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Thursday, December 11, 2008


Gordon Brown made a freudian slip of the tongue yesterday saying how his spending proposals had saved the world. The German Finance Minister, social democrat, Peer Steinbrück has been undiplomatically critical in Newsweek.

Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain's debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn't this the same mistake everyone is suddenly making again, under all the public pressure?

...It's the yearning for the Great Rescue Plan. It doesn't exist. It doesn't exist!

...When in doubt, I'd say the risk is greater of burning money without significant effects and in the end having a budget weighed down with even more debt. For me the only stimulus measures that make sense are those that create jobs and have a positive structural effect beyond the economic cycle.

Having quoted Herr Steinbrück as saying there is no rescue plan here is mine from a post I put on John Redwood's blog:

The thing wrong with this recession is that all the pain, cuts & unemployment are being borne by the productive party of the economy, not by the government part. That will not only not get us out of recession it can only get us deeper.

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 sizable 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”.

When Brown says we are in a world recession it is simply a lie. There is a recession in America & the EU & some spillover effects elsewhere. It is possible China's growth will fall to 8% because their export market is drying up but that is not, by any standard, recession. It is therefore certain that this is a structural problem within those countries submitting to Luddism rather than a world problem beyond their control. In fact what we are seeing is exactly what the Luddites called for when they said they wanted more government & EU regulation specifically to stop the "continuous economic expansion" they alleged were suffering from.

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