Britannia Radio

SUNDAY TELEGRAPH   21.9.08
1. Now it is Broke Britain that the Tories must heal [newspaper version]
=-=-=- Financial crisis: Re-learning old lessons
[Online version]
By Iain Martin

The tide now runs with the Left. In the US, the Republican 
administration has been forced into a humiliating $1 trillion 
nationalisation as the final defence against a financial firestorm it 
tried to put out but could not. Righteous anger with bankers is 
spreading and the cry has gone up for much tighter regulation.
At least America's muscular form of capitalism will deliver to its 
people images of those who erred in handcuffs.

Once a generation America punishes capitalists who have squandered 
other people's money; within weeks Bush administration officials and 
the disgraced boss of Lehman Brothers, Dick Fuld, will appear in 
front of Congressional hearings.

In Britain, meanwhile, our more conventional Left is massing its 
forces for an assault against markets. Gordon Brown, the man on whose 
credit bubble Britain has floated to calamity, has seen a hope here 
and is attempting an audacious reinvention.

He talks of "cleaning up the City", failing to mention that a good 
deal of his public spending splurge was paid for with taxes collected 
from the hard-working Square Mile when it was booming.

Many of the donors who bankrolled New Labour made their money there. 
Now, Brown hopes to blend in with the crowd preparing to march on the 
capitalist citadel.

He does not deserve to get away with it and the Conservatives need a 
plan, urgently, to ensure he fails.

The financial shock has the potential to transform politics beyond 
imagination.

Last week Barack Obama became the likely US President. The rapacious 
beast that is Wall Street is perceived as a Republican animal, while 
John McCain even looks a little like Herbert Hoover, the Republican 
President on whose watch the Wall Street Crash happened.

Worse, McCain thinks the economy is boring and that the fundamentals 
remain sound. If Obama can calm his nation and offer the possibility 
of future optimism, he will win.

In Britain, the Conservatives need to construct a coherent analysis 
of the problems that face the economy, and convince voters that they 
can lead the country out of the mire. The Cameroons have made much, 
rightly, of their hopes of mending broken British society, but how is 
this to be done when Britain is not just broken, but broke?

The Tories should make more aggressive attacks on Brown's claims 
about his record, particularly his assertion that "We are uniquely 
well placed to deal with the global economic crisis". After the 
cardiac arrest suffered by global capitalism last week, it is more 
apparent than ever that the opposite is true: we are less well placed 
than most other nations, as a result of policies pursued by Brown.

While he was Chancellor, following the example of his guru, Alan 
Greenspan, Brown encouraged the creation of a British consumer debt 
bubble and called it a boom. It has burst and turned into a bust. 
Even the regulatory system he set up in 1997 has failed its test.

Greenspan - the chairman of the US Federal Reserve for 19 years, who 
was showered with honorary degrees and accolades but should not 
expect many in future - made money cheap, or virtually free, and many 
investment banks, institutions and companies gorged. Consumers joined 
in the fun.

Greenspan argued that this was sustainable because our economies were 
enjoying a once-in-a-generation leap in productivity - the result of 
technological advance, financial innovation and globalisation - which 
meant asset prices would continue to rise. He was wrong: prices are 
falling and we are saddled with a toxic pile of debt.

In Britain, Brown combined this credit surge with a reckless 
extension of government spending. The country should be entering this 
downturn healthily in surplus, but government borrowing is out of 
control. Last month alone it was £10.4 billion and on current 
forecasts will hit £65 billion for 2008-2009.

Balanced budgets would have left room for tax cuts now for consumers 
and business to boost economic activity. Instead, the next government 
will have to cut spending not, initially, to trim taxes but to get 
the books into shape. There will have to be pain before later tax 
cuts help deliver any gain.

First, however, free marketeers and those on the Right have to 
confront the enormity of what has taken place - and rethink. That 
this is proof that the market works by punishing those institutions 
which deserve to fail is correct. But in an era of rising 
unemployment and negative growth this will not on its own be a 
particularly saleable pitch to electorates.

