Governor's pointed remarks

You could also say that the Governor is "on message" and simply preparing us for the austerity speech that will come at the budget.

With figures changing everyday, I suppose the single issue is whether or not their tax raising potential is actually flexible enough to maintain spending.

Does the Governor actually have the banking qualifications?

Thank god we have somebody working for the taxpayer who has the long term interests of our country at heart. The bank of England has been hampered by Gordon Brown (when he personally as chancellor took away RPI targetting - against the advice of Mervin King who pointed out the risks of house price inflation at the time).

I am concerned that the government in throwing everything including the kitchen sink at the downturn-recession-slump is actually going to create an even more destructive W-type downturn-recession-slump with the worst possible sting in the tail of the second down stroke.

I know this is premature but the failure of the CPI to register deflation suggests that apart from the collapse in the housing market and two million unemployed, inflation remains a factor. This renders absurd all the measures which have been taken for fear of deflation. Add to this the apocryphal remarks of London estate agents suggesting a more bouyant demand for cheaper flats and houses and we do not seem to have a downturn of the magnitude suggested by the implosion of debt that took out at least two major banks.

I fear that HMG in gearing up their own debt has induced a sterling crisis on top of a major recession. Only we can't see it as clearly as usual as any slackening demand is attributed to the downturn. This is not as it should be according to the theorists at The Treasury but there is a suggestion this might be the case. So we will find our floor shortly, recover a seeming stability on the back of inflation induced by rising import prices and excessive government spending. However, by the end of the year the whole thing falls into the sub-basement as the entire false edifice collapses creating a further debt crisis which we are unable to resolve.

I hope I am wrong.

I still think that putting VAT back up now would be the best cause of action. Not only would it free up over £10bn to stimulate the economy with or pay debt off with, it would also ease deflationary fears as the price of a number of things would go up. The VAT cut has had a very limited effect so why throw more money down the drain?

Well yes, if you have spent the last 10 years buying anything you fancy on a bunch of credit cards, a 125% mortgage, nothing in the Bank and you lose your job- then yes, debt levels will rise. However, if you put all your savings away then that may not be the case.

The UK WILL have an increase in it's debt levels, but not every country will. Can we at least admit that we spent the lot and that's why we are broke now?

So finally Merv ain't for swerving!!!

Whilst our rationalls may be different I agree with him on this one. I have been vociferous in my call for the adoption of protectionist policies as the basis for our recovery. In order to do that we must urgently address the following questions:

WHERE ARE WE NOW. Just "in the proverbial" is not a sufficient answer.

WHERE DO WE WANT TO BE. Again, "not in the proverbial" is not sufficient but then neither is the now discredited 2007 baseline.

HOW ARE WE GOING TO GET THERE. For me that will rquire us to explore ALL of the social and economic factors at our disposal. This will mean that the financial sector is removed from it present premier position.

Now i strongly doubt that Mr King would support me as he is still 'on message' regarding the global economy. But I think that he is signaling that further knee-jerk stimulous will merely rob us of the resources that we have left with which to dig ourselves out!

'the government would be mad to consider another large stimulus package.'

Is what way is this problem. Sanity been present in the last 5 years and all actions taken are rationale and consistently defended as blameless. PM Brown embarking on his G20 lecture tour should be supported. Everybody else in the G20s can listen to PM Brown as well as the UK public and recieve the message. I am a bit confused about this because normnally people go on lecture tours after they have finished a career. But I am sure all is well.

However there could not be any risk of a a government trying to buy votes leading up to a GE leaving a massive public deficit. I am sure of that. It is definately not California or bust. Or a burnt earth policy.

Can we have another graph please.

"especially when you're a country hugely dependent on selling its government debt to foreigners. "

Stephanie,

And what sort of foreigner buys a third party's government debt ... and what for? And would it not be, by virtue of the UK political system which allows a Elite Gang in a Cabinet to run things their way .."just getting on with the job" is the phrase, is it not .... then not so much a public arrangement privatised as a private failing nationalised?

The more one delves into the perverse workings of Government and its cosy relationship with a Banking Sector which has failed Catastrophically and is NOT Servering the Oil and Fuel of Currency to Core Vital Constructive Productive Elements, even though that Vital Liquidity is easily Invented by the Trillions on a Whim in some cases, and therefore Possible for All cases, thus to have everyone Independent of the Slavery to an artificial market specifically designed and created for that one unsavoury fact, which renders the Power of Control to the suppliers of Credit easily invented and Printed for convenient exchange of goods, the more one realises that it is an old Legacy System which is Unfit for Future Common Global Purpose and needs to be Replaced rather than being Rebuilt to Fail again. In fact with all of the trillions already pumped in and the situation still getting worse, it is surely testament to its demise and failure again?

Once you know how the System works, it is easy to abuse it for personal enrichment, is it not, as the rules are, there are no rules, other than those you would impose upon yourself and others, and the hope is always that the others would be too slow witted and pre-occupied to challenge you and your right to dictate to them your wishes rather than simply supplying them with artificial feed.... and for which they would be eternally grateful rather than as is now the case, many in the business fearing for their personal safety.

3 stan

I read your post and I had a fleeting image of the caterpillar in Alice in Wonderland eating the wrong side of the mushroom and the debt err mushrooming. However I have put it to one side. That is only a childrens fiction. If it is relevent we still have to reach the queen of hearts scene. Or maybe the bit about the oysters and the walrus. Must just pop back to reality and away from the, err, madness.

ANOTHER ONE THAT SHOULD RESIGN?

3#

"apocryphal remarks" are just that.

The first thing most salespeople are taught in training is never tell people business is going badly. The rationale behind this is that if everyone else doesn't want to buy the product/service, why should you ?

Some of the more specialist salespeople will admit things are going "OK" sometimes, or that they would "like things to be better" but you'll rarely find a salesperson admitting things are going badly. It's the first thing they're taught in sales school.

The figures out today on the amount of mortgage lending give a better impression (well at least they will do until the government finds a way of fudging them) - ie the situation is improving but still a long way off where we were. And its hard to see how it could be otherwise, as with job security upmost on most peoples minds the last thing most are thinking about is moving house.

Daniel Hannan speaks out too...

https://www.youtube.com/watch?v=94lW6Y4tBXs&feature=channel_page

5. At 6:23pm on 24 Mar 2009, HurstVanrooj wrote:

Well yes, if you have spent the last 10 years buying anything you fancy on a bunch of credit cards, a 125% mortgage, nothing in the Bank and you lose your job- then yes, debt levels will rise.

Eh? No they won't. What will happen is that you will declare bankruptcy or equivalent when it is clear you can't pay, and all or much of the debt will be written off.

The debt levels would decrease.

In fact, since the government and everyone are so afraid of printing money, bankruptcy is the way to decrease debt levels. You can't do it through "growth" because "growth" requires credit expansion, and credit expansion also expands debt.

Someone has finally stepped up to the plate and told it like it is. Many of us who are regular contributors to these various BBC blog sites have been posting comments to this effect going back to last year. Mervyn King did not say anything today that most rational people in this country haven't known for some time now.

But still as King was making his comments Crash Gordon is over giving a speech to the EU and telling them that all of Europe must spend more to stimulate the economy! Can someone please tell me what`s going on in this man`s head because I for one would really love to know. I think even for Darling the penny has finally dropped that we are all out of money but Brown still wants to spend like a drunked sailor. I'm really fearing for the future on this country with this man at the helm.

[Unsuitable/Broken URL removed by Moderator]

Good on Mervin King!

Finally someone has had the tenacity to sound out against Gordon Browns debt binge. We have stumped up enough of our tax payers cash to sort out the mess Gordon Brown has helped get this country into.

Gordon Brown has been in bed with the bankers for too long, he has cost us too much already! We will all be paying back this debt for generations and enough is enough. The sooner we have some other party in power the better for all of us, what about small and medium sized businesses they are being scorned by this Labour government all they appear to be are a 'cash machine for tax revenue' the 5% business rates rise is enough to tipple many SME's over the precipice. Hey do they matter in these economic times...apparently not to our government what's a few 100,000 more redundencies as long as the banks are OK!!!!
I AM DISGUSTED!!!!!

So, in other words, King is not saying anything useful to aid the recovery, and neither is Flanders.
Maybe Bevis or Butthead can offer better advice - they can surely do no worse.

Stephanie,

Whilst convention might usually prevent GBoE from commenting on fiscal budgeting and cause him to stick to monetary policy, I have said previously the two have become intertwined. At the committee in answer to questions on his gilt purchase operations, Mr King was emphatic that he had to keep in close touch with the Debt Management Office to coordinate. I have said previously that these operations provide a liquidity platform for the significant new 2009 gilt issuance needed to fund HMG deficits. Fiscal ineptitude could cause downgrades and higher risk premia. This could shatter success or otherwise of unconventional conventional or conventional conventional or unconventional unconventional measures......put aside a slide on sterling. He also said the reason he didnt throw money out of helicopters was because he wanted high grade assets on his balance sheet in return for his central bank money.

