Thursday, 11 December 2008

Media Miss Brown Target

I am mesmerised by how far the media have missed the target on the politics of the current economic slowdown.

Fact 1 – Labour would like you believe that (a) the recession is entirely the fault of the US sub prime crisis and that (b) Gordy is singlehandedly providing the solution to the global problem.

Fact 2 – The Tories have been woefully pathetic at saying anything serious and original on the crisis, belatedly coming up with their “with Labour’s plan we’re all doomed” mantra, rather hopefully positioning themselves for when it is actually really bad around about the time of the next General Election.

I will now deconstruct both facts. Fact 1:

1. Anyone whom I dealt with in business circles for the last couple of years was clear that we were all sitting on a balloon of debt. At some time, that balloon would burst. So firm and widespread was this view that many of my clients had actually stopped investing in the UK as the market was clearly overheated and due for a correction (aka a crash).

2. The worst of all offenders was the Labour UK Government who (a) laughably began to believe their own spin that they had conquered boom and bust, (b) were either too arrogant or too stupid to see that they were just lucky to be in Government during the back end of the longest boom in recent history, and (c) had lost sight of the fact that the Government was spending more than it earned (see Mr McCawber).

3. So in fact, our deluded Government were more than just complicit: they fuelled the boom and arrogantly thought that bust would never come. The sub prime crisis played its bit-part for sure, but we prolls rely on our leaders to survey the problems on the sea ahead and set our national sails accordingly. This Labour did not do. They binged on cheap money, threw it at the public sector and did not fix the roof while the sun shined.

4. This was not a banking failure therefore, it was a regulatory failure. The Government sets the banking rules and they allowed the rules to be too lax for their own gain. But as we all know, when the shit hits, Government searches for someone to blame and corporate fat cats are an easy target.

Now for Fact 2:

5. The current problem on the sea ahead is deflation. No serious economist believes that there is any other way of avoiding a deflationary cycle by anything other than throwing everything you’ve got at trying to boost the economy. Hence, the Government’s reflationary efforts.

6. To try to say, as the Tories are, that we should just cut Government spending (and any readers will know that I always think Government spending should be cut) and that this will somehow save us from deflationary oblivion is plain deluded.

7. What the Tories should be saying instead is that Labour is merely tinkering with reflation as they do not have any real money to throw at the problem because they did not save for the inevitable rainy day. They mismanaged the economy and are now trying to ‘throw’ the blame.

What amazes me is that the media can’t, don’t or won’t see through any of this.

What Government needs to do urgently is to free up the credit markets, rather than silly pointless stunts like saving us all £2.50 on every £100 we spend for the next few months (as if this will make any material difference). If this does not happen, we really are all doomed.

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