Advocates of free markets have found the argument easy to win for 
most of the past 20 years. What is required is a new moral defence of 
capitalism, one which reconnects conservatism with fiscal 
responsibility, balanced budgets, sensible consumer lending, saving 
encouraged by lower taxes, and simpler regulation which will not 
strangle any recovery, as the Left's draconian plans surely would.

At its core this involves leading voters to a reckoning in which 
individuals and governments re-learn a lesson Brown fooled so many 
into forgetting: we cannot spend more than we can afford.
============AND --->
2. A peasant's eye view of financial wizards
By Jenny McCartney

Oh dear. Last week Britain finally came round, as if from some 
delirious drunken rampage, with a thudding head and a deeply nauseous 
feeling.

Around it were scattered the useless tokens of high living: the 
fashionable baubles upon which so much silly cash had been lavished. 
The money-box was almost empty, and the debtors' chits piling up on 
the doormat.

Even for those of us who understand financial matters in roughly the 
same terms as a medieval peasant, the collapse last week of the US 
investment bank Lehman Brothers (established 1850) felt like a 
definitive chunk of disaster.

It was swiftly followed by the news that HBOS, the owner of Halifax - 
Britain's biggest mortgage lender - was on the brink of collapse, 
saved only by a shotgun marriage to Lloyds TSB, presided over by a 
grim-faced Gordon Brown. Then the US Federal Reserve was forced to 
step in and bail out America's biggest insurer, American 
International Group, at a cost of $85 billion.

Everywhere one looks, banks and insurance companies are flailing and 
keeling over as hollow-eyed officials perform desperate acts of 
resuscitation.

As I diligently plough through the numerous idiot's guides to "short-
selling", "moral hazard" and "sub-prime mortgages", blinking a 
little, the enormity of what the money men at the peak of Britain and 
America's financial institutions have done is only now beginning to 
dawn on me.

They have first taken staggering risks with the stability of their 
institutions, and their customers' investments. Then they have 
pocketed an equally mind-boggling fee, and passed the lunatic risk on 
to the chumps at the bottom of the financial food chain: you and me.

They were permitted to do so, in this country at least, by a 
Government that had specifically promised us "an end to boom and bust".

For years, British people were indoctrinated with the notion of 
Gordon Brown as some kind of economic wunderkind, whose huge brain 
could unlock the secrets of lasting prosperity.

Now, in the mist of meltdown, he argues that he is suffering the 
effects of a global crisis beyond his control, which he is soundly 
micro-managing to the best of his abilities.

Of course, there are crises beyond one's control in government. Yet 
the secret to successful management, in any walk of life, is surely 
to anticipate adversity and take sensible measures to avoid it, 
contain it, or survive it. That is what Mr Brown has notably failed 
to do on our behalf.

As even I - someone who can barely master the workings of a current 
account - was pointing out in February 2007, it was crazy to allow 
the levels of personal debt in the UK to reach record levels, in a 
feverish climate in which people were being offered mortgages based 
on six times their salaries.

In the midst of an economic boom, Gordon raided Britain's pension 
funds, borrowed heavily, and spent like nuts.

He disguised much of his spending in the form of Private Finance 
Initiatives, through which he is estimated to have run up £110 
billion of debt, for which the nation will in due course receive the 
bill.

He didn't save, however, and he didn't encourage anyone else to save 
either. In any case, no one could afford it: we were all busy 
servicing our big debts, everything from a whopping student loan to 
the huge maw of a mortgage.

An entire economy was pinned to the frail balloon of rising house 
prices, which has just been impaled on a very pointed twig.

The thing is, even half-witted medieval peasants knew that it wasn't 
a smart idea to lend money to someone who would have great difficulty 
in paying you back. Yet that is precisely what mortgage lenders in 
America, and to a lesser degree here, have been encouraged to do, on 
the apparent understanding that little Joe Public can bear the heavy 
consequences of disaster.

Ironically, those least permanently affected are the executives at 
the top of failing financial institutions, cushioned by their 
generous pay packages.

The more I think about it, the more I begin to crave some very 
medieval punishments indeed.