Not sure this is all about supporting Treasury hawks.

Below is a comment I posted in a different blog yesterday (still no answers as of yet). I would be interested in what you think the answer is Stephanie?
"I have been trying to calculate based on a thirty year repayment term how much the accumulated rescue debt would take every man and woman in the UK to pay back in increased yearly tax payments and have arrived at staggeringly high numbers. I wonder what the government's fiscal projections are in this respect? (acknowledging my own lack of expertise in this area and the very basic assumptions this forced me to make). I also wonder what the public will make of it when the truth finally hits home as to the penury they have been committed to without so much as a by your leave from the government? I sense that the anger will be sustained and problematical. Your own calculations Robert and those of other contributors would be much appreciated as at present the answers I come up with are testing my credulity."
I suspect Mervyn may have a good idea as to what the real answer is and this may be part of his new found vocal opposition to digging the hole deeper.Pity he did not speak up much earlier in the process.It might have saved a lot of people a lot of unnecessary future pain.

In the real world employers would happily take 2 million off the dole que by simply making it cheaper and easier to employ people .

Instead the country is LOCKED in the old inflationary system which helped get us in this mess in the first place .

High industrial rates , sky high waste disposal , massive employers liability insurence which is already covered by national insurence , VAT should be scrapped . Lighten the load a little then let small business HAUL THE COUNTRY OUT OF THIS MESS.

Bang goes another Nokia against the wall....

So, Mervyn thinks that we've so much on rescuing the financial system that we can't afford to spend more to rescue the real economy?

It's really strange. After all these years, I'm starting to find a weird affinity with the Arthur Scargills of this world.

Look, the answer is pretty simple. We've had 25 years or so of the rich getting richer and the poor getting poorer, both at home and worldwide. And the poor at home have borrowed insanely to live a lifestyle which they've been promised but could not afford.

So the answer? Simple. Redistribute the wealth (and therefore the *debt*) back again. Can anyone out there seriously tell me that if there was a 50% wealth tax for all individual wealth over 1 million worldwide and the money was redistributed to the less well off in each country, then this whole mess wouldn't go away? I doubt it. This whole debt business is just a matter of someone (aka the poor) owing someone else (aka the rich) too much money, and because of interest that debt just gets bigger and bigger. It's easy to fix given the will.

I'm not speaking as an out-and-out left-winger here. It's just that there only seems to be one solution to this problem.

#13 "In fact, since the government and everyone are so afraid of printing money, bankruptcy is the ONLY way to decrease debt levels."

I strongly agree, except there is one other way - use taxation to take money from the rich (aka creditors) and give it to the poor (aka debtors) so they can pay off their debts.

Widespread bankruptcy or major wealth redistribution - those are the two options out of this mess, Take your choice.

Well surely - he should be giving his considered opinion to the Select Committee!

I for one think that G Brown is determined to put another £1.5 - £2.0 trillion on the total bail out bill before he comes out of No 10 - as I've said before. This is all political and is not economically planned or thought out. Brown wants to spend more and more money but surely if he does any UK spending this can itself be called protectionist unless the money goes to global institutions - Surely Brown is not thinking of putting money to the IMF or more money going to banks?

Unfortunately, G Brown/UK government do not seem to be 'learning the lessons' as is G Brown's favourite vocation and pastime.

All M King may be saying really is make absolutely that all of 'the money' is spent wisely i.e 'Look before you leap' - to a government without any grip:-

on the national finances and regulation,
national energy policies
employment policies
population/immigration policies
nuclear power policy
national security
crime
drugs and alchohol
imports/exports
domestic economic enterprise and investment
etc etc

Globalisation is fine if all of the other global nations have equivalent or mirror imgae economies and each nation plays by an acknowledged set of ground rules but 'they' never have and 'they' never will and the UK is now totally exposed to every type and scale of corruption and attack.

For once, Well done Mervyn!

Roll on the UK general election - the sooner the better!

The Governor is right because we are already overloaded with debt, public and private. The BBC and ITV news make deflation sound terrible because people will put off paying for things. Difficult when all of us have to buy food, energy or petrol so lower prices in these areas is a good thing for most. A few might postpone buying a car or washing machine for a while, but deflation is not realy a problem apart from for those who have borrowed too much against a house or flat. Printing money to encourage inflation and devalue the pound is a much bigger problem, great for those with debts because they are reduced but not good for those with savings and on a low income.

I continue to be worried by the apparent disconnection of what we see in News reports---and what we hear from the Government---and the fundamental reality I see and hear from everyone I meet---whether staff, other business people or whoever.

Mervyn King's comment is one of the few from public figures that chimes (at least for me) as coming from someone who seems to have a connection with what is going on.

(Kenneth Rogoff's views on the Asset support plan is another)

In the real Business world people are not looking at year projections and quarter reports...they're taking cashflow numbers weekly and in many cases almost daily.

Just focussing on the tax aspect...the Corporation Tax take in 2010 must be massively reduced over this year, likewise VAT--- these effects are now unavoidable in turn.

I imagine these yet to fall 'shoes' are what King has in mind, and I agree the earlier post that sees in this situation the chance of a greater fall in a 'W' shaped recession, but for me it will be a tremendous drop in tax takes as much as actual 'spending' that increases the possibility, because 'spends' are always able to be changed, reduced, altered and smudged---the taxes not arriving will not be arriving.

The feeling remains that for over a year the Political responses have been misfiring precisely because they are too political in focussing on an agenda tied to possible election dates and finessing of the presentation of events.

The fact that Mervyn King has spoken out now may indicate that he may see that same 'political finessing' apparently contemplating the need for yet more money to be thrown down the manhole; but he indicates his fears that such finessing carries dangers that are so grave in their implications that normal rules of 'courtesy' and protocol are over-ridden by the idea that the welfare of the country and citizens precedes that of party.

Probably not though-- Probably some other reason altogether!

"The vast bulk of the rise in UK borrowing is due to things beyond the government's control"???

Come on Stephanie, with borrowing now over 10% of GDP, that is ridiculous. Did it come from a Number 10 press release?

It isn't important WHY he said what he did. What is important is WHAT he said. Reading Stephanie's musings as to WHY he said what he said WHEN he did, is precisely the sort of gossipy nonsense which has sadly replaced good journalism. For those who didn't watch/listen today, it can be downloaded tomorrow from the HoC site. May I suggest that if Stephanie really wants to know why etc, she should just go and ask King, and then reports back what he says?

Mervyn King is commenting now because Gordon Brown is out of the country!

Mr King is not content with having destroyed the banking system and the currency, almost single handed he now wants to warn us against doing what he has been doing. He is pulling up the drawbridge now that he and his banking friends are OK.

Perhaps, he is writing his own obituary! (Let us all hope so!)

He has destroyed the currency and money itself and dose not seem to be aware of what he has done.

Mervyn, we in the real World need a currency that has a price. We need sound money, not only for itself but because the whole decision making process in the business and real World depends on money having a sensible price.

Here are a couple of examples of your stupidity Mervyn:

I read today that a couple's 400,000 GBP mortgage now costs them 1p a month - that is insane as it was costing them (the very inexpensive) 1500 GBP a month last year. That is Mervyn you have devalued the currency by a factor of 150,000 times!

Also consider the capital sum need to provide a 5000 a year state pension: at 0.01 percent - the deposit interest rate being paid now - you would need to have a capital sum of 50 million pounds, whereas when interest rates were 6.25 percent (as they were last year) all you needed was 77,000 capital! Thus you have devalued the currency, looking at it this way, by a factor of 650 times in three months!

You have destroyed the nation.

As I am unable to find publishable words to adequately express my sense of outrage at your conduct Mr King I cannot go on... There is no mountain high enough from which to express my derision.

Just go!

Mervyn King may or not be right about further large stimulus to the economy. But we may as well ask David Beckham on this matter or toss a coin. King can no longer be trusted about anything. He was in place, winning the plaudits (and trousering the respectiable salary etc) during the entire asset boom. To be sure, as governor of the bank he has a limited remit and arsenal, to control inflation - but he surely could have done and, certainly, said a lot, lot more. Does the man feel no shame. He should have resigned months ago.

Although King is a central banker and hence an enemy of honest or sound money, at least he has some semblance of truth and honesty on his side. Brown is clueless and his incompetence in dangerous. I think we have had enough of Neo-Keynesianism for one lifetime. Real wealth creation is manufactured, grown or mined. The rest of it is a tranfer exercise.

On another note I note that Montana now have a sound money bill (though not yet passed) in the USA. Finally some politicians get it.

