Today the leaders need to deal with the difficult issues

 

              Yesterday the UK was a generous host. We gave the President a great platform, and the pictures he wanted for back home. The President as a good guest gave the UK government the words of friendship they wanted. I have no wish to analyse the speech, as it was one of those occasions which did what both sides wanted.

             Today as the leaders of the G8 meet in France they need to get down to discussing the areas of trouble and doubt. These include:

1. How much further can they go in bombing Libya, given the clear purpose of the intervention agreed by the UN  is to limit attacks on civilians, not regime change?  Shouldn’t they be reducing their military intervention?

2. How will they move from war to negotiation in Afghanistan, to try to create a more settled country as the troops leave?

3. How will the US improve its relationship with Pakistan?

4. What advice will they give the Eurozone about sorting out its problems before they threaten wider damage to the economy and banking systems of the west? Will anyone there point out that the bail outs are not working, and that new policy developments are needed if Euroland wants  a single currency to work?

5.  What actions are appropriate to head off further sovereign debt crises? When we faced a bank debt crisis the Heads of government were full of ideas,ever ready to blame malefactors,  but now we face recurring sovereign debt crises they seem strangely silent. How do they intend to get western government levels of borrowing and debt under control so they do not destabilise economies and banking systems?

                   The summit is also scheduled to discuss internet regulation, counter terrorism, green growth, relations with Africa and development matters. They won’t be short of things to say.

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43 Comments

  1. Posted May 26, 2011 at 7:57 am | Permalink

    You’re absolutely right, we need a revolution. I would argue that the leaders know exactly what do to but they lack the motivation. There have always been conviction politicians (on left and right) who are raised by the public in times of need. Now is such a time.

    Leaders today have what psychotherapists called “interjects” – this is a general term for thoughts that interupt, redirect or deflect other thoughts as they ready themselves for verbalisation or ponderance. Interjects live on the edge of consciousness and are often avaiable on closer examination.

    I think we all know that the UK and the west need to improve their competition and education, can’t afford large beauricratic public services, we don’t save enough – but this involves hard work and sacrifice and politicians interjects stop them from imposing this. Every G8 leader knows what I’d needed, they just love the power too much.

    • Posted May 26, 2011 at 9:51 am | Permalink

      Interesting observation. I’ve seen it working the other way round. There is the bubble narrative that they all stick to and repeat to each other. Excluding the total idiots, deep down they know what they are saying isn’t quite right. The “interjects” is reality attempting to break through. The almost religious use of the approved mantras of the bubble is interject suppression.

      • Posted May 26, 2011 at 3:22 pm | Permalink

        Quite right – this is the “new politics” where “narratives” are more important than facts. Thank you Blair, Mandelson & Campbell. The BBC tends to swallow the leftish narratives whole…and all developments are seen through this prism…

        • Posted May 26, 2011 at 6:19 pm | Permalink

          REPay. Can I question the use of “leftish” ? I understand exactly what you mean, of course, and that is the 20th century genisis of the narrative. But the 21st cetury reality is that the whole of the leadership of the establishment was swallowed it. ( Also, the bubble culture is an EU wide monoculture. E.g. the “observations” in my 1st post were in a non-UK setting ). The bailout vote is typical – 10% of MPs voting for what 70-80% of the electorate want, and that 10% not rightist dominated.

          The essential division is between the bubble and the people. It seems to me that the sooner we explicitly recognise this, the sooner we can move forward. How ? Good question.

    • Posted May 26, 2011 at 10:08 am | Permalink

      A friend of mine once said “Wisdom is about being in touch with reality.”

      So the growth figures yesterday showing a 4.4% drop in investment spending and a 1% rise in GDP growth is down to additional (3%) Government spending – smells just like the 2.5% GDP growth before the election coming from Government spending (on this basis a 7.5% Government growth splurge). Consumer spending falling, investment falling, tax receipts falling – is that a surprise?

