German Finance Minister Rubbishes Brown

Herr Steinbrueck is correct. Having inherited a golden economic legacy handed to him a little over a decade ago, Brown has as good as bankrupted the UK. The savings ratio has collapsed as savers have been discouraged and reckless borrowing positively encouraged. Property prices trebled in a few short years before the bubble burst, and Brown ran up a budget deficit during the boom, claiming he didn’t need to set money aside for unforseen problems as he had abolished the economic cycle. “No more boom and bust” was his oft-heard cry. How hollow that now sounds.

Debt - both public and private - is out of control and Brown has no desire to exercise fiscal discipline while he has a general election to fight, in a little under 18 months or so if, and it’s a big if, he survives that long.

Passing on Cuts to Savers

While driving home from a Christmas shopping trip this afternoon, I heard a news item on Radio 4 which stated Gordon Brown was going to force banks to pass on rate cuts to customers. Not borrowers, you understand, but customers. In fact, by passing on cuts to borrowers banks have to pass them on to savers too, or they lose money. Brown knows this, but he doesn't really care much for savers, as his record shows.

Next time your building society or bank cuts your savings rates, you know precisely who is to blame.

Brown Ignored by Overseas Media

Here's something interesting.

Gordon Brown and his friends are trying to present him as the economic saviour of the world, the man to whom other world leaders are turning in their hour of need.

Yet I've been reading a fascinating article in the Washington Post about the G20 meeting. Fascinating not because of what is in the article, but because of what isn't. As one might expect, the countries in attendance and their world leaders are mentioned in the piece, but there is one very notable exception: Gordon Brown. The article runs to 2 pages, yet the man who claims to be running the show and leading by example isn't mentioned once when practically everyone else is.

Perhaps the G20 meeting isn't the Gordon Brown show after all. Perhaps other leaders are not so keen to take advice from a man who is dealing with a much bigger debt burden than any comparable economy. Maybe the narrative in this country's media is a little out-of-touch with reality and is due a correction - rather like the economy, some might say.

The article, for anyone who might be interested, is here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500902.html?hpid=topnews&sid=ST2008111500904&s_pos=

Hazel Blears' Comment Moderation

The other day, I posted a comment on Hazel Blears' blog. The text went like this:

"This does sound a trifle patronising.

In my experience, young people just want somewhere to hang out, smoke cigarettes and drink the white cider they bought from the dodgy off-licence down the road. Talk to them about "community cohesion" or "taking ownership of their communities" and they'll think you're absolutely stark-raving bonkers, especially if you use language like that. Well, those that don't listen to Cliff Richard will."

Today, I received an email from the webmaster asking if I would like to rephrase it. Apparently, the term "stark raving bonkers" is deemed too personal.

What?

The Axis of Ineptitude

Congratulations, Obama.

In 2 months or so, one half of the axis of ineptitude - George Bush - will be gone for good. His administration will be swept away by the tidal wave that is Barack Obama. With that, we can all breathe a collective sigh of relief.

Let us not forget, however, that the other half of this axis - the Brown half - is still in office, and intends to cling on as long as possible. If we are lucky, Labour will depose him in a leadership election in 2009. If we are not, we will have to wait until the middle of 2010 before he is removed.

Change is definitely in the air. Speak to people on the street, even in safe Labour seats, and you realise there is no mood for continuity. Brown represents that continuity; the failed policies, the old dogma, the inability of an administration to admit to its own mistakes by putting them right. The Labour Party needs to wake up and smell the coffee, or it risks losing by a landslide when the UK electorate finally gets its say on the decade of debt, the invasion of Iraq, and other failures of the past.

Until Brown goes, one half of the axis of ineptitude remains in place.

Brown's Culture of Debt

Shortly after taking office in 1997, Gordon Brown handed the task of determining interest rates to the Bank of England, charging it with keeping inflation down. Back then, the government's official inflation figures were based on the reliable Retail Prices Index. One might have expected this to mark the end of political interference in interest rates, but that was not the case. In 2003, Gordon scrapped RPI as the MPC's inflation target index, and replaced it with the Consumer Prices Index, or CPI. In effect, he was telling the Bank of England not to concern itself with ever-rising house prices and consumer debt, and to concentrate on little more than the price of goods in the supermarkets.

This was a highly significant act calculated to force rates down. In 2005, Labour's election campaign ran several posters boasting about the how cheap it was to obtain credit. The message was clear: spend, spend, spend and don't worry about the consequences. People did just this, and personal debt burst through the £1 trillion mark, and kept on rising. Personal insolvencies soon hit 100,000 per year, by far the highest numbers ever recorded. What did Gordon care? So long as the debt bubble kept growing, his faux growth figures made it look like the economy was still doing well. Accordingly, the government kept on spending money as if it were water, with no regard to what might happen in future. Eventually, the whole house of cards had to collapse, and so it did in 2007 with the first run on a British bank in more than a century. The credit crunch was upon us.

The mess that Brown has made of the UK economy will take years to clean up. Far from being in a good position to weather the storm, the UK is in an uniquely bad position to deal with the economic situation. The recession will hit Britain far harder than most comparable countries. Of course, infamous as he is for being unable to own up to his past mistakes, Brown won't admit to any of the damage he has caused, and still insists on trotting out the same tired old lines. This is why he is unlikely to restore RPI as the Bank's inflation target. To do so would be tantamount to admitting he messed up badly.

Oh dear.

We are now into what looks likely to be a very deep and long-lasting recession. What's more, the government seems intent on compounding the terrible decisions it made which brought us to this place with even worse ones in a doomed attempt to get us out.

Increasing public spending is the wrong thing at precisely the wrong time, and will inevitably make the situation far, far worse. We've been down that road before, and the consequences were pretty horrific. Even Jim Callaghan knew you couldn't hope to get away with what Brown is attempting, but then hindsight is not something that troubles Brown, who famously listens to no-one. He has persistently ignored best advice, which is why the country is in such a poor position, and why it will continue to get worse until he starts to see sense, or is removed from office. My money is on the latter.

Brown's answer to the economic hardship for which he is largely responsible is to lurch to the left, yet this it no time for outdated and discredited political dogma. Instead, he should just cut taxes and stop throwing away the money that this seriously indebted country does not have. The economy needs a stimulus, not another mortgage.