All these controversies and the Financial Crisis itself stems from an incomplete understanding of what MONEY is. Money maybe defined as anything which at any time is generally used as a "medium of exchange" and a "measure of value". With the widespread use of credit, the use of money (cash) has been limited to transactions where the parties do not expect to meet again or, where the parties do not trust each other.

Money, per se, is not wealth, but because of its ready exchangeability, most individuals, whether natural or juridical persons, consider money as their personal wealth. However, to the state and its government, money is not wealth. Legitimate governments is the only entity authorized to print and issue money. This money it can use to pay for equipment, infrastructure and services required in the performance of its multifarious functions and social services. There is no need for government to borrow money for this purpose.

The deficit often mentioned is the result of an error in the accounting of government expenditures which is entirely different from that used in private companies. Government have budgets based on tax collections supposedly comparable with private entities income and expenses. However, government do not have a balance sheet where cost of equipment and infrastructure are shown as assets (wealth of the nation) created by these expenditures and should not therefore form part of the budget deficit. Balancing tax collection against expenditures maybe a great idea, but deficits spent for the good of society does not have to come from government borrowings. Why borrow when you can print? Inflation worries are misplaced when government spends money to create wealth and pay for necessary services.

Now that things appear to be going really pear-shaped with the economy, King is trying desperately to disassociate himself with the government. Nice try Merv, but no-one is fooled!

"On another note I note that Montana now have a sound money bill (though not yet passed) in the USA. Finally some politicians get it."

That's about as much use as Salford pronouncing itself a Nuclear Free Zone!

Money has no real value. It is an illusion, a transmittion mechanism by which individuals and organisations employ their power and wealth. Therefore it can never be sound (if by that we mean stable).

Mervyn King, having been reappointed as Governor of the Bank of England, became his own man. He no longer is one of Gordon Brown's creatures: barking only when the master calls.

Clearly the mess a.k.a. the British Economy will take years to sort out. The old adage "when in a hole the best thing to do is stop digging" would require Gordon Brown to admit he is a complete failure, both as a Prime Minister and previously as Chancellor, don't hold your breath.

Undoubtably Brown is merely continuing a series of failed premierships going back to Thatcher. However much so called tory "thinkers" like Geoffrey Howe et al try to distance themselves from the current disaster, it is rooted in the Thatcher/Regan hegemony. "Thirty years of tory scum" is "Thirty years of Tory scum"

"Asked about budget policy, Mervyn King will usually politely refer inquiries to HM Treasury. After all, the independence of the Bank of England is a two-way street. Since he doesn't want ministers weighing in on monetary policy, he has usually shown them the courtesy of resisting commentary on the budget."

Except of course that the two are interrelated. If Darling Brown go on a spending spree that Gov BofE will have to raise interest rates. That I think is the underlying message from King.

Is this El Gordo and Comicals savaged by a dead sheep moment?

So George Osborne thinks that the Governors statement fully backs the previous Tory financial policy does he? It just goes to show that high intelligence is no guide to ability or judgement. Perhaps he should read it CAREFULLY again after school, say 100 times? Ouch! Yaroo! I say chaps!

#3

The only question I have regarding the "W" shape of this recession is, "Will we see the upturn in the middle?" Sure, the Government is throwing huge sums at the problem and surely, one would think, this should have some effect, however short lived. But will it?

I offer two reasons why it might not:

a) The "surprising" failure of inflation to fall is not surprising at all. The surprising thing (if politicians reaching for the nearest favourable statistic is surprising)is that, having ignored the RPI for years, the Goverment and reporters are now relying on it as evidence of looming deflation. What has happened is that CPI inflation remains stubbornly high largely because we are dependent on imports and the pound is falling; and this is being offset by the fall interest rates.

The idea that the falling pound will stimulate export-led recovery is, however, pie in the sky. The UK no longer produces things that can be easily exported - and even if the rest of the World were minded to buy, they already produce competitive products. This being so a weak pound will not help - and weakening it further through Quantitative Easing or fiscal stimuli will make matters worse.

b) The money being pumped into the economy is not being invested in anything much. Certainly not in wealth generating (or cost saving) activities, or even infrastructure that could stimulate such activities further down the road. All this money appears to be being spent to shore up the failed banking system and to pay off, or write off, past debts. The trouble is that, once it has been spent we will still have the debt - albeit reclassified as Government debt - and we will still have to repay it.

Even the idea that all this money will stimulate demand in the short term, so regenerate growth, and so create taxable income to cover the repayment is an illusion. A demand-led recovery will most likely see that demand being met by importers long before any new investment in the UK: and so the most that will be achieved is a faster circulation of a dwindling pool of money. The suggestion that this might become fast enough to cover the debt that spawned it contradicts the Law against perpetual motion.

#7 "I am a bit confused about this because normnally people go on lecture tours after they have finished a career."

I think the operative word here is "normally" !! Could it be that Brown's Reich is a "dead man walking" ??

#16 "So, in other words, King is not saying anything useful to aid the recovery, and neither is Flanders. "

On the contrary, they are !! What Mervyn King is saying is that by not worsening the situation, recovery will come much faster !! He is also saying that he does not have Harry Potter's magic wand and, therefore, cannot produce instant solutions !!

I've just thought of a question which I think is really important to ask.

People and businesses who have had to lend, don't have any money,
The banks they've lent from don't have any money,
The government doesn't have any money,

Where has all the money gone?

#34 "Undoubtably Brown is merely continuing a series of failed premierships going back to Thatcher. However much so called tory "thinkers" like Geoffrey Howe et al try to distance themselves from the current disaster, it is rooted in the Thatcher/Regan hegemony. "Thirty years of tory scum" is "Thirty years of Tory scum"

I seem to remember a certain Dennis "Bushy-brows" Healey going cap-in-hand to the IMF to borrow billions to bail a bankrupt Britain out of the mire the then Labour government go into !! Perhaps Brown is just carrying on an honourable Labour government tradition of bankrupting the country !!

#33 "That's about as much use as Salford pronouncing itself a Nuclear Free Zone!"

Salford *IS* a Nuclear Free Zone !! Just because it is also a Reality Free Zone simply adds to the spice !! About as useful as a nutter bombing down the road in a reckless manner with a sticker on the back of his car saying "Baby on Board" !!

9 glanafon

You do take me back to 1967 and Sureallist Pillow.

`When the White Knight is talking backwards
And the Red Queen is off her head;
Remember what the walrus said:
Feed your head!
Feed your head!'

No doubt all the heads in the cabinet will get policy turned on to something more groovy.

Preferred The Jabberwock myself.

King may also recognise that we still do not know what effect the QE will have and how soon. A further raft of unfunded spending plans may just exacerbate inflation which is of course King's express responsibility.

Stephanie, still amazed at the fellow bloggers lashing out.

The policy options that will make a difference at present are in reality very few. The Baldwinist 'sound money' camp are still vying for a come back.

Still no leadership from anywhere as to how the real economy will look post facto - emasculated low margin financial services and exactly what else?

addendum to my post #28

I don't disagree with Mervyn King, but, and this is a very big but indeed, first remove the plank from your own eye before you remove the speck of dust from an other's!

Fix that which you have to power to fix and do it NOW!

Even more plainly re-establish a proper long term price for money.

Put interest rates up to sensible levels NOW.

If you do not then for example borrowers will borrow mortgages based on the 1p per month cost of a 400,000 GBP mortgage and the subsequent disaster will be down to you, and only you.

(And if you though it is bad now - the future will be a 150,000 times worse!!!)

Make this you last act before sacking the whole MPC and then resigning.

Slightly off-topic re the gov I'm more commenting on a blog from a few days ago about global regulation...
Why not "nationalise" the rating agencies? After all to an extent S&P and co are de-facto regulators as anything given a AAA rating will be bought (even if it is "toxic") and anything given a B rating will not atract a good price. The rating agencies are paid by the companies issuing the investments and so there is a clear conflict of interest. If a global body eg IMF, World bank or a new one set up specially for the purpose were to take over the rating agencies then this conflict would be removed and the new agenciy would be free to refuse to classify any new type of finacial engineering it did not understand or approve of. This would still allow for the market to inovate and investors could still buy new unrated products but with the full understanding that this would carry a high level of risk (whereas before the purchaser was misled by inappropriatly high ratings). It could work in finacial terms as the FDA does in pharmaceuticals. It could provide a level of confidence by treating risk rating as a public utility provided to the market but avoid the heavy hand of a global overseer.

Any comments...?

You're all doing very well !!

Oh no debt!

Our debt was far far greater after WW2. Granted, our saving ratio was a lot stronger back then, but that is a lesson for the future, and it certainly isn't condemning this country to death. Whether we had a package or not we were going to face rising debt, anyway, as well as 'tougher times'.

Hi Stephanie

This must be very embarassing for Gordon Brown as he rums around the world telling them to spend more. I would love to be a fly on the wall of some of the meetings as I am sure some must be pointing out his previous errors to him.....