      I’m not convinced by this phoney recovery. 60% of city managers expect things to be worse next year. All the growth is in Asia – Hogg Robinsons profits up by 30+% reflect this. Investment will follow the growth. All the managers I know from banks are flying to the East not the US or Europe for meetings. Inflation is a good sign – it shows growth – yet we import all our inflation and can only watch the growth. Our low interest rates not only show low inflation but a low demand for investments – figures this week show that banks have the money to lend there just arent enough quality investments. If the supply of quality investments were there banks would pay higher interest rates to borrow the money – but they dont, they do what HSBC does and allocate money to invest in the East.

      Watching the Heath vs. Wilson documentary on BBC4 last night I could just feel the similarities. Government lavishing public money on the public sector – sound familar?

      You can quote alot of statistics but for me its not the statistics its the lack of leadership overtly tackling the “economic entropy” and an over entitled public who think a NHS ranking 18th in the world is world class.

      • Posted May 26, 2011 at 2:43 pm | Permalink

        I’ve no professional interest or insider knowledge of banks but my spidey-sense tingles when I hear of politicians forcing banks to lend £x bn to this type of enterprise, and £y bn to that (e.g. green industries, small businesses, etc.).

        I’m not saying banks shouldn’t lend to small businesses (which would be a ridiculous statement) but that unless the conditions are in place (and I don’t mean subsidising windmills and solar panels on middle class roofs) for banks to reasonably expect a decent return for their money forcing them to lend against their will seems like we’re asking for more bad news.

        Politicians should lay the fundamentals of the economy and leave it to the private sector to do the rest, stop trying to micro manage and pick winners.

      • Posted May 26, 2011 at 6:22 pm | Permalink

        The over supply of money suppresses interest rates. So does the collapse of demand for loans. Demand and supply affects price, the rate in this case. Inflation is the over supply of money.

        In sensible banking system the supply of loans is a function of savings, then at low interest rates saving would be shunned and instead loaned to invest as investment demand rises to exploit the cheap money. The rate rises as investment demand picks up and so savings become attractive again to exploit high rates , and so investment demand falls and then the rate falls. A virtuous cycle.

        In this ponzi system the link between savings and investment is severed, almost unlimited loans can be created out of thin air. Rates stay suppressed for longer than a normal cycle and bad investments mount, until it becomes unsustainable and collapses.

        Until we restore have a system that restores the link between savings and investment, we cannot come right.

  2. Posted May 26, 2011 at 8:16 am | Permalink

    The problems listed are all created by the very people we’re supposed to trust to solve them. The chance of war being solved by warmongers and debt being solved by overspending statists is vanishingly small. What is actually needed is smaller government on every level and no foreign intervention at all.

    • Posted May 26, 2011 at 9:40 am | Permalink

      I am fairly close to yours and JR’s line on this let us hope, against all experience and expectation, to finally get some sensible actions on all the above points raised.

  3. Posted May 26, 2011 at 9:06 am | Permalink

    JR: “I have no wish to analyse the speech”
    I hope that isn’t because you found it as soporific as Ken Clarke apparently did, according to newspaper photographs. The media still have an infatuation with Obama and the whole visit seemed to have been choreographed to ride on the aftermath of the recent splendid royal wedding. We don’t really know much about what Obama said to our parliamentarians other than generalities, but we do know that he can play table tennis, dish out the barbecued meat and scrubs up well for ceremonial occasions and those essential photographs for the folks back home. Just two faux pas – the premature toast and dating his signature in Westminster Abbey as 2008. All in all a successful visit.

    Reply: The speech was mainly a celebration of the history of the US/UK alliance, with plenty of references and quotes from Churchill. Its theme was common values, its clap line was the one about how people from unlikely backgrounds could become MPs and even a President.

  4. Posted May 26, 2011 at 9:16 am | Permalink

    My expectation is that you, and regular posters here, will be disappointed by the outcome. No doubt the final communique has already been drafted by the so-called sherpas responsible for it. The actual meeting is unlikely to change anything. The current crop of Western leaders are not up to the job of dealing with the many issues you have described. Things will have to get a lot worse than they already are before they are booted out of office – as most of them deserve to be.

