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Gillian Smissen
Barry's Blog

Economic catch-up....

Since taking a break in blogging there has been a lot happening on the economic front.....

First a re-cap....

Over a 13 year period of incompetent economic management huge problems kept stacking up on each other....

--- From 2000 Brown reversed reducing the deficit left over from the previous recession and went on a spending and borrowing spree like a drunk billionaire determined to go bust.  The result a huge deficit (the excess of spending over income on the current account, similar to you spending 1500 a month on income of 1000 a month with the 500 going on a credit card.... it could not go on for long.)  This was a disaster waiting to happen with the economy in a terrible position to weather the next downturn.
--- In 1997 he changed the whole way banks were regulated ignoring Mrs Thatchers wise dictum that 'banks are not ordinary businesses' he introduced a tri-partied regulatory system with no clear responsibility for prudential controls and then capped it all by urging the banks in a now infamous Mansion House speech to 'go out, take risks and win business for Britain'.  Some did and in doing so started to store up problems ready for the next downturn....
--- In giving independence to the BoE Brown drew up an inflation brief that ignored levels of private debt in the economy.  This resulted in interest rates being kept too low too long.  The effect was two-fold, private savings were disincentivised and borrowing shot up leaving families vulnerable for the next downturn...  That was re-inforced when he sent a spend today and worry tomorrow message to the public by cutting down on tax-free saving allowances and introducing stealth taxes on pensions and ISAs.
--- The economy seemed for many years to be booming, but it was an illusion.  The so called Brown boom was sustained on a sea of debt and some journalists recognised at the time we were living in a 'Fantasy Island' economy.

The scene was therefore set in the UK for a disaster....  Brown actually claimed he had 'banned boom and bust' a statement that can be likened to King Canute thinking he could halt an incoming tide.  Nobody economically aware had taken that statement seriously at the time but, disasterously it is now clear that Brown actually believed that conceit.

But thing were even worse.  Governments elsewhere were also stacking up problems over this period....

The Euro was introduced locking in the economies of the responsibibly managed northern countries with the irresponsible southern European countries who copied Brown's spend, spend, spend approach.... 

Clinton in the USA made some changes to enable people who really should not be allowed to borrow money to do so... That was the real start of the toxic debt issue and, guess what, urged on by Brown some British banks were busy buying up US banks and exposing themselves to this risk...

So the scene for disaster on an international scale was truly set.  The slowdown started in 2007 and the first warning sign of disaster to follow was the Northern Rock debacle.  They had the riskiest business model of all banks made riskier by the lack of prudential control after 1997.  Then October 2008, the banking collapse....

The recession soon followed, caused not so much by the banking collapse but as a part of the natural economic cycle but exasperated by the banking issue.  This recession was the longest and deepest for the UK since the 1920's depression and was so long and deep entirely because of the terrible condition the economy was left in by Brown's mistakes.  

Of course the Euro has also played its part in exacerbating the problem as did the mistakes in the USA but all countries were not affected alike.

Those countries who had adopted responsible fiscal policies (outside the Eurozone) were able to recover more quickly, some indeed were barely affected by the slowdown.  For instance Canada, Australia, Norway and much of the Far East did well.

Now, at last, the British economy is back to pre-recessionary levels of activity.  There are still problems.  Wages, in real terms, have still not reached pre-recession levels.  Interest rates, still at historically low emergency levels, will soon be forced up, how far and how quick no-one knows and with many people still over-extended with debt could create huge problems.

It has all taken far too long.

George Osborne has been far too timid in cutting public spending, much to little and over too long a period.   Even Callaghan cut spending deeper than Osborne in the late 70's on the instructions of the IMF over just two years...

Osborne also has not reformed taxes.  They remain far too high and much too complex.

Supply-side reform has also been insufficient.....

More action on all of those would have seen the British economy prosper much more quickly and wages improve.   But at least we are on the right track and, to be fair, Osborne has had his hands tied behind his back by coalition.  The Limpdems stood in the way of so much that should have been done to put things right quicker....

Perhaps we should look at the alternative.  Mr Red Ed Milliminor...

Remember how he praised the election of Hollande in France?  Remember his praise for the high tax, high intervention, high spending policies adopted by Hollande?   Remember how he has attacked the 'oh so timid' so called cuts made by Osborne.  Remember how he has consistently called for higher taxes.   Think of all that extra spending he has called for, all to be paid for by a bank levy, a levy spent at least 10 times over....

Look at France and compare that basket case to the UK.
That basket case would be the UK if Milliminor ever gets his hands on the Treasury.  Be warned.


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  • PhilipP

    Miliband and Cameron - separated at birth. Both clueless, clumsy, full of empty promises they know they can't possibly keep.27 July 2014   22:58
  • howard mcsweeney1

    The blues must be very concerned at the current situation with them running neck and neck in the polls despite the two Ed's being a laughing stock to most of the public. The latest poll of marginals from Lord Ashcroft suggests that if an election was held now the reds would have an overall majority.25 July 2014   12:10
  • PhilipP

    Dear diary, why are there so many millionaire socialists on the labour front bench? Don't they care about the poor?24 July 2014   22:18
  • Roger Walkden

    You could say that about Labour and the District Council Barry.

    They leave a mess and we (Conservatives) have to pick up the pieces and put the economy/finances, back together and in so doing, it makes us unpopular.

    Roger24 July 2014   16:19
  • BarryW

    Both Roger, Labour make the same mistakes time after time. Not one single period of Labour government has ended well for this country, higher unemployment and a financial crisis is what they always leave behind.

    I noticed that Milliminor liked himself to Michael Foot recently. A good comparison and a demonstration of his poor judgement......24 July 2014   13:31
  • Roger Walkden

    The big but in all the above Barry, is that Labour and its supporters, are either in denial about it all (not my fault gov.) or have very short memories - or more likely, both.

    Roger24 July 2014   11:03