I await your thoughts on the 2 inflation measures which came out yesterday. One being flat and Gordon Brown's preferred CPI actually rising to 3.2%. Both numbers were higher than expected.

This raises several issues. Has the government created its own deflation scare as cutting mortgage interest rates and the cut in VAT sweep straight into the RPI? Also if the story we are told is true why isn't CPI falling? Gordon Brown gave us CPI as a new inflation measure do you think he and the Bank of England are still using it?

Inflation numbers can be an irregular pattern but yesterdays figure I think because of their nature require comment and because one of them is supposed to be used by the Bank of England....

Stephanie,

Given that the Queen is a stickler for tradition I wonder what interpretation you put on her asking King to go to Buck House - the first time she has asked a Bank of England Governor for a meeting in 57 years so I've heard?

We are lead to believe that the Queen is well informed about matters of State so asking for such a meeting seems of significance. And yet commentators, especially the economic ones seem to be steering clear at present.

What do you think?

43 correction

For `walrus' read `doormouse'.

Senior moment, sorry.

The only thing I want to know about the Governor of the BofE is; after he and our Sub-Prime Minster, Crash Gordon, have ruined this county's economy, what size pension will he walk away with? We know from the earnings of Tony Blair how much Crash is going to earn.

If any of these people really knew what they were doing we wouldn't be in this mess.

Post 13 & 22 bankruptcy doesn't reduce debt it merely redistributes it.

The worrying thing is that much of the debt is owed to banks either owned in part or int totality by you and I through the UK government (Northern Rock, Bradford & Bingley's mortgages, Lloyds / HBOS & RBS) or via our pensions such as Barclays and HSBC. If people default then the loss is effectively socialised across the whole UK population.

I will give you a scenario. Person A has an interest only mortgage on a city centre flat which is for many thousands more than the current market price; they owe GBP 15,000 on credit cards and have a car loan on a car which is worth less second hand than the outstanding loan.

If I was person A and 25 years old I would be getting advice and an IVA as soon as possible. I imagine there are many thousands in similar if not worse positions than this.

The USA is now trying to lighten the burden on the taxpayer by offering investors to take some if not all the liabilities off it.
The point is that this opens the choice to buyers to pick and chose what they want.
No prizes for guessing who will get left with the absolute garbage!!
Why is teh taxpayer getting dumped on again in the US and UK, have we fdorgotten oit was teh Demnocrats via President Clinton that insisted loans be made to those who could not get onto the property ladder under fear of penalties for 'exclusion' to the banks.
So the real truth of this is that the Democrats are handicapping their taxpayers for errors of their own creation.
Flogging off toxic rubbish at 6 cents in the dollar is still 6 cents too much, and what price did the US Treasury buy it at from the banks?
Here we have an insurance sheme that is no different in its liabilities simply because worthless rubbish is still worthless rubbish.
Two more questions:
What price is the UK government underwriting this toxic mess at? Par or at a deep discounted value to par?.
If it's value is only worth the same as the US rubbish what has the National Audit Office got to say on the matter?.
All the hullabaloo on Fred Goodwin is a red herring at best, aggravating and obscene as it is, we should be have a real stewards enquiry into what the then Chancellor of the Exchequor was up to, what he knew and why the actions taken were made.
For sure all the preparatory globe trotting is fanciful and decadent but do we really think anyone will believe a word any of the politicians come out with from the G20.
Just as King has rightly said we cant afford more spending, all the other countries attending if they too were honest would have to admit the same, particularly the USA so who is kidding who?

Why doesn't the Bank of England focus quantitative easing at reducing longer term interest rates so as to encourage investment ......

.......and raise the "bank rate" (short term interest rates) to discourage consumer spending?

This would help to rebalance the economy.

The Daily Mash (dailymash.co.uk) have read between the lines of what Mervyn said in an article headed : "There's no more money says man who prints all the money"

I think many of my fellow bloggers will find themselves in full agreement with the sentiments expressed!

Mervyn King makes sense, and Stephanie's analysis is objective and to the point. Pity, the same cannot be said of Nick Robinson, who has proved to be eternally synpathetic to the Brown camp!

post 28 and 45 John

You say:

"I read today that a couple's 400,000 GBP mortgage now costs them 1p a month - that is insane as it was costing them (the very inexpensive) 1500 GBP a month last year. That is Mervyn you have devalued the currency by a factor of 150,000 times!"

Well, I agree with your sentiment but your maths leaves me speechless. Its all very well exaggerating a bit to try to get our attention, but rubbish like this makes it difficult to take your points as seriously as you intend them.

We already get enough gibberish from amanfrommars, you can do so much better when you try!

John from hendon, I think you need to redirect your ire to its proper home. Do you really think that Mervyn wanted to drop interest rates to their current moronic level? This is a political decision pure and simple, the BOE is about as independent as Gordon Brown's solitary brain cell....

I write here as no commentator seems to want to say anything about the latest RPI and CPI figures.
Apparently economists were shocked and perplexed by February's figures.
This really is the crux of the whole problem.
Economists , like investment bankers, weather forecasters and people prepared to predict what the climate will or will not do are completely out of their depth- faced as they are with hugely complex systems with so many different factors influencing them that they behave in an unpredictable way.
But it does beggar belief that increasing prices were not expected.
Cutting interest rates to zero has devalued our currency and as we are a hugely nett importer our domestic inflation is going to increase - a seemingly clear conclusion which anyone with a ha'p'orth of sense had worked out - but not apparently economists.
As contributor no. 78 suggests - in a questioning way - the government has created its own deflation scare as cutting mortgage interest rates and the cut in VAT sweeps straight into the RPI.
They have ignored the inevitable downside of all this fiscal and monetary fiddling - underlying inflation faced by all of us buying anything will increase substantially. You can see it in the shops now.Any imported items are increasing in price. Whoops did i write 'any' imported item? I forget momentarily - nearly all items for sale are imported.
By the way contributor 7, I guess GBoE is the Governor of the Bank of England. I thought just for one moment it might be Gordon Brown of..

Could we trade the Laird Brown in for anything?

All this talk about the IMF is very strange.

If a country is bankrupt as a result of excessive debt, it can go to the IMF and get ...a loan.

So it is possible to borrow to cause an economic recovery?

#44 tonyparksrun

"The policy options that will make a difference at present are in reality very few. The Baldwinist 'sound money' camp are still vying for a come back.

Still no leadership from anywhere as to how the real economy will look post facto - emasculated low margin financial services and exactly what else?"

There are a number of resons why:

TIMESCALE We have been at this downturn/recession/depression thing now for almost a year (2 if you take the US housing market as the start point). All the indicators are downward and the potential for meltdown continues to grow. However, there is still affordable food in the shops and the trains still run etc. etc. therefore the man in the street hers all of this but it's not yet real for him. The politicos and financios see all this and ae just hopeing that if they hang on it will all go away of its own accord, after all nothing lasts forever (except maybe national debt).

SIZE The whole thing is just too big and too complex. We do not have a super-national authority to take global economic decisions. Even the USA is finding that their deisions on how to fix their own economy are constrained by the needs/interests of foreign sovereign states e.g. China

ECONOMIC/POLITICAL BALANCE The polticos are constrained by their timeframe in office. They talk about long term initiatives but are really focusing upon their own short term futures.

In Europe, we are begining to see 2 differeing schools of poltical/economic thought. One is typified by the Bown type incentive package approach and the other by the Sakosy social economic cooperative approach. Neither however, appear to be totally thought through and are flying by the seat of their pants.

ECONOMIC THEORIES There is a dirth of really NEW economic thought being promoted. Even if you disagree with the basic principles, the 1930s had Keynes. Who can we look to with a model for recovery? The old models, Clasical, Keynesian, Monetarist, Liberal/Libeterian (sorry Kurt!) do not offer the real answer.

There are just a few reasons why we apper to have no real ledership - I'm sure that there are a myrid that I've missed.

It appears that one needs to form an opinion as to whether this Government considers the current situation to be a serious matter to be resolved, or if the Government considers it to be simply a trivial matter to be postured about with.

For example, those who watched the Newsnight Paxo interview yesterday evening with the Exchequer Secretary to the Treasury on 'matters economic' might form a view that the Government considers that the Public are not considered worthy of sensible debate and reply in such matters.

One might expect that a person in such an exalted and senior position as the Exchequer Secretary to the Treasury would have their finger on the pulse, be able to sensibly comment on all matters relating to the Economy and be able to associate that...
...Sensible Answers are what are the acceptable responses to Sensible Questions

Unfortunately the Exchequer Secretary to the Treasury (Angela Eagle) appeared to inflict further damage to the already low credibility of the Brown economic handling by not being able to bring herself to sensibly respond to any of the questions.