  5. Posted May 26, 2011 at 9:37 am | Permalink

    I think you missed the most important question, though it was implied in ‘green growth’ (a great oxymoron).
    6. When the countries in the EU have doubled or tripled their real energy prices to placate the green lobby, what will be the effect of the resulting collapse of the European economies?

    • Posted May 26, 2011 at 11:56 am | Permalink

      Having read all the recent articles on the bailouts and in particular Greece, I was angered to learn from You tube So the Greeks have this year been buying fighter jets from the French and submarines from the Germans at several £ billions and maintain an army of over 100,000, although they have a population of only 11 million. Yet we contribute to bail them out!

      So Pakistan buy nucleur submarines from China, is a nucleur power, maintains a vast army in its own right, harbours terrorists, yet our leaders give them £650 million to build schools.

      Our politicianss need a serious wake up call as this is not acceptable to the British people in austere times.

      They are borrowing this money in our name and our childrens and grandchildrens to waste it completely. Madness!!

      • Posted May 26, 2011 at 3:09 pm | Permalink

        Tim: “Our politicianss need a serious wake up call ..”

        They mostly need to be kicked out and any escape route such as, for example the House of Lords sealed off.

      • Posted May 26, 2011 at 3:30 pm | Permalink

        Tim wrote: “[…] our leaders give them [Pakistan] £650 million to build schools.”

        I think the idea is to try and prevent Islamic terrorism by reducing illteracy and poor schooling. The void in the past has been filled by Saudi funding of Madrassas, which promote the glorification of jihad. Whether most of the £600 million aid or so will reach the intended recipients and have the desired effect is a moot point.

        • Posted May 26, 2011 at 7:34 pm | Permalink

          APL. I agree on the kicking out. There are few true statesmen and women in our political class. Mr Redwood and about 45 others were the only ones prepared to bring the executive to account on the illegal bailouts of the EU. The rest just folded and agreed a watered down version. Disgraceful and not representative of the people of the UK not acting as our servants.
          We have too many politicians of all persuasions whether it be 650 in Parliament. Should be 200 at most. House of Lords has recently broken records on its numbers. Then we have the devolved national nonsense but NOT for England! Then MEP’s. Too much Governance.
          SJB. The idea that it will reduce extremism at source doesn’t wash when mass migration, 40,000 student visas are allowed from the very region that Bin Laden was found. Our Government is not joined up. The recent mass migration figures prove that. I’m afraid this Government will have to be judged on actions and outcomes as I see little difference on the ground from the last lot and they’ve had a year. Waste after waste of my taxes for the benefits of and for foreign causes.

  6. Posted May 26, 2011 at 10:36 am | Permalink

    I wholeheartedly agree with Javelin,we need a Revolution,and I believe we will get one soon.
    Either a politician will grasp the issue completely,or and I believe is the most likely someone from the world of business who have proven they can run a huge operation,with the right thought processes,for instance a Warren Buffett type.Clearly big government is wrong and there are examples of where small government has worked spectacularly ie Hong Kong,just
    look at from where Taiwan started for it’s size it still must have the largest foreign exchange reserves in the world.More to the point the person or people who do this will sell the public on their way of things as the PROOF exists ie Berkshire Hathaway started I believe with Mr Buffets initial 50 dollars.

    • Posted May 26, 2011 at 7:54 pm | Permalink

      A revolution of cuts and running down the state? Pure fantasy a right wing wet dream and a nightmare for everyone else.

      • Posted May 27, 2011 at 8:30 am | Permalink

        Certainly a wet dream for me on how to fix the country. “No pain no gain” as they say 🙂

      • Posted May 27, 2011 at 12:08 pm | Permalink

        A nightmare for everyone with a vested interest in maintaining a bloated State.

      • Posted May 27, 2011 at 8:58 pm | Permalink

        A smaller state is the only real option either now or a little later when they are unable to borrow any more £1o billions per month – what is your solution.

