where the 'W' comes in, of course, although it may prove to be a lopsided one, alas.)

The citizenry have obtained not just one thing that they did not want but two things that they did not want: namely, a new town hall and more debt! Sooner or later, other expenditure - on necessary services, not least - will have to be suspended so that the new town hall can be paid for, at which point the original debt in response to which the buiding project was initiated will still have somehow to be paid back. Nonetheless, provided that the council can time events to fit advantageously into the political calendar, it may succeed in pulling the wool over the electorate's eyes and get itself re-elected so as to continue to derive the benefits of public office while the citizenry suffer the calamity which their undeservingly re-instated representatives have engineered.

This in other words is in essence at least partly what Angela Merkel appears to be telling the central banks: whether it soon begins to look as if a recovery is taking place or not, we shall in due course be back where we started, if we do not find ourselves to be in fact worse off than that. This would appear to be the context within which we should examine today's statement by Mr King as well as Mr Krugman's statement on the UK economy, in support of which the UK government has committed taxpayers to unprecedented levels of government debt, future substantial tax increases and swingeing government cut-backs in the provision of essential services, over which arguments are already beginning to rage.

Professed admirers of Krugman should give the man some credit for a degree of balance and perspective, indications of which may be detected in his NY Times blog entry of June 10th on the topic of 'green shoots'. There he says - in a blog which, frankly, seems disconcertingly insubstantial - that he perceives that the economic news is starting to "darken again". Up through about March every report was worse than expected, he states, "often worse than you could have imagined". Since then most reports, he claims, although continuing to be bad "in an absolute sense", have "surprised on the upside". His impression, however, is that reports are increasingly coming in (concerning Korean trade, Japanese orders and German exports, for instance) that are once again "surprising on the downside". His concluding cautionary remark is: "This thing aint over yet."

Indeed. Beware of the 'W'. In 2010, when the world may be beginning to emerge from the recession, the UK will not be doing so, apparently, according to the OECD, and unprecedented and dangerous levels of UK government debt, resulting in part from pre-recession fiscal policy that Mr King considers to have been unsustainable, will confront the incoming UK government with a requirement to raise taxes and cut spending as unemployment spirals horrendously out of control.

As if 2010 were not already looking like a bit of an 'annus horribilis', for some, what else may be happening then to stir the pot? Why, a Scottish Government referendum on independence, of course. Don't tell me you had forgotten. In the scenario that you may expect, the result of that referendum may be, on a conservative estimate, fairly evenly balanced. Hubble, bubble, toil and trouble.

Comment 76 : Sagamix

I'll try to come back to you, but it won't be until tomorrow.

the bank of england should regain their powers and the joke that is the FSA should be dismissed and got rid of, in its entirity.

the tri agreement was a farce, "the bank of england are independant" stated brown/blair, that maybe, but members of the monetary policy committee who vote each month on interest rates were labour stooges.
the powers that were in place to stop the banks overstretching themselves, were removed from the bank of england and given to the FSA, not for "a new approach" but for brown/blair to remain in control.

this methodolgy from brown completely fell flat on its face, to say the FSA was out of its depth would be an understatement, it didnt just fail, it was negligent!
that it took so long to fail, was more a tribute to the strength of the economy that labour inherited in 97, widely acknowledged as one of the strongest economic set of books an incoming government has ever taken on.

brown's line today is "we are doing all we can to help home owners" yet i fail to see how giving billions of borrowed/printed money to the banking world, so they can charge us higher fixed term mortgage interest rates to pay back this money, actually helps a single person with a mortgage?

not only does the taxpayer have to repay all this printed/borrowed money, but the taxpayer has to (and will do in the future) pay a higher price for their mortgages. in addition taxpayer's will have the horrendous amounts of debt interest (ie, wasted money) to pay out as well!

i welcome the bank of england standing up for a redress of the nation's debt, something needs to give and the british taxpayer is in dire need of protection from another 12 months (or until a general election) of labour spin and continued borrowing/printing money.
forget party politics, we have no choice but to bring this debt we taxpayers have been burdened with, under control as soon as possible!

