And We Trust this Government with Our Money!

Before deciding if Gordon Brown should be allowed to save the world or even arrange a party in a brewery you should read this from Scotsman journalist, Ewan Morrison!

 

website http://robthill.wordpress.com

Credit Crunch and Recession – the Economic Bandwagon

The credit crunch as well as now the global recession continue to produce gloomier and gloomier news. Partly this is the media having an easy feast day; not too much hard work finding the story, more just picking it off the news wires. However, the underlying facts are real enough. It is now several months since our government or rather Gordon Brown decided to save the world and it is time to ask if his reaction to each new shock-wave has had a real effect as opposed to a media headline. He cannot say and neither can anyone else predict if the government response to each new crisis is going to help in the long run, because the future is not ours to predict especially in a banking catastrophe of such unprecedented magnitude. However, the first reaction both here and in the USA of pouring trillions into the banking system seems to have saved the banks, allowed them to rebuild their own positions but not done much for the rest of the economy. So perhaps those trillions might have been wasted in terms of reducing the recession, if not actually lost to the taxpayer. Here the media would serve us all a lot better by finding out what other countries are doing, not just reporting about London and Washington. The next sector to get bailed out seems to be motor manufacturing, perhaps another few billion. We should note that up until a few months ago we were quite in awe of mention of a few million whereas now we can only react to talk of billions. What sector will be next? Or will the US and British governments realise that the recession cannot be bought off?

On a more general note, the media have reminded us that these recessions happen every few years with greater or lesser consequences. It is called the Economic Cycle, which suggests that this is a natural phenomenon a bit like the rotation of the earth, something outside our control. It is of course nothing of the sort. It is actually a recurring Economic Bandwagon, entirely man-made. It features nobody wanting to be left behind, everyone wanting to be part of the gravy train and outright greed. Presumably lemmings have exactly the same motives of wanting a part of the action. Each cycle has it share of soothsayers predicting gloom and doom all of whom are ignored and vilified. Like any runaway vehicle the more people who jump aboard the more unstoppable it becomes until it finally comes to an abrupt, violent and totally disruptive end. Only 2008 saw the biggest ever economic vehicle crash in an unprecedentedly spectacular fashion.

In spite of all the mayhem every few years, the accepted mantra is still that capitalism is best for the world. Surely capitalism as practised in the last few decades requires at least some modification. If economists can take on board the fact that the economic cycle is entirely man-made, it should be possible to devise methods of counterbalancing its runaway effect. Engineers many years ago perfected the mechanical governor which reacts against the acceleration of a rotating machine by increasing the load. Governments need to give themselves similar powers. It may, however, be wishful thinking to suppose that they themselves will stand aside from the economic bandwagon and apply the brakes.

 

website http://robthill.wordpress.com

Credit Crunch

From what I can gather from the media, the billions of pounds the government has made available to the banks has mostly been used to recover their own financial positions.  Anyway, the downturn came from excessive and frivolous lending so it seems odd that ministers should be howling for these institutions to be lending at the same rate as last year.  Surely that is likely to make matters worse rather than lessen the recession.

I appear not to be alone in this as the BBC reported that the German finance minister. Peer Steinbeck, is saying much the same thing.  A previous government minister once famously said  “When you are in a hole, stop digging”.  Furthermore Peter Oborne of the Mail Online has a detailed analysis of my point.

Clearly the strategy is not working.  Money is as tight as ever and well-known firms are in real trouble and some are going bankrupt.  Surely it would be wise to try something or anything else quickly before things get even worse.  For instnce it would not appear too unreasonable to pour the money into public works rather than to shore up the banks who are prime suspects for causing the mess in the first place.  Capital investment in social housing, renewing school buildings,  etc., at least provides work and there is something to show for it at the end of the day.  This kind of investment need not take years of planning before anything happens.

 

website http://robthill.wordpress.com