I am aware that some think I can be colourful in my description of the ConDems. But I have been enormously overshadowed this morning by no less a person that Samuel Brittan — hardly your archetypal radical. Writing in the FT he says:
David Cameron and George Osborne are behaving like owners of a whelk stall rather than economic managers of a nation with its own currency.
He by and large leaves the reader to work out why, but his reasoning is obvious. The UK is not a company, it’s a country. So it can influence its level of demand: a whelk stall can’t. It has its own currency, so it’s not Greece, because if you have your own currency you can’t default. It has its own central bank, from whom it can borrow endlessly, if it wishes. And he implies it should.
So, as he concludes:
We could live with an old-time religion Conservative Budget if the rest of the world stayed with sensible demand management. The real harm is that the British government has tipped the balance in favour of ill-timed financial austerity at gatherings such as the Group of 20. Even then there is some hope that the more pragmatic German and French leaders may make their austerity a matter of words more than deeds. And all is not lost so long as the Obama administration and China’s leaders stick to quasi-Keynesian policies.
The big guns are lining up to say the Tories have their policies hopelessly wrong. And still they’ll battle on. Which is why, no doubt, Brittan entitled his piece:
Are these hardships necessary?
I think the answer is self evident.
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Are you insane?
The Government is a giant company, the people are the share holders and the customers while the Civil Services are the employees and Parliament are the board of directors. Remember, when a Government spends money it isn’t the Government’s money that is being spent, it is the peoples’ who truat that it will be spent well.
As a former accountant, do you really advocate a company borrowing endless amounts of money? Do you really think that the UK having its own currency, and therefore be able to print money to pay off its own debts, is really a fix? Do you not see them problem for an island nation, with few remaining natural resources, to have a weak currency?
@Bobski
As an economist I know how limited the accountants view of the world is
And that the UK and a company are nothing like the same thing
Take one simple example: there is no chance whatsoever of any company ever paying itself in currency it creates
But the government can demand it be paid in currency only it can create
That’s very, very different
So, very politely, your analysis is hopelessly inaccurate and inadequate
The naivite in Bobski’s appreciation of economics and fiscal process is staggering.
If this kind of simplistic thinking is what is driving the lunatic Coalition rush to cuts, then Heaven help us all.
@BenM
Agreed!
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This comment has been deleted. It failed the moderation policy noted here. http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision on this matter is final.
This comment has been deleted. It failed the moderation policy noted here. http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision on this matter is final.
You are not an economist, Richard. The ICAEW have rules prohibiting members holding themselves out as things they are not, and you wouldn’t want to be reported for breaking them, would you?
@ Richard
This may sound flippant but is in fact a serious question. Do you propose that this “endless” borrowing should ever be paid back? If not, then how do you propose that the last vestige of confidence is maintained in a currency that has already lost 98% of its value in the last 100 years.
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@Peter
You clearly don’t understand that accountants can’t even regulate the word accountant
Let alone economist
@woolley
This borrowing is, of course, also an asset
An income bearing, rock solid reliable asset that people want
Why deny them the chance to own it?
[…] Shame about the owners of the whelk stall. […]
@Richard Murphy
hmmm you might have noticed the problems that result from lending to people who can’t pay it back – or perhaps you have not understood the real cause of the banking crisis just past, or indeed the current problems if the pigs default.
@alastair
I’d have thought you’d have realised the PIGS don’t have their own currency and can therefore default
Very different indeed I think
And let me assure you – the reality is there is no need to pay this debt back. People really rather enjoy owning it
@ Richard
They will enjoy owning it until they realise it is a massive state Ponzi scheme and the bigger it gets the bigger the eventual bang. Iceland had its own currency and so did Weimar Germany.
“if you have your own currency you can’t default.”
This is wrong at least twice. To begin with, what you presumably mean is that you can’t be forced to default–you can still choose to. It might, after all, be seen as a less unpleasant option than the enormous inflation that would result from monetizing the entire debt.
Further, you are assuming that debt is necessarily in the country’s own currency. Lenders might have preferred to lend—and be repaid—in dollars or euros or some other more reliable medium.
Over the past few decades quite a long list of countries with their own currencies have defaulted.
Sam Brittan is quite right – Cameron and Osborne are economic ignoramuses who are very liable to tip Britain back into recession through inappropriate fiscal policies.
And heaven help us if some of the people criticising Richard on this blog ever get their hands on UK economic policy. We’d be back in the stone age within a few years. And you guys have the gall to criticise Richard for not knowing any economics? Ha ha.