Offering instead a series of repeated unrelated statements which put me in mind of the Monty Python interview with the intentionally dim footballer Jimmy Buzzard, whereby Buzzard answered all questions with one of four statements
'Good evening Brian' (x2)
'Well Brian...' (x2)
'I'm opening a boutique Brian' (x2)
'I hit it first time Brian' (x2)

The cycle of Pythonesque unrelated repetition was fortunately broken later in the Python show when the cameras flashed back to the interview for 'breaking news' as Buzzard volunteered
'I think I have fallen off my chair Brian'

This is somewhat similar to the Eagle repetitive response chain which was only broken when she appeared to finally recognise a word to respond to in answer to a Paxo ref to King's comments on Stephanie's blog

'Mad ! I'll tell you what is Mad !!! '

Hardly the considered and meaningful response one should be able to expect from the senior postion of an Exchequer Secretary to the Treasury. Her staff must be squirming by the hour.
Perhaps she had the day off when they did the 'Acceptable Responses to Economic questions' bit on her PPE course,

However, if the Treasury Officials wish to add the Paxo interview to Eagle's list of one speech this year as Exchequer Secretary, then it might be useful to do a compare and contrast with the Python Jimmy Buzzard interview.
Do a search for - Python literary football youtube

If the mods allow a youtube link, just go here

https://www.youtube.com/watch?v=sw8ZL_gcTSM

The Paxo Eagle proper interview is available on the Newsnight site.

The moral arising from the above tale is that if one wants a sensible viewpoint into the serious Economic situation
- then forget about talking to the Exchequer Secretary to the Treasury as she either doesn't know or she wishes to treat the Public with disdain.....and stuff the economic consequences to be suffered by the Public as the Government appear not to take the matter seriously or sensibly.

FatBrainUK (#56) "Mervyn King makes sense, and Stephanie's analysis is objective and to the point."

Is that irony?

"There are two possible explanations. One is that he thinks the British budget is now in such a bad way that saying this is no longer controversial.

The other is that the governor wants to give public support to those in the government - notably in the Treasury - who are resisting calls for another fiscal stimulus on 22 April.

In fact, this is wild, creative conjecture about King's mental states which is the antithesis of objective reporting. Note the "he thinks"'. How can anyone know what King thinks? All one can do is report what he says, and one can hear that verbatim at the Parliamentlivetv site if one missed it - often they provide a transcript too.

Then we have "the governor wants to give public support".

He either supports or he doesn't.

What he wants is not observable....is it? It's intenSional, like what he thinks. It'sa canvas to do finger painting on!

If you go through what is actually said, you'll find people who are supposedly reporters, writing stuff afterwards which actually wasn't said, but which they assert means the same, or is what the speaker allegedly thinks etc. These mentalistic idioms are non truth-functional so one can't say it's true, or false, it's literally meaningless fantasy/gossip.

This is not objectoive reporting. It isn't even critical analysis of what is said. If King uses the same intensional fillers, he too renders himself inscrutible - something the Treasury Select Committee should not allow if they were really taking oral evidence.

Is everyone getting the drift as to why nobody really knows what's going on these days? And if you think that you 'know what they mean', you are deluding yourselves :-)

KEYWORDS: INTENSIONAL, GOSSIP

Why is NO ONE on the BBC commenting on the ramifications of a failed gilt auction?
It's beginning to look like only the BoE will be up for buying Golem Brown's debt soon. And the BoE uses money fresh off the presses to do it. Harare on Thames.

#64 JadedJean

Slightly O/T, but does that apply to literary analysis too?

Oh dear - everybody is jumping to conclusions about every single word uttered by any politican and anybody in authority. King simply said that he felt that was little room for further fiscal expansion. Good, now we know that he would rather call a halt here. BUT if the needs be there is nothing to stop the Government expanding further - just a set of consequences that might not be to many peoples' liking.

Stephanie's summing up is always first class and well balanced - and what is more - delivered in a calm and professional manner. Poor old Robert talks in great gulps of tabloid headlines and is far too melodramatic. He would have done well working for Maxwell or Murdoch.

Thank you Stephanie for your well balanced and considered views. Keep up the good work. PS do you feel you could usurp RP's role? Or is that very non-BBC.

DevonNative (#66) "does that apply to literary analysis too?"

Yes.

#61 DevonNative:

"All this talk about the IMF is very strange.

If a country is bankrupt as a result of excessive debt, it can go to the IMF and get ...a loan.

So it is possible to borrow to cause an economic recovery?"

I see what you are getting at, but ...

Yes, the IMF will provide loans to support a country while it is getting out of trouble. However, the loans are conditional on the country implementing tough economic measures to return the country to economic well-being. If the country had implemented the measures earlier for themselves, they might have avoided the bankruptcy and not need the IMF.

So, it is not the loans in themselves that provide the economic recovery, but the measures imposed as conditions for the borrowing.

In view of this, you might think that a government could do this for itself, if it was not totally spineless. In practice, it is easier for a government to blame the "unreasonable" requirements on the IMF, than to shoulder the blame itself - a bit like getting consultants in to a business to work out who should be made redundant and letting them take the blame.

#57. ThorntonHeathen wrote:

"your maths leaves me speechless" So 1500 pounds in pence is not 150000 pence then? That is after all the result of multiplying 1500 by 100 isn't it? So this month they are paying 150000 time less than last month are they not? How can a real example as reported in many papers be, as you put it, "rubbish"? Insane yes, but not I think rubbish! And also if the mortgage in question was non-performing last month it has instantly become a performing loan and the CDO relating to it (if there is one) has instantly become more valuable - compound insanity!

But I do have to admit that it is a rather extreme example - the mortgage in question is set at half a percent less than base rate and that of course should have been a zero percent charge, but as I understand it the computer could not do that! (that of course would equate to an infinite multiple or infinite inflation!!!)

I really do want Mervyn King, Nicholas Macpherson and Hector Sants to go as well as all of the MPC as these are the so called 'experts' who regulated us into this mess and I am unable to understand how they can possible in all sanity be left in charge to fix the problems that they created. I do not understand the term 'integrity' when applied to these people - in all logic it has simply depreciated about as much as the above mortgage!

croydo # 69

"Yes, the IMF will provide loans to support a country while it is getting out of trouble. However, the loans are conditional on the country implementing tough economic measures to return the country to economic well-being. If the country had implemented the measures earlier for themselves, they might have avoided the bankruptcy and not need the IMF."

I think you may wish to substitute the word "country" for "government" because it gives the impression that the government had really nothing to do with the mountain of debt it has created.

Furthermore, I seriously doubt that this or any government could implement anything that would benefit the lives of any of its citizens. And yes, you are right, the government is spineless! Here are a few more adjectives to describe them:

coercive
corrupt
fraudulent
inefficient
inept
immoral
interfering
interventionist
lying
monopolistic
profligate
robbing
thieving
wasteful

The list is not exhaustive, but I think it establishes the point that government needs to get out of the money producing business, get out of managing the economy, get out and stay out of people's lives and let the free markets sort out this mess.

#58. I_Despise_Labour

"Do you really think that Mervyn wanted to drop interest rates to their current moronic level"

Yes.

I have exchanged letters about this subject for well over a decade and neither Mervyn King nor his predecessor understood the problems that they were building up by setting interest rates to manage to the cpi and ignoring asset price inflation. We have bread and promoted a school of fundamentally flawed economists who are not to to fine a point on it, useless.

If these men had had a better understanding of their errors they would have been at least intelligent and not just fools. We have permitted these massive errors in economic education to go unchecked so that today all of the (well, the vast majority anyway) economists (and bankers) simply do not understand. If they had understood, like Bernard Madoff, at lest they would understand their error and could plead guilty as changed!

Mervyn King kept interest rates too low for too long and he is simply now doing the same thing, only more so.

PS re your 'handle' if I am referring to you name correctly - I despise both Tory and Labour as they both pursued the same fundamentally flawed economic policy of no, they called it light, regulation and too low interest rates with a total and cavalier disregard for the consequences. Indeed they are indistinguishable and offer no choice at all, tweedle dum and tweedle dee!

Politicians are just amateurs who are the front men and fall guys for the real government of the Civil Service! These guys are the real ones who should be sacked (along with the politicians, but they are easy for us to change) - sacking tenured civil servants is far far more difficult - but as they are also educated into belief in flawed economic theory they must also go.

Just changing the government will not do! In fact the civil service will encourage us to believe that it will so that they remain in power, but it will not do.

LibertarianKurt (#71) "but I think it establishes the point that government needs to get out of the money producing business, get out of managing the economy, get out and stay out of people's lives and let the free markets sort out this mess."

And yet, ironically, the adjectives you list are the very ones which most educated people over the past thirty years would probably use to describe prcisely what has happened as a consequence of the state withdrawing from enforcing regulation, and leaving matters instead to 'market forces'.

