Shakespeare in the Merchant of Venice was right . Don't borrow or
you'll be in trouble and in Brown's Britain lenders lose their money.
This posting is based on the Labour Party’s ‘spinning’ document in
advance of the speech which is going on as I write. He’s living in
a ‘make believe’ land where reality seldom intrudes.
For instance there’s the real world news that “Pensions slump by 28
per cent in a year
Private pensions have lost more than a quarter of their value in the
last 12 months, a personal finance company has said.”
At 11.40 am the FTSE’s reaction is a minus of 3.81% . Japan’s Nikkei
fell 6.4% earlier, which influenced sentiment. The pound has fallen
further on early trading to $1.542 making Brown’s policy of more
borrowing more difficult.
XXXXXXXXXXXX CS
===========================
TELEGRAPH 27.10.08
Gordon Brown vows to borrow and spend
Gordon Brown will today defend plans to increase public borrowing and
spending as the only 'responsible' thing to do to protect families
and businesses from the economic downturn.
By Andrew Porter and Aislinn Simpson
The Prime Minister has come under fire from the Conservatives for the
policy, which they believe will "leave the cupboard bare" in a
forthcoming recession.
Leading economists have also discredited the move, saying that the
Government should be looking at tax cuts instead.
Official figures released last week showed the Government borrowing
is rising at the fastest rate since records began after the Second
World War.
But in a speech in London this morning, Mr Brown will say the
Keynesian principle of increasing public spending and fast-tracking
major construction projects to stimulate the economy is the right
strategy to pursue.
He will tell a City audience: "We will and can allow borrowing to
rise to help restore demand and to come to the aid of workers,
businesses and homeowners. "We have already combined targeted support
through the tax system - such as the temporary [nb] increase in stamp
duty thresholds, the freeze in fuel duty and the £120 tax rebate for
basic-rate taxpayers [partially to make up for abolishing the 10p
rate -cs] - with a commitment to maintain the necessary government
investment to enable Britain to benefit from the upturn.
"Through our actions we are both supporting families and businesses
now and helping them prepare for the future. That is why the
responsible course is to borrow now [He has already grossly over-
borrowed already and this could wreck the economy altogether -cs] to
maintain growth and output, and to reduce borrowing as a proportion
of GDP as the economy recovers and tax receipts rise again."
He will also stress the importance of intensifying welfare reform, on
the same day as incapacity benefit is replaced by a new allowance
aimed at getting one million people off benefits.
"The very moment in an economic downturn when we need to invest in
human capital is no time to slow down welfare reform," he will add.
He is expected to urge the banks to start lending to each other again
having secured a £37bn bail-out from the Treasury, and pledge further
reform of the financial system including addressing the issue of
"credit default swaps" - which some commentators fear is still going
to be a big problem for the markets.
In a wide-ranging speech, Mr Brown will highlight moves to boost the
"low-carbon economy" as Transport Secretary Geoff Hoon unveils plans
to spend tens of millions of pounds trying to kick-start the market
for electric cars. [This whole madness is money down the drain - see
my earlier “More lies from the chief 'spinner' -cs]
He will point to a promise of new public services apprenticeships
being made today by Skills Secretary John Denham in a bid to boost
employment levels to counter recent sharp rises in the jobless total.
And he will set out his proposals for international reforms - ahead
of a crunch summit of the leaders of the world's 20 biggest economies
in Washington on November 15. German Chancellor Angela Merkel will be
at Downing Street on Thursday for talks with Mr Brown, who in recent
days has also spoken with US President George Bush and his
counterparts in Brazil, Canada, India and South Africa [He had the
nerve yesterday to complain that he - the architect of the whole
British disaster - had been right all along and that other countries
hadn’t listened to him! --cs]
Official data released last week showed that the British economy had
shrunk for the first time in 16 years - and by a much greater margin
than experts had predicted.
The 0.5 per cent contraction for the quarter from July to September
sent share markets deep into the red and saw the pound slump to a new
six-year low against the dollar.
If growth in the current quarter is also negative then the country
will formally be in recession - a prospect acknowledged as "likely"
by the PM last week.
A leading economist has warned that interest rates may have to be cut
to zero if Britain is to avoid recession. [ What will those relying
on their savings live on then? The Japanese tried that and it didn’t
work. -cs]
The Office of National Statistics (ONS) has disclosed a public debt
that is ballooning already.
The Treasury borrowed £8.1billion in September and £37.6billion in
the first six months of the financial year, according to the released
last week figures.
Research from the Centre for Policy Studies showed government debt
has now climbed to the equivalent of £75,984 for every household, and
analysts have warned that it could reach around £65 billion.
Criticism of the Government's public spending plans came in a letter
to the Sunday Telegraph signed by 16 economists including Trevor
Williams, chief economist at Lloyds TSB Corporate Markets and Peter
Spencer, chief economist to the Ernst & Young ITEM Club. [see my “The
madman must be stopped” yesterday -cs]
"It is misguided for the Government to believe that it knows how much
specific sectors of the economy need to shrink and which will shrink
"too rapidly" in a recession," they said.
"Thus the Government cannot know how to use an expansion in
expenditure that would not risk seriously misallocating resources."
========================
POLITICS HOME 27.10.08
BBC News at 11.02 GMT
Hammond: Increasing borrowing not a strategy
Philip Hammond, Shadow Chief Secretary to the Treasury
Mr. Hammond criticised Gordon Brown's strategy of increasing
borrowing: "increasing borrowing is not a strategy for dealing with
the recession, it’s a consequence of the recession."
He criticised Gordon Brown's handling of the economy, saying that he
had "borrowed right the way through a boom and that means we have
less room for manoeuvre. I think everybody is now expecting that the
Bank will cut interest rates."
===================
DAILY MAIL 27.10.08
Sometimes Darling, even economists can be right...
By DAILY MAIL COMMENT
[NOTE: Criticism of Darling is OK in the Mail. but Brown is taboo for
Paul Dacre the paper’s Editor-in-chief is a friend of Brown. -cs]
Economists can often be spectacularly wrong. Take the 364 who signed
a famous letter in 1981, predicting that Margaret Thatcher's efforts
to balance the Government's books at a time of recession would ruin
the country.
Barely was the ink dry before the economy began to revive, leading to
almost a decade of growth - and making those 'experts' look very
foolish indeed.
But even economists can sometimes get it right.
Darling should take heed of the 16 economists who call his public
works programme 'misguided'
At the very least, the Government should consider the views of the 16
who wrote yesterday, condemning Alistair Darling's 'misguided' and
'discredited' plans to spend our way out of the new recession with a
programme of public works.
For don't their warnings make a great deal of sense?
As they rightly point out, public spending is already wildly out of
control (and far more so than the official figures suggest, once the
Private Finance Initiative, the banks bail-out and public sector
pensions have been included).
The 16 are surely right, too, to express fears that the state's
growing dominance of many sectors will stunt private companies' hopes
of recovery. For how can fair competition flourish, when one player
has government backing?
As for fiscal policy, may they not also be wise to prefer tax cuts to
public spending as a means of stimulating the economy?
After all, tax cuts mean individuals and the free market can make the
spending decisions that determine which parts of the economy should
prosper.
Public works - including Mr Darling's knee-jerk plans to refurbish
all secondary schools - leave the decisions to the wasteful and
inefficient state.
No. Before it's too late, the Chancellor should heed these 16
economists.
They, at least, appear to have learnt from the mistakes of their
predecessors. Can the same be said of Mr Darling? [or the puppet
master Gordon Brown? -cs]
Monday, 27 October 2008
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