A few days ago I had an odd call. Would I like to appear on Newsnight to discuss Jack Straw’s decision over the Great train robber? “No” I said, “of course not”. I have never spoken, written or blogged about it. I have not studied it and do not think it an important issue compared with the state of the economy or the damage done to our government and constitution, which I write about regularly. Why didn’t they invite me on to talk of quantitative easing, unemployment, and the banking crisis? I expected nothing more.
I was therefore pleased that yesterday I was invited to take part in a discussion of the state of our economy on the back of some terrible unemployment figures. It was interesting to see the way the debate has been circumscribed by Labour spin, and to try to break through the prison of distorted opinion created by the government’s idiot soundbites.
It was a difficult task, as I received so little air time given the large number of points that needed correcting or challenging. Here are a few of the problems with the conventional explanation that dominated in the Newsnight introductory package and the views of the other three interviewees:
1. “This is a global crisis”. The implication is we imported the problem. Wasn’t Northern Rock a British bank lending to British people under a British regulator? Didn’t the UK authorities themselves hike interest rates too far, starve markets of money and bring on the UK crash?
Cursory study shows that India, China and much of the rest of the developing world does not have a banking crisis like the Uk or US one. The problems of the strong exporters like Japan and Germany are different from the problems of the big deficit importers, the US and the UK.
2. “Quantitative easing is not inflationary.” Couldn”t it become so? What if it started to work and the banks did kick in with substantial lending once they have hit the new exacting targets for liquidity? Why are commodity prices surging already? Could the pound have another nasty bout of weakness? Haven’t they noticed that UK inflation has remained much more persistent despite the economic collapse than elsewhere? How do we get out of it again?
3. “The problem is the banks refusal to lend.” The banks cannot lend more money to the private sector, because the authorities are demanding that they increase their liquidity and capital. If they want them to lend more they need to relax the regulations. It’s no good lecturing them to do one thing, and instructing them to do the opposite.
4. “The money has disappeared into the banking system and not come out. The banks should be criticised for this.”Yet the banks are lending it back to the government so they can run a huge deficit. Isn’t that what these people want, as they are so keen on the public spending?
5. Wouldn’t “Tory cuts” of “£5 Billion” do enormous damage now to prospects? There are no planned “Tory cuts of £5bn”. That is a Labour invention. There are clear statements that the Conservatives would bring the deficit down by doing more for less in the public sector. Far from causing damage, that would allow more of the money to pass into the private sector to create more private demand. Today’s public borrowing is tomorrow’s tax hike.