Perhaps your anarchism is just more extreme than what we've all witnessed to date. We have witnessed a progressive breakup of the UK state controlled Means of Production, whether you choose to recognise that or not.

#71 Kurt

With the "light touch" regulation that the Uk government has employed with regard to the financial markets then we can see that the 'free market' has done much to get us into this mess rather than sort it out.

If the question is "Can the government sort it out?" then the answer must be NO. The best that any government can really do is to create/maintain an environment wherein individuals and organisations cantake action to sort the mess out. The type of support is open for debate.

The support given to the financial markets both here and the US has not solved the mess. All the billions and now trillions that have been spent hasn't sorted the mess in that market. Rather, it appears that it has slowed the effects of this depression in the short term. Perhaps we are now in for a LONG period of decline followed by an even longer period of stagnation rather than the lemming-like cliff jump into oblivion. However a short period of mayhem may, with hindsight, have appeared more preferable.

I will not even attempt to brake your conviction that governments should be as small and insignificant as possible and that all tax is theft. I disagree but I do concur that goernment itself is not the solution but can be a catalyst for finding the right solutions if it gets its thinking cap on

JaededJean # 73

"We have witnessed a progressive breakup of the UK state controlled Means of Production..."

Really? Well, we libertarians don't think that the state has been nearly broken up enough! The means of production should always reside in the many private hands and not the sole hand of the (please review my adjectives @ # 71) state. Apologies are, once again, not offered if I have trod on your Stalinist/Hitlerist/Statist sensibilities!

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

#73 JadedJean

Well, I have to agree with you again when you say:

We have witnessed a progressive breakup of the UK state controlled Means of Production

That would be the fine state control that brought us British Leyland, 1970s stagflation, a thirty-week delivery time for a phone, the Winter of Discontent and an IMF bailout.

I doubt anyone can name a single thing that any government has ever done that has been wholly beneficial nor anything that cannot be done better by an unfettered free market. Even the pinnacle of good government, the US Constitution failed to free all of the people or secure an equitable distribution of the Means of Production.

What we are seeing now is precisely the opposite of market forces at work. Had they been then we would have seen bankruptcys amongst the financial sector. Of course, had the market been allowed to self-regulate with sound money then the current difficulties could never have arisen in the first place.

#21 random-thought

Your solution of a re-distribution of wealth might well sort out many of the problems in the short term but, with a continuation of the state-manipulated financial and fiscal system we currently endure, the problems would soon reappear, I am afraid.
If you want to resolve the matter permanently it is necessary to readdress iniquities in resources on a permanent basis too.

#74 foredeckdave

One of the reasons for the current situation is that, far from light regulation, the governments have created a facade of legitimacy around the financial sector whilst ensuring that it operates for the benefit of the few. It is not accurate to call the manipulated system we have the Free Market. It is anything but.

I must agree, you are technically correct to point out that a government can be a catalyst. It could do absolutely nothing, but then what would be the point of its existence?

#72 john-from-hendon

It is a matter of concern that our intrepid journalists rarely name (and shame) civil servants. You are absolutely right to point the finger of blame at these tenured self-serving incompetents. But, if no one knows their name or where they live how can they be held to account? Some analysis of who they are, what decisions they have been involved in and what they have gained as a result would make for better journalism.

Good news is that their pensions are about be wrecked by hyper-inflation.

I will try again with comment #76

# 64 JadedJean

I think I know what you mean. Seriously, a brilliant comment. Have you considered giving lessons in objective reporting?

#69 "a bit like getting consultants in to a business to work out who should be made redundant and letting them take the blame."

They are known in the "trade" as Axemen and it is an honourable, if somewhat lonely and friendless, profession. The silence that precedes and follows as one walks through the company is deafening as is the all-pervading fear of who's next for the chop.

Still, better an Axeman than the whole company going belly up !!

#70 "but as I understand it the computer could not do that! (that of course would equate to an infinite multiple or infinite inflation!!!)"

It is not the fault of the poor computer which cannot deal with the failing(s) of the software designer(s)/programmer(s) !! They did not envisage or build in any allowances or "traps" for negative results. All they had to do was - if result = less than zero, then result = zero !!

Computers do not usually make errors !! It's people who do and then blame it on the poor computers !! The building society should sue the software developers for this error in design and/or programming and recover some of the cost !!

This is equivalent to those systems that produce and send out bills for 1p and threaten dire consequences if this bill is not paid in time. The cost to produce and send the bill and recover that debt will be greatly in excess of the debt !!

We seemed to have diverted from the topic that Old Mother Hubbard discovered that her cupboard is bare and that there is no more bones for any new stimulus !!

Meanwhile, the Chinese and the Russians are dreading the effects of quantitative easing on national currencies and want a new International Reserve Currency !! This will have the effect of locking out those whose cupboards are bare and have a serious knock-on effect on government bonds !!

THEY WHO PAY THE PIPER

John_from_Hendon " We have bread and promoted a school of fundamentally flawed economists who are not to to fine a point on it, useless.

If these men had had a better understanding of their errors they would have been at least intelligent and not just fools."

I think you're right, but I'd like to add a perpective. A few years ago, a colleague of mine made the guarded but serious suggestion when discussing some of the issues which I have aired in this blog, that over the years, traditional economists (and educationalist) were replaced with Chicago School economists (and environmental enrichment ideologues in Education) for political purposes. That may seem somewhat trite or even conspiratorial to some, but really, it's just politics. In the context, I took im to be essentially talking about classic Trotskyite (Neocon) entryism with a twist ;-).

As to the Civil Servants being culpable, well, the same has been done to our Civil Service. If the free-market anacho-capitalists' (Thatcher's) Hayekian objective was to remove regulation, they just had to ensure that those promoted to senior positions in the Civil Service were wreckers. That was done by promoting incompetents or those eager to improve efficiciency through Market Testing and its variants. Our Civil Servants are not changed as adinistrations change as they are in the USA, and Thatcher's lot were in power a very long time remember. With their eyes off the recruitment ball, our large Public Sector was just that, a large body of ineffectively recruited and managed Crown Servants who largely could not cope.

An example of how some tried to warn of what many had seen happening for some time from the mid 80s onwards (see towards end of page - see what has happened to Probation in the last few years through the Offender Management Act).

This 'subversion' was, in my view, exacerbated by the RRAA and other 'equalities' based PC legislation which effectively drove Public Service recruitment quotas/targets to be proportional to local ethnic base-rates in spite of the fact that there are marked differences in mean educational attainment and educability.

This is something for those who still think that we have not rolled back the state enough. I sugest it has been done surreptitiously and for most unwttingly. Day by day we are fed examples of how inefficient the Public Sector is, and whilst the answer to that by any government genuinely interested in actively managng the UK would have been to reverse the Thatcherite policies which were wrecking the state, New Labour actually continued them with a vengeance, and especially via education, education, eucation which I have eplicated elsewhere. The use of PPP/PFI demanded irrational growth in the financial sector whilst pointing to the engineered inefficiencies in the Public Sector as justification for further privatisation and dergulation.

The culprits are, I suggest those who funded New Labour. Alas, that investigation, of course, went nowhere. They were venal people, but what they did was not illegal.

THEY WHO PAY THE PIPER

John_from_Hendon " We have bread and promoted a school of fundamentally flawed economists who are not to to fine a point on it, useless.

If these men had had a better understanding of their errors they would have been at least intelligent and not just fools."

I think you're right, but I'd like to add a perspective. A few years ago, a colleague of mine made the guarded but serious suggestion when discussing some of the issues which I have aired in this blog, that over the years, traditional economists (and educationalist) were replaced with Chicago School economists (and environmental enrichment ideologues in Education) for political purposes. That may seem somewhat trite or even conspiratorial to some, but really, it's just politics. In the context, I took him to be essentially talking about classic Trotskyite Neocon) entryism with a twist ;-).

As to the Civil Servants being culpable, well, the same has been done to our Civil Service. If the free-market anarcho-capitalists' (Thatcher's)Hayekian objective was to remove regulation, they just had to ensure that those promoted to senior positions in the Civil Service were wreckers. That was done by promoting incompetents or those eager to improve efficiency through Market Testing and its variants. Our Civil Servants are not changed as administrations change as they are in the USA, and Thatcher's lot were in power a very long time remember. With their eyes off the recruitment ball, our large Public Sector was just that, a large body of ineffectively recruited and managed Crown Servants who largely could not cope.

An example of how some tried to warn of what many had seen happening for some time from the mid 80s onwards (see towards end of page - see what has happened to Probation in
the last few years through the Offender Management Act).

This 'subversion' was, in my view, exacerbated by the RRAA and other 'equalities
' based PC legislation which effectively drove Public Service recruitment quotas/targets to be proportional to local ethnic base-rates
in spite of the fact that there are marked differences in mean educational attainment and educability.

