Alistair Darling has announced that the Government is not going to be applying the golden rule (to keep borrowing below 40% of GDP) and the sustainable investment rule (to balance the books over an economic cycle) rigidly. Well you could blow me down with a feather, the Government stopped following the rules rigidly in 2001 when they started plowing money into this and that.
At first, the Government created PFI projects which took debt off the books (although the future debt will be with us for years). They took the nationalisation of Network Rail off the public books, the nationalisation of Northern Rock and Bradford & Bingley are likely to be taken off too. Public sector pension liabilities have also been removed. If you add all that up the borrowing is well above 100% of GDP. Bye Bye golden rule.
As the Government borrowed more money while the economy was growing, the sustainable investment rule looked under threat. So the Government changed the start point of what is termed the economic cycle. All the while stating that they had got rid of boom and bust, so they really didn't believe that the economic cycle still existed. The present oncoming recession has now changed all that. The economic cycle has reasserted itself - it had never really gone away.
So never mind that the Government didn't understand when the economic cycle started, they didn't understand the economic cycle. Full Stop. Which is why we're in such a mess; investors have decided that UK Plc is a bad bet and are selling Sterling and buying Dollars at a startling rate. Bye Bye sustainable investment rule.
The Government keep saying that the current economic turbulence started in America which is true. Unfortunately they don't say that over the last 10 years, politicians have believed their own statements of "no more boom and bust" and allowed the economy to be built on a house of (credit) cards, it only needed one shock to bring the whole edifice falling down. The US Government bringing down Lehman Brothers was that shock.
The Government is culpable for letting borrowing get out of control in a boom, and they think spending more of our money on the tick is the answer. Borrowing always increases in a recession, but usually from a low base - this time it's from high levels and will need some strict management to get the books balanced again when the economy starts to recover. This Government doesn't understand basic housekeeping, they only understand how to spend other people's money. Will somebody rid us of this turbulent Government?
Squiffy.
Thursday, 30 October 2008
Saturday, 18 October 2008
Wednesday, 1 October 2008
The party season
Apologies for it being so long to make a post, it's been a very busy time for me. Working hard, getting married and then a honeymoon.
Unfortunately, I missed the Lib Dem conference as I was still away. I did manage to catch Nick Clegg's speech, however, and he was trying to do the same as David Cameron last year - unfortunately I saw the autocue at the back of the conference hall.
The speech seemed to be fine, and secured his place as Lib Dem leader. Promising tax cuts is a great idea, although looks highly optimistic in the current economic turmoil. Especially as Vince Cable's plan for any bank in trouble is Nationalisation.
The Labour Party conference seemed less fevered than I expected, although I was not in the bars and meeting rooms afterwards. The speeches were not very exciting, although the happy chipmunk - Hazel Blears - made a good speech.
Gordon Brown did his best speech ever, and came up with the best line of the conference season - "No time for a novice". He still manages, though, to make me want to throw something at the TV screen when he tells some mis-truths. His whole little section on universal and women's suffrage was full of inaccuracies (being generous) or lies (being truthful).
I think he has secured his position for the time being, the financial situation seems to have given him a new narrative as the man of experience. The talk of 'change' on the steps of 10 Downing Street on becoming PM, must now be fully consigned to the dustbin - he is now the man of continuity.
The Conservative party conference has had to content with the backdrop of dire financial turmoil and this has made it difficult to be heard. Nevertheless, I believe the tone has been right - sober but sound, non-complacent but confident.
David Cameron's hastily written little speech on Tuesday was a masterstroke, he looked statesmanlike offering bipartisan co-operation. All that is pretty irrelevant, but ensuring 2 minutes on the daily news cycle after the bailout package was voted down by Congress was brilliant.
Today's speech by David Cameron was again excellent and fitted the mood of conference. It was on a par with last year's fantastic effort but against a completely different set of circumstances - showing that he catch the mood when necessary.
At the current moment the polls show that the Tory party lead is down to roughly 10 points, but as Mike Smithson says on the PoliticalBetting.com the Labour party always gets a 7% boost after conference. I do believe that within a week, the polls will be similar to those before the conference season - only changes by the economic turmoil will sustain through the polling period.
Let's see what happens next week.
Squiffy.
Unfortunately, I missed the Lib Dem conference as I was still away. I did manage to catch Nick Clegg's speech, however, and he was trying to do the same as David Cameron last year - unfortunately I saw the autocue at the back of the conference hall.
The speech seemed to be fine, and secured his place as Lib Dem leader. Promising tax cuts is a great idea, although looks highly optimistic in the current economic turmoil. Especially as Vince Cable's plan for any bank in trouble is Nationalisation.
The Labour Party conference seemed less fevered than I expected, although I was not in the bars and meeting rooms afterwards. The speeches were not very exciting, although the happy chipmunk - Hazel Blears - made a good speech.
Gordon Brown did his best speech ever, and came up with the best line of the conference season - "No time for a novice". He still manages, though, to make me want to throw something at the TV screen when he tells some mis-truths. His whole little section on universal and women's suffrage was full of inaccuracies (being generous) or lies (being truthful).
I think he has secured his position for the time being, the financial situation seems to have given him a new narrative as the man of experience. The talk of 'change' on the steps of 10 Downing Street on becoming PM, must now be fully consigned to the dustbin - he is now the man of continuity.
The Conservative party conference has had to content with the backdrop of dire financial turmoil and this has made it difficult to be heard. Nevertheless, I believe the tone has been right - sober but sound, non-complacent but confident.
David Cameron's hastily written little speech on Tuesday was a masterstroke, he looked statesmanlike offering bipartisan co-operation. All that is pretty irrelevant, but ensuring 2 minutes on the daily news cycle after the bailout package was voted down by Congress was brilliant.
Today's speech by David Cameron was again excellent and fitted the mood of conference. It was on a par with last year's fantastic effort but against a completely different set of circumstances - showing that he catch the mood when necessary.
At the current moment the polls show that the Tory party lead is down to roughly 10 points, but as Mike Smithson says on the PoliticalBetting.com the Labour party always gets a 7% boost after conference. I do believe that within a week, the polls will be similar to those before the conference season - only changes by the economic turmoil will sustain through the polling period.
Let's see what happens next week.
Squiffy.
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