First, apologies for the spelling and grammar in the last post.

Second, I can understand your point, but unfortunately you’re still fighting the last war – and using the tactics necessary to win it – rather than the current one. I suspect that to correctly asses the current situation, you, and many on the political right, Mr Redwood included, are going to require not a change of attitudes or opinion or nuts and bolts policies, but a whole paradigm shift.

The current government’s fiscal policy during the boom years was boneheaded. However, to then continue fighting that battle now, when deflation and depression are clear and present dangers is surely a risible stance. Cuts in interest rates are not enough. We need ZERO interest rates, perhaps even targeting long term rates – guaranteeing to keep them at near zero for, say three months, or even a year – and we need to start running the printing presses NOW so the Bank of England can start the quantitive easing process. Hand in glove with this monetary policy, we need a fiscal blast that can defibrillate spending back into life, and ideally, we need all of this now, and in conjunction with similar measures from the rest of the G20.

The pound’s fall has been a benign drop for now, and parity against the Euro would not be such a bad thing as things stand. It would stimulate British manufacturing, make imports more expensive and thus create jobs, create some inflationary pressure (albeit small in a deflationary environment) and aid the country’s current account. This depreciation of the pound has been a blessing, and is a prima facie argument for staying out of the euro.

I’m sorry, but desperate times call for desperate measures, which is why you all need to dispense with your admirable balanced books economic instincts. Alternatively, you can stick to your guns but admit you’re advocating a decade-long depression. It’s what Herbert Hoover and Andrew Mellon did last time, and we know what happened.

One of the problems we face is the need of the government to borrow vast sums. The vastness of those sums depends in part on whether and by how much cuts are made in areas of government spending which are bound to rise as the economic position deteriorates. The pound is plunging, raising the cost of imports and putting pressure on interest rates. A sound approach to government finance rather than reckless borrowing is what is needed.

Monetary policy is losing its traction — in no small part due to the ECB’s risible rate decisions over the summer and Autumn — and we are in desperate need of unified, cross-nation and massive fiscal stimulus.

Of course, in an idea world, we would want to balance the books and maintain prudence, but I’m afraid this is not an ideal world. Deflation, the worst nightmare of the capitalist economy, is on the way, and unless we kill it now, we will not do so for 10 years of unremitting misery and destruction.

Germany as the forth or fifth (I don’t remember which) largest economy in the world (and largest in the EU) has a huge strategic role to play in this crisis, and it’s idiotic current stance is talking us ever closer to the abyss.

Sorry to break it to you all, but It’s time to stuff the pomander under your noses and support Brown’s efforts at stimulus, rather than being a slave to the failed Hoover-Mellon policies of the 1930s, which would take us to financial Armageddon.

I like this blog very much too. I don’t always agree with the sentiment, but I can understand the logic of the positions taken.

Reply: Shadow Cabinet Members other than the Leader and Chief Whip do their Shadow jobs for no remuneration, beyond their basic MP salary.

I’ve often wondered if the public sector claim that ‘they’d get more money in private industry’ – (teachers especially are always claiming this, it’s complete fantasy) should be tested with the quangos and bureaucracies. I don’t think anyone would employ any of them

(Oddly that when Brown is on, they don’t use the footage of him picking his nose)

To this idea I would add reform of public sector pension schemes, which currently amount to a huge unfunded liability.
Close all unfunded public sector pay-as-you-go pensions as of 31 December 2009, protecting pension entitlements earned up to that date. Wef 1 January 2010 invest public sector pension fund contributions in money purchase schemes invested in the usual array of pension scheme assets. Tax their investment income the same way as private sector schemes.

M R Cannon

“The first point of recapitalisation was to save banks that would otherwise have collapsed. We not only saved the world..” [Laughter . ]

- Mr. J. G. Brown, during Prime Minister’s Questions

Were we standing on the brink,
Gordon Brown,
Whereas now we’re safe in the pink,
Are we, Brown?
Were we crashing, diving, falling,
At the news from New York City?
Groaning “Worldwide growth is stalling”
Crying “Save us, please have pity!”
When the Hang Seng took a nosedive,
And the Dow Jones tumbled down,
Was it you who kept us alive?
Was it, Brown?

The rot started in the States,
You say, Brown,
Did you cut their interest rates,
Did you, Brown?
As investment banks were failing
And as repossessions rose,
Did you hear the people wailing
As you picked your bogeyed nose?
Did you jump into a phone box
And don your super hero’s gown
Your trousers tucked into your socks
Really, Brown?

Did you fly into the air,
Gordon Brown?
O’er the wasted lands laid bare,
Brown, O Brown!
Where the Main Street banks were busted
And their pensions had gone west
Did they turn to one they trusted
Did they think that you knew best?
Men don’t think it half so hard when
The pound falls ever further down,
Since the markets are still open
Saved by Brown.

It would greatly, I must own,
Soothe me, Brown!
If you left this theme alone,
Mighty Brown!
As we face a bleak tomorrow
With a mountain range of debt;
You seem not to share our sorrow
But, grinning, do not get it yet.
You’re the source of half the trouble
Not our saviour, just a clown.
As we watch our problems double
Chuck it, Brown!

We can have steady economic growth because a well run economy is capable of providing a genuine increase in wealth year-by-year, but there is no general economic equivalent to winning the lottery. If it appears that wealth is growing at a huge rate the reason is always that a bubble of some kind is developing and giving a false impression.

A sensible government does not encourage a boom, it keeps a steady course with a constant eye on what is happening to real, substantive national wealth.

The Conservatives made that mistake under Mr Lawson’s Chancellorship and Labour made it under Mr Brown, each resulted in a substantial recession and the burst of a house price bubble.

When people talk of ending “boom and bust” they must start meaning that they aim to end both boom and bust, the two cannot be divorced.

The difference is Redwood tells he truth about things whereas Labour just LIE.”

I think it is to late for a mere cut in public salaries above £100,000. I even think we are beyond a hiring freeze in the civil service I suggested at the beginning of the year. We need to abolish sizeable parts of government. Particularly the regulatory parts & the quangos, many of which not only absorb their own budgets but massively increase the costs of productive industry. Regulations cost the people 20 times more than they cost the government to enforce.

That & telling the Atomic Energy Authority that they are licencing any successful nuclear reactor design this day would not only end the recession but get us growing nearly as well as China, India, most of East Asia & South America still are in this alleged “world recession”.

So, sadly, whilst we all appreciate your efforts in trying to get the Dear Leader to understand basic economics when he reads your blog, I fear you are wasting your time. Still, no matter. The rest of us who enjoy reading your blog do understand what you are saying, even if Gordon does not.

http://kerry-mccarthy.blogspot.com/2008/12/guest-blog.html

I did post a link to the full remarks.

BBCi’s initial headline this morning for the German FM’s remarks was “Germany Out of Step on recession”.

I was quite startled by that. Rather than a quick, punchy, impartial summary of what was said, the headline reflects the rebuff Labour ministers made. In other words the BBC took the Labour Party line on the issue.

Maybe I am paranoid or overzealous but this hardly strike me as impartial. Had the story been about a German FM criticism of the Tory Party’s policy proposals to deal with the recession I dare say the headline would have been sthg like “Damning International Criticism of Tory Proposals” or “Cameron under International Pressure”.

The BBC-i head line has since been changed to sthg like “Ministers shrug off German Attack”.