This is something for those who still think that we have not rolled back
the state enough. I suggest it has been done surreptitiously and for most unwittingly. Day by day we are fed examples of how inefficient the Public Sector is, and whilst the answer to that by any government genuinely interested in actively managing the UK would
have been to reverse the Thatcherite policies which were wrecking the
state, New Labour actually continued them with a vengeance, and
especially via dysgenic 'education, education, education' which
I have explicated elsewhere. The use of PPP/PFI demanded irrational
growth in the financial sector whilst pointing to the engineered
inefficiencies in the Public Sector as justification for further
privatisation and deregulation.

The culprits are, I suggest those who funded New Labour. Alas, that
investigation, of course, went nowhere. They were venal people, but what
they did was not illegal.

rwolff (#77) "doubt anyone can name a single thing that any government has ever done that has been wholly beneficial nor anything that cannot be done better by an unfettered free market."

See Stalin's USSR and the PRC (still Stalinist). The USSR started going wrong after 1953.

You need to keep an eye on how the USA has been going about sabotaging statism. Think Trotsky. Think Neocons. Think 'free-market anarchism.

#80. ishkandar wrote:

"The building society should sue the software developers for this error"

No I disagree.

on two grounds:

If a computer system does not do what you want and your told the designers what you wanted and you accepted the software system then it is your fault not the computer programmers/designers.

and secondly -

You should fire the idiot/poor soul (delete according to degree of personal venom and bile) who wrote the mortgage terms that gave rise to this absurd situation.

LibertarianKurt (#75) "Apologies are, once again, not offered if I have trod on your Stalinist/Hitlerist/Statist sensibilities!"

Note the invective and negative propaganda once again. That's what Hayek did in his 'The Road to Serfdom' or at least, those who put the cartoon of it at the Von Mises site did). Any genuine attrocities perpetrated by planned 'Socialist In One Country' economies or any other are not being condoned, but to be honest, I take most of the past and present assertions of acts of 'evil empires' as largely little more tnan pro-free market, Western (USA) propaganda havig spent some time looking into it. It is, in view view, primarily Trotskyite/Orwellian propaganda designed to undermine statism domestically, i.e. here. We still see it daily in charges that the PRC is doing unspeakable things to legitimately peacefully protesting Tibetan monks who are allegedly just expressing their human rights. The reality is more far complex, as constitutionally, secession is procribed by the PRC Democratic-Centralist (Stalinist largely) constititution which is mroe duties based than rights based. One has to look at their laws and not judge them by ours. Our annual dose of Holocaust Rememberance serves much the same, pro free-market, Masters of The Universe purpose and is, in my view, just a perpetuation of the post war 'Collective Guilt' cooked up by Allied Psychological Warfare units as part of the denazification programme. That this is foisted upon naive school children is nothing less than politcal indoctrination.

Plug the fact that most of this is disccused in non truth functional Natural Language riddled with mentalistic idioms and it makes rational talk in politics and religion all but impossible. Hence the advice never to discuss politics or religion (or economics)?

Life is short. Have a look at the SEAB stuff.

#69

Thank you for your very coherent reply. I guess the trouble for the government when it doesn't have the IMF excuse is that by cutting the number of people it employs unemployment goes up and that makes a government look bad. A government might also make the mistake of cutting down on workers who do something useful (like nurses) or who may even produce something exportable (government hasn't privatised all the engineers and scientists yet, has it?) and end up retaining the additional managers employed as a result of using Parkinson's law as an aspiration.

#68 JadedJean

Thanks.

foredeckdave # 74

"...but can be a catalyst for finding the right solutions if it gets its thinking cap on."

Sorry Dave, government cannot be a catatyst for finding the right solution for anything. On the surface, what appears to be a good government solution (especially to mainstrean economists) to a particular problem will always have unintended consequences. When these unintended effects reveal themselves, the government then comes up with another "right" solution to counter the problem it created in the first place. This process can go on indefinitely, the result of which is a mass of legislation and regulations that usually ends up benefiting no-one or at the very least benefiting one particular group at the expense of another group.

As an example, I will quote Henry Hazlitt in order to illustrate the point. Whilst minimum wage laws may seem a good or right government solution to the problem of lowly-paid workers, the effects of the legislation that the government introduces are almost always overlooked:

"Well, let us examine the harmful results that follow from the efforts to raise wages through minimum wage laws. A wage is in fact a price and it is unfortunate for clarity of economic thinking that the price of labour's services should have received an entirely different name from other prices. This has prevented most people from recognising that the same principles apply to both prices and "wages".

People who would be among the first to deny that prosperity could be brought about by artificially boosting prices and people who would be among the first to point out that minimum price laws might be most harmful to the very industries they were designed to help, will nevertheless advocate minimum wage laws, and denounce opponents of them, without reservation.

The first thing that happens, for example, when a law is passed that no one shall be paid less than £250 for a forty hour week is that no one who is not worth £250 a week to an employer will be employed at all. You cannot make a man (or woman) worth a given amount by making it illegal for anyone to offer him (her) anything less. You merely deprive him (her) to earn the amount that his (her) abilities and situation would permit him (her) to earn, while you deprive the community even of the moderate services that he (she) is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.

Furthermore, it may be thought that if the law forces the payment of higher wages in a given industry, that industry can charge higher prices for its product, so that the burden of paying higher wages is merely shifted to consumers. Such shifts, however, are not easily made, nor are the consequences of artificial wage raising so easily escaped. A higher price for the product may not be possible: it may merely drive the consumer to some substitute. Or, even if consumers continue to buy the product of the industry in which wages have been raised, the higher price will cause them to buy less of it. While some workers in the industry will be benefited from higher wages, therefore, others will be thrown out of employment altogether. On the one hand, if the price of a product is not raised, marginal producers in the industry will be driven out of business; so that the reduced production and consequent unemployment will be brought about in another way.

When such consequences are pointed out, there is a group of people who will reply, "Very well; if it is true that X industry cannot exist by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether." But this brave pronouncement overlooks the realities. It overlooks, first of all, that consumers will suffer the loss of that product. It forgets, in the second place, that it is merely condemning the people who worked in that industry to unemployment. And it ignores, finally, that bad as were the wages paid in the X industry, they were the best among the alternatives that seemed open to the workers in that industry; otherwise the workers would have gone into another. If, therefore, the X industry is driven out of existence by a minimum wage law, then workers previously employed in that industry will be forced to turn to alternative courses that seemed less attractive to them in the first place. Their competition for jobs will drive down the pay offered even in these alternative occupations. There is no escape from the conclusion that the minimum wage will increase unemployment."

The thing is Dave, none of us will ever know how many businesses were unable to get off the ground or how many businesses were forced to go under or even how many more people could have gained employment because of the government's "right" solution.

Some ignorant person asked what governments have done better than the private sector at what. Apparently Scandinavia and other countries manage well enough with large scale gvt involvement in a great many areas of life.
Closer to home, the NHS has delivered well on the goals of healthcare for all at a reasonable price; pensions and benefits have prevented and helped prevent absolute poverty for millions; and so on. Good education over much of the 20th century, as mandated and provided to a large extent by gvt, has worked rather well. Not to mention the legal financial framework necesary for a capitalist economy to run, the various regulations necessary to provide protection to the public against corporate greed and sharp practises etc etc.

Or would you rather we returned to the 19th century?

calcination (#90) "Some ignorant person asked what governments have done better than the private sector at what."

They are not ignorant, they are just ideologically committed to anarchism/Trotskyism. State control limits their dream of free-market/enterprise. That is why they're anti-state i.e anti Public Sector. In the past these bodies have limited their power. If they can remove government they can establish nepotistic monopolies without fear of sanction/regulation. It's sold as freedom etc, but it's really just self or group interest. This is why the Muslim world and the SCO looks upon the Neo-Liberal West as 'Satanical'.

Are they misguided? Difficult to answer if one looks into it in detail and looks past the propaganda. One has to look at the genetic basis of human cognitive diversity and think of low literate/numerate people as akin to children who need protecting from predators and even themselves. You will find that Libertarians make out that this is not so, and that people are free to choose, improve themselves through education etc, but they are not, as they are not free to choose their parents/genes. It's a con.

The Cold War morphed. The war is now economic/demographic and the Libertarians are losing.

Message 90

`Not to mention the legal financial framework necesary for a capitalist economy to run, the various regulations necessary to provide protection to the public against corporate greed and sharp practises etc etc.'

Such irony does not fit very well with the remainder of your comment.

#90 calcination

I believe I am the ignorant person to whom you refer. Perhaps you could enlighten me by describing exactly what is so great about Scandinavia with some examples of its great government achievements.