  7. Posted May 26, 2011 at 10:45 am | Permalink

    You reckon there is any chance of getting him renewing his links with Wokingham , perhaps in a rerun of his step relative from Bracknell’s stag do ?

    Wasn’t he supposed to have bailed out when the crawl reached one of the pubs near the town hall just before the stripper arrived ?

  8. Posted May 26, 2011 at 11:05 am | Permalink

    The internet seems to work reasonably well without overt meddling from politicians. One of the many raisons d’etre of it are that it to some extent fulfills the role which is signally failed by the MSM, namely to recognise, in the oft quoted words of Lord Northcliffe, “News is what somebody somewhere wants to suppress; all the rest is advertising.” Newspapers now like to pretend that they are keen on free speech and full public disclosure by wanting to dish the dirt on ‘celebs” private lives. The fact remains, however, that they do not go anywhere near those monstrous conspiracies of silence, deception and extreme criminality which are used to further many of the ignoble agendas with which we are all faced today.

    There must be considerable disquiet in some quarters that, following a typically cynical act of state sponsored deception or worse, that that act is unpacked and dissected on a website somewhere within hours such that there are now two ‘realities’, the official reality and the hidden truth, beknownst to all who seek it.

    The unregulated internet opens the possibilty that the consequences of an official deception become too onerous for it to be contemplated, which is all to the good and needs to preserved against the wishes of those whose ignoble purpose would be to proceed as before with their criminality. In a world in which modern technology offers ever more formidable powers of state sponsored suppression, the power to oppose must be equally formidable, otherwise the future is dire indeed.

    Reply: I too am suspicious of the wish to regulate the internet, though in fairness I think the leaders at the moment have in mind trying to stop destructive attacks on its functioning rather than censoring its content.

    • Posted May 26, 2011 at 2:01 pm | Permalink

      The way to stop destructive attacks is invariably to trace the source of the attack and apply heavy penalties, otherwise there is a temptation to engage in false flag attacks to justify rigorous regulation and censorship.

      • Posted May 27, 2011 at 8:22 am | Permalink

        I’m not in favour of the death penalty generally but would make an exception for virus writers but not hackers .

    • Posted May 26, 2011 at 8:27 pm | Permalink

      What you are talking about is ‘net neutrality’ and I am pretty sure that most contributors on this site would be against this by default as this could be expensive for business and the belief in more payment for everything is OK even if they do not have the funds themselves. In fact I would even go as far as to see them want people to have a licence to use the internet is some perverse pro BBC logic. Foxhurst first advocates a free internet and then seamlessly advocates heavy penalties for any transgression of this freedom without thinking how these penalties will be enforced with these freedoms in existence. Skynet anyone?

      • Posted May 26, 2011 at 10:59 pm | Permalink

        Don’t put words in my mouth and don’t misrepresent what I did say. To present an argument based on a presumption of what most people on this site might believe according to Bazman is a futile exercise in begging the question. Incidentally, a Denial of Service attack is not an opinion, although it may be used to suppress an opinion.

        • Posted May 27, 2011 at 4:31 pm | Permalink

          Bazman is actually an just a harmless internet bot who opinions only mirror those in existence who have similar opinions.
          The sun will rise tomorrow is also not opinion, but I’ll put it to Mr Wong in China on that who specialises in denial of service attack services. You can phone the Police in China or elsewhere. If they fail to be of any use or remotely interested you could always phone David Cameron or the President of China. I am presuming China is the culprit, but could be anywhere as blind zombie proxy servers are of often used without the owners knowledge. Maybe it would be better if we just ban the internet which is another option and an opinion.

  9. Posted May 26, 2011 at 12:18 pm | Permalink

    1 – We should stop. Gaddafi has already offered to let eastern Libya be de facto independent. Let anybody from the sole rebel town in the west move there if they want. When in a hole stop digging.

    2 – Say we will keep UAVs in the air until peace is agreed, but no troops on the ground.

    3 – It is for Pakistan to improve its relationship with us.

    4 – Tell them to get rid of the single currency as well as all the EU apart from a free trade zone and while they are at it to build nuclear plants. Anything else is rearranging deckchairs and we should not be on record as responsible for doing that when it collapses.