62 jrperry

When I first read the above I was angry that, if true, Labour try to influence an open discussion forum.

Then I was pleased because it means Labour is scared of us or sees us as influential and needs to try to negate that influence.

Then I looked at sagas contributions and must ask saga, are you on the Labours "lines to take" bloggers list?

Whoever takes over after Brown is inheriting an awful mess and will not be thanked for making the tough decisions that this Government has avoided. Thank goodness Mr King has had the courage to speak out and in so doing has left our Gordon looking like a lonely Shag on a rock!

Nothing is going to happen until the person who was Chancellor while this developed is still Prime Minister. It is clear the he has a physiological problem in admitting mistakes so he will never be able to admit that his almost all of his policies have been wrong then take steps to change them.

The only answer is gobro go.

Mervyn King's remarks rather put Brown's claims of real imvestment increases as opposed to Conservative cutbacks into perspective. I wonder how long he will continue with this electoral falsehood?

https://www.independent.co.uk/news/business/news/king-warns-of-the-long-hard-slog-to-clear-britains-debt-1718035.html

Has anyone else noticed how when Brown is making exaggerated claims about public spending in PMQs Harriet Harman sits behind him on the front bench nodding in assent almost continually whereas Alistair Darling just sits there stony faced with not a hint of positive body language?

tun @ 87

hey steady on! - accusing me of "taking a line" - you'll get me locked up

every one knows pmq,s are just for public airing and go no where near the true direction the government plans to go.
a publicity stunt aimed at pleasing the public but it serves no honest purpose and is a joke.
the mass public knows what state this country is in and knows there will be cuts and deserve honesty from those in government, but we get whitewash and flimflam merchants trying to play party politics with this countries future, how narrow minded of them.
this country is in crisis and needs leadership not what we have at the moment a lame duck government and inept opposition.
ever decreasing circles is how our politics seems to be going.
change is needed, not just government but the whole system.

My inclination is to believe the OECD , Mr King and Prof Ferguson.
I am disinclined to give credence to Mr Brown , Mr Darling,Mr Krugman or Sagamix.
All of whom follow the " we can't be wrong , so it must be you" line.
And at least three of them follow the party line of " Tory cuts , Labour Investment"
I want a political line of " Dear god how do we save the country?" and Not " How do we save our seats?"

In my fairly long life I have never seen such a desperate decline as this, and I do blame it ALL on the last 12 years of lies and spin , of illegal wars and celebrity culture in politics.
I am disgusted with a compliant media who should be there to ferret out truth and hold to account those in power.
I am most disgusted with the "Westminster" media who have been arrogant, short sighted and self congratulatory. Those chosen so often to be interviewed on the BBC because they are " Safe" the Toynbees, the Whites.
The fact that the PM allows one question at his press conference , which he never answers , is never challenged.

36. At 6:27pm on 24 Jun 2009, york1900 wrote:

I have been through a Tory fix it before and it was not nice high unemployment and wages driven down except for top few.

So you've been through a Tory fix eh, so have many more of us.
I was a miner in 84-85 so don't preach like your the only one who suffered.
Who do i blame for the recession in the 80's..................Labour.
Labour to put it politly messed up the country the last time they were in power and were promptly booted out in 79, remember the winter of discontent, mass strikes, rat infested rubbish piled high in the streets, dead bodies not being buried, or is your memory fading now?
Every socialist should read these words...........YOU CAN'T KEEP SPENDING WHAT YOU DON'T HAVE!

It's not rocket science, where do you think the money keeps coming from?
hard working Brits are bleeding from high taxes yet it's all going into a debt ridden black hole as it was in the late 70's when Thatcher came in and had to take drastic action to plug the hole which she did.

Once again we have to wait for a Tory government to come into power to fix the economy.
In my opinion this has without doubt been the worst Labour administration we have ever seen, giving away our powers to Brussels
destruction of the pensions industry, mass immigration, massive pfi debt, stupidity beyond belief in selling the countries gold at a LOSS of £3 billion.
The human rights act giving criminals equal and sometimes more rights than there victims.
The scrapping of the 10p tax band hitting the low paid.
The waste of money setting up the FSA and their ineffective monitoring of the banking system when the BoE could have done a far better job. (something the Tories plan to do).
The trouble with the majority of Labour supporters is that they think the state is there to provide for them.

