The Knife, after a long period of wishing he’d learnt economics properly, suddenly twigged that running a country might be like running a household. Maggie Thatcher apparently held this view too. I felt confident in my new found understanding, then discovered that this simplistic view was regularly derided by what you might call the Blinky school of economics.
Feeling inadequate again, I then looked up supply side economics, which sounded arcane and appealing, only to find out it was the respectable name for tax cuts, but it did indeed correlate with the main period of true prosperity in my lifetime. Maggie again.
Keynesian though, also had an authoritative ring to it, but once I realised that in practice it meant Gordon spending money (with no end in sight), that he didn’t have, on dubious schemes, allegedly to boost the country’s prospects, I was reassured that it was probably a bad idea.
Happily, John Redwood has come to my rescue:
“..There is no state money. State borrowing is taxpayer borrowing. State debt is the taxpayers’ debt. Every time the government tell us the government will borrow more, that means you and I have to accept responsibility for more debt. Everyone concerned about the level of public indebtedness could help by calling it taxpayer debt.
Individuals know that if you run up too big a debt on your credit card or take out too big a mortgage you have to cut your spending. It’s no good saying you will simply borrow more money to pay the interest on the money you have already borrowed. That way it’s a slippery slope to bankruptcy. You can’t go on borrowing more in the hope you will win the lottery or that suddenly the government will offer you one of their super quango six figure salary jobs which would make the debt affordable. You have to be realistic about your prospects and your means.
So it is when we act together as taxpayers. Only dreaming politicians think that the UK will one day win the lottery or be offered a big bung by the international community to keep it going. The rest of us know that everything the government borrrows and spends on our behalf is going to have to be repaid one day with interest. We will all have to work harder and longer to repay Gordon’s debts, because they are our debts…”
After this dose of readable advice, along comes Ed Conway, who makes a very important argument, which has to be read carefully:
“…Wasn’t the story today that the ONS came out and announced that the economy grew by 0.3pc in the final quarter of 2009, as opposed to its original estimate of 0.1pc? How on earth is that consistent with what you’re
telling us? Quite consistent, I’m afraid, because it wasn’t merely the latest quarter worth of data that the ONS revised today – it also went back through a whole range of its statistics, and discovered that the recession was in fact significantly deeper than it previously thought. So although in Q4 Britain ended up producing more or less the same amount of cash (actually £133m less, as I’ve pointed out), it produced even less than was previously thought in the preceding quarters…”
The devil is certainly in the detail. So when shiny Liam Byrne claims that “Tory cuts” are going to cause a double-dip recession, even an economic rookie like The Knife twigs that he’s blaming the Etonians for something that the dismal science is already predicting will be a result, in the UK at least, of Labour’s/Gordon’s embarrassingly crap spending policies….using our money.
Strangely, three quite different American presidents have really said it all:
“Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body – the producers and consumers themselves.”
and Ronnie Reagan ~
UPDATE: This is a sharp little blog piece by a very practical money man, James Tyler. .