Tear it all up and start again…

Keynes today, the subject of all our thoughts and the topic of a learned seminar in London yesterday. Tax cuts and more borrowing, yes. Keep your debt in your own currency. Be reconciled to the end of lending from China. And yes, print money and a little inflation is no bad thing.
This was from the round of recipes offered by a panel of economists at the Royal Society for the Arts, just one of the bouts of economic agonising that is turning the orthodoxies of the dismal science on their heads. Michael White of the Guardian attempted a little layman’s deconstruction of the arguments, while panellist Gayn Davies dared to commit himself in print on those former black heresies, printing money and inflation. RSA director Matthew Taylor, once Tony Blair’s chief strategist had a selfless solution he would never have proposed in No 10.

My own prescription, for what it is worth, is that whilst borrowing will inevitably increase, we should also re-profile existing spending. In particular, I would enact a time limited tax increase for higher rate tax payers (including me), passing the revenue over to increase unemployment benefit, which I am told is one of the best ways of ensuring that additional public spending translates directly into consumer spending.

Meanwhile over at the LSE, Her Majesty put the wisest question of all..
In the unlikely surroundings of the London School of Economics, she last week cut to the quick ( he meant “chase” I think) Describing the credit crunch as “awful”, she tapped a gilded economist on the proverbial shoulder and asked: “Why did nobody notice?”

While at the same venue last week, I heard former diplomat and Green policy mandarin Sir Crispin Tickell declaring we had to find an alternative to growth in order to save the planet. I dared to disagree: why not “grow” Green technology instead of subsidising Chryslers, Fords and Buicks?

  • dewi

    Excellent post Brian. Isn’t it astonishing how ideologues can change minds so completely at times of crisis….

    1) Agree completely with increase in dole. For those of us lucky enough to be in work our cost of living is going to plummet over the next 6 months – mortgages, fuel, vehicles all falling or on verge of doing so. Tax decreases not necessary.
    2) On the toxic US property stuff – one factor perhaps overlooked is that US lenders are usually limited to claiming the house value on foreclosure – thus it is in the economic interest of those in -ve equity to default – even if they can afford not to easily. Strange system…

  • Dewi

    Nice Mark

  • Jean Baudrillard

    Slugger seems to have taken its eye of the ball recently – there’s been little talk about the local economy despite worrying signs that we are swiftly going down the pan.

    Yes, the political impasse is important – but surely the sick state of our economy is probably worth more of our attention?

    For example, today RBS have begun the first in what is expected to be many rounds of jobs cuts (I read that the final figure might be as high as 10,000 staff losing their jobs.) What is the likely impact on its local subsiduary the Ulster Bank?

    I’ve seen passing reference in the FT to the fact that RBS might dump the Ulster Bank to help pay off its debts – but there is little mention of it in the local press despite worrying implications.

    Meanwhile ‘luxury’ apartments are either being sold off for social housing (the Curzon apartments on the Ormeau Road which have remained unsold for months) or are being given away in increasingly desperate stunts by developers. (The Telly is giving away a ‘luxury’ apartment worth £175,000. A year ago you would have been lucky to snap up a two-up two-down fixer-upper on the Donegal Road for that price). I have friends who bought a house in the same development for nearly £300,000.

    Any chance of an ongoing focus on these issues Brian?

  • Mack

    Jean – Surely overpriced apartments coming down towards fair value (they’re still along way off) is a good thing?

    The problem was the property bubble in the first place (and the associated overlending to developers, speculators & homeowners and the securisation of worthless derivative products!).

  • Greenflag

    Queenie Question Time sounds like it could beat ‘reality TV ‘ if it should ever take off .

    I can envisage the panel – Messrs Brown , Cameron , Archbishop of Canterbury , Governor of Bank of England etc having to sit in the ‘mastermind ‘chairs as Questionmeister Queenie gets down to business .

    Queenie : ‘Your starter for ten Mr Brown -why are you asking a Communist one party ruled country like China to use some of their 3 trillion dollars worth of accumulated foreign reserves to bail out or kick start the western capitalist countries ‘? How come they have all the money now and we have no industry ?

    Mr Brown : Pass

    Queenie : ‘Your starter for 10 Archbishop . Why if I am head of the church are people not attending to worship me sorry God ‘?

    Archbishop : Pass.

    On the other hand QQT may not work . Sometimes its perhaps better not to ask ‘real ‘ questions just in case somebody actually gives ‘real answers’

  • Greenflag

    Brian Walker ,

    ‘I heard former diplomat and Green policy mandarin Sir Crispin Tickell declaring we had to find an alternative to growth in order to save the planet. I dared to disagree:’

    Nothing wrong with promoting ‘green technology’ at individual , national and international level . It will however take more than ‘green technology’ to kick this global economy back into ‘shape’ if that’s the word .

    Sir Crispin Tickell (is that a real name 😉 is looking to a future where it will just not be possible for the ‘entire ‘ world to enjoy present western world income and living standards . Sir Crispin is stating only what many already believe . I read recently that there are 61 trees for every human being on the planet . I do not know how many trees it takes to supply the Chinese with chop sticks for a day much less a month or a year or a decade but I wish luck to whoever wants to persuade the Chinese to stop using chop sticks to save trees/the planet . Ditto for a myriad other situations world wide in developed and developing countries.

    How can the poorer half of the world be uplifted without economic growth ? If China is the workshop of the world what hope for economic growth in Madagascar , Haiti , Somalia , Indonesia , Zimbabwe etc ?. Globalisation and new technologies have facilitated the transfer of knowledge and info and now the developing world want what we in the west accept as the norm and what they see on TV or the internet .

    We are as a planet between a rock and a hard place in terms of resources and the desire of people everywhere for a better life for themselves and their children . The present global political and economic system has, as Queenie pointed out, chosen up to now not to ask awkward questions . And again I fear it’s because the answers were not forthcoming even if they were , were to unsettling and too dangerous to consider.

    As my mum used to say -‘Don’t care was made care’ which applies as much to economists and political leaders of governments if not more so as to ‘careless teenagers’ .

  • Damien Okado-Gough

    Here is an extraordinary piece from YouTube in which US economist Peter Shiff predicted in 2006/7 all that has come to pass, and he is rubbished by other commentators. Excellent stuff indeed.


  • Greenflag

    ‘and he is rubbished by other commentators.’

    Well after all it was Fox News ;)?

    ‘Excellent stuff indeed.’

    In retrospect it all now seems obvious as Queenie’s question seems to posit.

    Of course it’s not just the USA economy that’s been dependent on the American consumer it’s the entire world and in particular the newly emerging economies .

    If anyone out there sees any light on the economic horizon let’s hear . I’m beginning to think that old codger with the eternal sandwich board grim prospect ‘The End is Nigh ‘ needs a change of slogan to

    ‘The End is not only nigh but it’s never Ending as well ‘:(