The state is NOT there to provide for people it is there to provide a service for people.

If you look at the pre-1997 inflation and interest rates, you will find that both inflation and interest rates came down after the election of 1997, and have remained low since.
This resulted in making a lot of things and aspirations more affordable for more people (myself included).
It also caused investors to look towards more speculation and risk to try to achieve the higher interest rates they had been enjoying previously.
Unfortunately these risky and speculative investments, from necessity, used money some of us were able to save, necessitating Government action to protect our deposits, when the nature of the speculations and risks were exposed.
Although my view may be too simplistic, I think we have an ethical choice here.
Would we prefer to have the sort of control and regulation which keeps interest rates and inflation as low as possible to keep things affordable for as many people as possible, or would we rather allow inflation and interest rates to rise as a way of potentially cutting consumer spending and rewarding saving?
No one is disputing the necessity to bring down Government borrowing, but I suggest anyone advocating one particular way of doing this weighs very carefully the pros and cons of the fiscal policies of the past 12 years.

it's no longer a party political issue.

how much we have to cut spending will be determined by those who buy our debt, not by any politicians.

merv issued a warning.

the end game is nigh.

I love the Govenors interventions a little bit indiscrete here then rows back to neutrality again once the damage has been done. He is really a class act. I have a sneakey feeling though that George Osbourne will not welcome this when in Government.

PMQs makes me laugh it's all cleverly done with Cameron picking the dates so naturally it is a cut, Gordon reading out figures because he doesn't seem to want to attack Cameron personally so each side can argue this until the cows come home.

The real issue is how long do we take to bring down public debt do we do it quickly cutting doctors, nurses, teachers, ending benefit quickly in a short sharp shock -the tories favoured way. Or do we do it at a slower pace (but still cutting doctors nurses etc.) in an attempt to lessen the pain on those people who need public services in our society the labour way. That in essence will be the choice at the next general election. The Governor suggested that we should combine the two approaches in my view.

The depth of the cuts will in part depend on how the economy performs and how we compete with our competitors for market share. If we perform well then investment can go into the NHS and the cuts in other areas (maybe) could be less as increased tax revenues can go to pay off the national debt (as happened after 97).

If you look at how the Tories did last time they took over from Labour -they instigated really deep cuts initially but it did not really go down that well and the public were angry (this is before computers and blogs and instant reaction) and a boom was created by Lawson to win an election that didn't really help national debt payments at all and led to the recession in the early 90's.

I know I will be accused of bringing back old history so therfore not relevant etc - but remember the quote 'those who do not know their history are destined to repeat the same mistakes'

I would like Cameron and Brown to really debate the issue of how we pay off the debt what the choices are for us rather than this 'you don't tell the truth you are a bad PM' ' recite List of figures you would make it worse' rubbish that passes for political debate at present. Cameron has a first class education it would be nice if he showed it from time to time.

Jerry Springer has a point (or two)

No Professional politicians. People should have their own careers and do politics as a voluntary thing. Anybody of any age race colour or creed. Could be argued you would only get rich people who could afford to do it but perhaps some form of remuneration and expenses / allowances where appropriate. Definitely a government owned building (such as the old county hall in Westminster) for those needing a second base in London on occasions.

AND now the BBC. Why DO we need a State owned tv service? This BBC is the most awful and out of touch (viz the climedown in foul language). Why do the public have to PAY for this service which offends so often by bringing porn and filth into our sitting rooms? Why does East Enders offend at 7.30 when small children can ask - what is a condom and why did Ronnie put a hole in one? DISGRACEFUL.

I would imagine Mervyn King is right on the button and far more competent and dedicated than Darling. No contest!!!

BBC totally out of touch. Government totally out of touch.
As Jerry Springer says: "Rise Up"!!!!

#92 sagamix

Bit early isn't it?????