I note you use the traditional socialist examples of state achievement here in Britain; the NHS and State Education. Both of these are clearly failing institutions. NI contributions alone are greater than the cost of private healthcare for most working people including many of those on less than average wage whilst Bupa can advertise clean hospitals as a selling point. Why, if it is so good, does it need the protection of Crown immunity? The education system has clearly been dumbed down (see JadedJeans frequent comments on this). Exactly which educational standard do you assert is higher due to state involvement?

As for regulation, why are our great leaders now telling us that the current problems are due to a lack of regulation? Perhaps they think that due to poor standards of state education we are all to ill informed to spot their mendacity? Who do you trust, the state and its plethora of quangos or reputable private organisations to assure quality?

Undoubtedly government was better in the 19th century when it was dramatically smaller. Unfortunately it still did then what it does best – protect the interests of its friends.

rwolff #93- possibly the problem is differing values- I happen to think that a high standard of living for the majority of the populace is a good thing. Perhaps you can mention some countries you would rather live in which combine high standards of living and general wellbeing with lack of gvt involvement?

Tell you what, to make it simpler I'll agree that gvts have limits when you agree that free markets have limits, as seen by the current bank caused recession. (Although it was a systemic failure aided by bad gvt actions- the real world is much more complex than your libertarian fantasy land)

The funny thing is that before Blair et al wasted billion on the private finance initiative (theres a hint) and internal markets on the NHS, we were in fact paying a great deal less than any other country with comparable health outcomes. Including of course the USA (Where you die if you don't have the money to pay for treatment) and France. As for private hospitals they are currently parasitical upon the NHS, and no country with health outcomes that are desirable has a free market based healthcare system, unless theres one I am not aware of.

As for education, thats right, it isn't as good as it was, that's one reason I have never voted for new labour, since I could see they were a bunch of shysters from the start. Nevertheless you ignore the previous decades of public education which helped make the country what it was and could be again if we dump blair and his ilk and learn the lessons of the past 50 years.

Since it is clear that you would prefer the 19th century, I suggest you depart forthwith to pastures new, because people like me will be fighting you all the way when you try and drag us back in time.

rwolff (#94) "I note you use the traditional socialist examples of state achievement here in Britain; the NHS and State Education. Both of these are clearly failing institutions."

They are indeed failing, but that's the consequence of years of attrition - that is what Thatcher started and Blair continued. It's been made worse through a) mass low skilled immigration b) a below replacement level indigenous birth rate c) exacerbated differential fertilty as a consequence of education x 3.

If one builds something but the next 'two' governments come along and start systematically breaking it down over 30 years allegedly in the interests of the more efficient free-market and Private Sector, pointing to inefficiencies in the Public Sector is not just more of the same, but disingenuous is it not?

70 John from hendon

If you still believe that your comment "Mervyn you have devalued the currency by a factor of 150,000 times!" is not barmy then you need to learn the difference between rabid exaggeration and simple maths.


Libertarian Kurt & Rwwolf

Your belief in the pseudoscience of pure economics and the self-loving (pun intended) Homo Economicus is touching but misplaced. Please continue to enliven and entertain (tread?) the boards, but don't expect to make many converts. Try narrative history or poetry for a change.

Jadedjean - no wonder you are jaded. You spout the most eclectic mix of occasionally incisive, pertinent observation and frequently neurotic, divisive educo-babble (see, I can make up concepts too) that I have ever tried to read and make a coherent narrative from. Any more of this and the lumpen proles will be coming to get you....

Hey, does that mean I am a Narrativist?

#94 calcination

I agree with you whole heartedly.

There never was such a thing as a Free Market. Even if one truly exited it could not ultimately be free as it would have to ultimately become a monopoly. The idea of the Free Market is about as realistic a chocolate teapot as the Theory of the Firm!

The problem with the NHS and its supposed ineficiencies, has more to do with the PFI initiatives and the highjacking of the system by interest groups and so called health economists (eg smokers costing the NHS). I will accept that management and its structures have been poor and therefore it is to the credit of the NHS staff that they have continued to deliver so much.

Whilst there has never been a true golden era for state eductaion perhaps the 50s and 60s were the high point. I believe that state education started to fail after the Butler Act was not fully implemented. Butler called for a fully funded 2 pronged secondary education system were academic study (High and Grammer schools) were complemented by vocational education (Technical and Secondary Modern). As we know the second part of this programme was never properly implemented or funded.

However, based upon the UK's ability to look after the major needs of the majority of its people, we still have the capacity to develop new commercial and business systems to meet our needs. However, we do need the leadership from an effective government to create the environment in which that can happen.

rwolff (#93) "The education system has clearly been dumbed down (see JadedJeans frequent comments on this)."

You do understand that the reason for that is because the population has dumbed down genetically through a)immigration and b) differnetial fertility (cf. education x 3)?

Please confirm you understand that you appreciate that I am asserting that it's the heritability of cogntive ability (human capital) which is important here, and that you understand that education does not raise intelligence, it just resources natural human ability. Maintained schools may not be able to select much of their intake anymore but you have to grasp that in some inner cities school mean IQs are in the high 80s! Education delivery is dumbed down to make it appear that standards are not slipping. They are slipping though, because one can't turn sows' ears ito silk purses. Efforts to maintain standards manifest as bad behaviour as they can't cope.

Tell us you fully understand this as I currently don't see anything in your (or LibertarianKurt's) posts which show that you fully appreciate that what we are suffering from today may be demographic dysgenesis as a consequence of deregulation and anti-statism. That is, dysgenesis is an entropic force. It's why one needs strong government, to manage the dysgenic forces (i.e implement positive eugenic policies). That's why one finds strong government emerging when dysgenesis is rampant. It's because GDP and IQ are so highly correlated.

It was the birth rate problem after WWI which partly led Hitler to come to power. If you want to prevent such dictatorships, prevent dysgenesis and you won't do that by opening borders.

ThorntonHeathen (#96) 'Narrative' is a relatively new buzzword, coined circulating, no doubt as a consequence of the expansion of our feminized literati in recent times, yes? The trouble is, it just means story spinning as far as I can tell, and that's certainly not what anyone should be heeding in these times. What we need is objective description and analysis of what matters.

If you don't understand technical terms, just look them up. What you have written is nonsense. To understand what's happening in Liberal-Democracies you have to look at their differential birth-rates, and how these impact upon IQ and behavour. Liberal-Democracies are now below replacement level. They are biologically unfit.

#94 calcination

I can agree we have a differing concept of the good and, perhaps differing values. I am most certainly not a utilitarian. I think that line of reasoning has been well and truly discredited. It is repugnant (morally to most, always to the unfortunate victim) to sacrifice an unwilling victim for a notion of the greater good and leads to absurdities such as hanging the innocent child to placate a witch-hunting mob etc. Secondly no one has yet devised an adequate concept of the good nor found the fabled utilitarian-calculus. I will be happy to debate the issues should you not be familiar with the contra-arguments but suspect most people on this blog are already aware of them.

I wish that I could point to somewhere where there is an absence of government. I would point to your recommended Scandinavian countries as places where at least their governments do not overtly fear their citizens nor those of other countries; perhaps this is because they are less inclined to strut the world. To be clear, I have no problem accepting and even admiring social provision. I object to coercion to achieve it. Individuals ought to be free to chose their allegiances and to subscribe or not as they see fit.

I do not accept that free markets have limits. As LibertarianKurt frequently points out, often quoting Hazlitt, anything that a government coercively takes from one is to their detriment. We have never actually seen a true free market in operation yet most of our social life is spent in just such a world. Would you have the government chose your friends? They may well do so soon if Jacqui and Co. get their way.

Merely attaching the word private or free to something e.g. public-private partnership does not make it so. Nor does the hackneyed use of the word market as in internal market make the subject an example of the free market. There are clearly better health systems around the world otherwise we would not see health tourism, we would have outcomes and (no)waiting lists that stand comparison. I suspect your underlying concern is more humanitarian than dogmatic here. I do not wish to see people suffer due to lack of resources. The issue then becomes access to such resources rather than the dogmatic assertion that only a coercive state can deliver.

Both you and JadedJean seem to hanker for the glory days of education (the 1960s? or the 1950s?). The former saw the preparation for complete state control of syllabus and standards whilst the former is generally perceived as promoting narrow curricula and elitism (something JadedJean might applaud I suspect). Like healthcare, it is desirable for all to have access but not for the delivery to be prescribed by the state. Again the issue is one of means not ways.

I do not wish to drag anyone back to the 19th century. In any event technology has made life much better in many respects. I do believe that there is empirical evidence, especially from the US, that the much reduced ambit of government back then had clear advantages. Not least, in relation to this blog thread, price stability and a quantum leap in living standards. I am not clear why you or your chums should want to fight me. Would it because I am reluctant to pay for your pet schemes? I have no desire to coerce you. Feel free to form your own coercive cooperative and beat each other as much as you like to pay for it, just don’t ask me to contribute.