    5 – Cut government spending and allow the economy to grow. Simples.

  10. Posted May 26, 2011 at 3:23 pm | Permalink

    I would like to remind you that the top three “areas of trouble” are to do with the religion of Islam and the areas where it is accepted. (Yes, Yes, I know you are touchy about this Mr/s Moderator).
    There seems to be a bland assumption that in this matter the West is Right and Islam is backward and Wrong. As a member of a very large organisation which puts the same God at the centre, I really find this weak and silly. Perhaps the religiously neutral states of the G8/9? are so totally out of step with Islam that they just can’t bring themselves to discuss actual religion? Or perhaps the Muslims (please let me say that word) themselves are now so far apart from our godlessness that they don’t want to either.
    What is certain is that there is going to be a lot more (trouble-ed) unless some accommodation can be found between the two world views.

  11. Posted May 26, 2011 at 3:38 pm | Permalink

    JR wrote: “How much further can they go in bombing Libya, […]”

    Hard power is expensive and does not always achieve the desired result. By contrast, soft power can be a cheaper alternative and bring dividends. For example, Serbia getting EU candidate status this year was in jeopardy because of their lack of cooperation in the hunt for alleged war criminals. Who should be arrested today …? None other than Ratko Mladic.

    • Posted May 27, 2011 at 8:35 am | Permalink

      Yes, and he’s now too ill – seems to me that its only when they want free healthcare that they come out of the woodwork.

  12. Posted May 26, 2011 at 3:39 pm | Permalink

    Do our leaders actually discuss anything at these meetings? I thought most of the meetings were just held to formalise what their officials had already decided. Certainly, serious discussion on any one of the issues that you have listed would take far more that the time allocated for the lot.
    Surely these meeting are nothing more than photo-opportunities for our leaders, designed, in the case of Obama, to boost his standing in the polls.
    In these days of modern technology and video inks, they should all stay at home – my daughter works for a US company in the UK, and she tells me that business visits to the US and vice-versa are down to about 10% of what they were 5 years ago, with huge savings in both cost and time.

  13. Posted May 26, 2011 at 4:03 pm | Permalink

    Apropos my comment above re Taiwan,on googling it’s foreign exchange reserves immediately after ,they are at a record high of $355 Billion and stand 4th highest in the world
    would that we had that,BUT our political elite would IMHO squander it or more to the point the GREEDY EYES of Brussels would be SALIVATING,perhaps the Greeks might contemplate RETIRING at 40 or maybe not working at all.

  14. Posted May 26, 2011 at 4:14 pm | Permalink

    Also by the way India’s gold reserves are 557.7 tonnes ours are 310.3 tonnes yet we give aid to them.I have not even looked at their foreign exchange reserves but I now will and expect to be shocked if I compare them with ours

  15. Posted May 26, 2011 at 4:21 pm | Permalink

    India’s forex reserves $304,818,000,000 Ours $118,644,000,000,if I do much more of this
    I may need sectioning.I say again AND WE GIVE AID TO THEM??????,now I know we are truly off our cotton picking rocker as a nation to allow this,my comment above agreeing with Javelin and revolution is very very moot

    • Posted May 26, 2011 at 7:45 pm | Permalink

      As middle England wakes up to the incompetance of this coalition Government following the previous 13 years of mismanagement anger will grow. People are alive to the corruption and growing costs and interference of the EU and how little our leaders are prepared to do to stand up for us. Mass migration is a bigger problem now than under Labour. David Cameron talks net migration in the 10’s of thousands. By my estimates that’s an additional 2 – 3 million foreign nationals every decade to add to the 6 million or so under labour. Enough, we don’t want this. We have a right to a homeland with a unique culture and heritage. Our children to an education where they don’t have disruption as English is not the first language of many. Our public services and benefits given away to those who have contributed nothing or very little. Spending is up, not down. Foreign aid is up not down. Taxes are up and cuts are not being made. Perhaps an English spring is coming?

      • Posted May 27, 2011 at 5:57 pm | Permalink

        Apparently some estimate UK Population closer to 80m souls, back in 2008. It would be interesting to see what the source thinks today.

        (Google)How many people live in Britain – by Greg Hands MP

  16. Posted May 26, 2011 at 5:53 pm | Permalink

    Its the Americans who need advice. Except at the margins the Republicans will not raise taxes and the Democrats won’t cut expenditure.

  17. Posted May 26, 2011 at 6:49 pm | Permalink

    Apropos what I said about Warren Buffett,I see vince Cable quotes Mr Buffett talking about asset backed mortgage lending and the H- BOMBS that financially threaten Britain via this,I think he means that the ASSET backing the mortgage [lots of them] are not up to the value of the mortgage,I would love Javelin to comment on this as I value his knowledge.In today’s Mail they even talk of Spooked Markets in this regard,who caused this Property Bubble
    LIEBOUR,TONY AND GORDON letting the property market rip,even Patrick Collins writing on football used the phrase of people in the pre 2007 boom drinking their Sauvignon in their Dinner parties wondering How Much the houses had increased in price since the soup course was served. ENOUGH SAID

  18. Posted May 26, 2011 at 9:23 pm | Permalink

    While you may not wish to analyse speeches which, as you say, gave both sides the strokes they craved, somebody must.
    The utterance of these two men represent complete denial in the face of US debt, UK stagnation, the obvious inability of the ClubMeds to survive without massive German bailout, the Chinese overheating – and the Australian dependence on the Chinese giant.

    I do not see even the glimmer of a sign that either Obama or Cameron even perceive this – let alone have a plan to deal with it.

  19. Posted May 27, 2011 at 10:21 am | Permalink

    Put June 29th in your diary – that’s when Greece needs E60bn more cash – or it won’t be able to pay all its bills – to bond holders or Government workers.

    The IMF, ECB, Greece and Germany are all playing chicken with each other. Nobody want to pay. Greece has a gun to their heads. The German Government wants a “soft” restructuring, but the ECB now holds billions of these bonds (so do the German and Belguim Banks) so they’re not too keen on that, and if that happens who knows who holds Greek Credit Default Swaps – I guess a lot of Italians banks.

    I can’t see the IMF budging – despite not having a leader – they represent sound fiscal management and that is not happening.

    I’ve never thought a straight Greek restructuring is a death blow to the Euro – as long as they understand they must eliminate their deficit on the 1st of July the Greeks should be able to ride this out. The Greek Government will hold up their hands to the public and say – we over spent – there’s no point in rioting. Blame the last administration.

    The contagion will hit the banking sector. CD Swaps will be triggered and Im sure aot of bond holders will loose alt of cash. But in future bond holders will do better due diligence. Which brings us around to the real political contagion. Ireland and Portugal will be forced to cut their deficits immediately or default as well. This will hit Spanish and British banks very hard – lending will dip for 3-6 months and it will take another year to build tier-1 capital up again.

    But the real fall out will be due diligence from bond holders. And I have said before I dont think the British Government books will stand up to scruitiny. the real debt is alot larger than the books show and the real growth is alot lower than the OBR predict.

  20. Posted May 31, 2011 at 6:04 am | Permalink

    Questions for you, Mr Redwood:

    1. If regime change were the most effective (as well as the most cost-effective) way of limiting attacks on Libyan civilians, then is it not prudent to support regime change?

    2. Is not the responsibility for moving from war to negotiation in Afghanistan the responsibiliy of that country’s government, given that it has most to gain from a more settled country and the departure of foreign troops?

    3. What does it mean to have a strong and positive relationship with Pakistan?

    4. What advice, from whom, is to be provided on the Eurozone economy and banking systems? If anyone pointed out what you would have them say, how would they tell what would work and work well from what would not work, or work badly?

    5. Surely those proposing to get western government levels of borrowing and debt under control so they do not destabilise economies and banking systems have a responsibility to advocate specific cuts and (yes, and) revenue increases?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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