The PM is in the US to talk to the President to compare the size of their economic phallus' (phalli?) and see who has spent the most money in the bail outs on things that they shouldn't have - like bonuses, fat pensions, consultants, investment banking advice and daft conferences to whitter on as if they know what they are talking about.
In a single day, even an hour, it seems fiscal policy was turned on its head and there are worrying signs that not only does no one know what they are doing, but worse still, they are all promoting doing the opposite thing.
Knee Jerk Reactions
In the series of bank bail out knee jerk reactions like large nervous twitches, we have seen several hundred billion spent by the government and the Bank of England to try and remedy the financial mess we are in. I am deliberately vague on the figures as there seems to be no popular consensus on how much actually has been pledged, spent, put up as guarantees and loans or slung down a large drainpipe leading to nowhere. In the remarkable series of events that allowed Fred Goodwin to walk away with a fabulous pension at our expense, no minister seemed to be able to know his address or phone number to contact and tell him he was not going to be rewarded for failure. How surprising that a bunch of vandals found Goodwin's house with remarkable ease and made the same feelings known with a series of well directed bricks.
Barack Obama seems to have lost his coolness and has developed a nasty habit of tittering when answering questions on the crisis which he refers to as essential 'gallows humour', and his usual unflappable speech style has been replaced by a Gordon Brown stutter.
The two should get on famously this week as the one thing they are both getting good at is spending large amounts of money their countries haven't got.
The latest in the series of knee jerk reactions came yesterday as inflation shot upwards and not one single economist had predicted it, which does not inspire much confidence. Having already embarked on his course of Quantitative Easing in earnest, Mervyn King, wobbled visibly and there now seems to be a volte face likely on that particular bright idea. In response gilt yields shot up record amounts as investors started to speculate that the era of low interest rates may be short lived.
The rise from 3% to 3.2% in the Consumer Price Index was very unexpected - in fact falling high street prices had been seen as potentially pushing us toward deflation if anything. But it is clear that economists don't spend much time in the real world as from my tired eyes shop prices have stabilised and gone back up with few exceptions. The fire sales seemed to be over a while back. In response, Mervyn King penned a fifth letter of explanation to the Chancellor.
I hope he put pictures in it as I think Alistair Darling is having real trouble reading things at the moment.
Further, King then told the Treasury that he may hold back on spending his £75bn of Quantitative Easing that he agreed to do not a month ago. The fear that inflation takes off is one of the side effects in the theory book on this one and Merv is playing very much by the book it seems.
The combined effect of these two things then sent gilts down in price and yields up as investors speculated that the Bank would buy far fewer Government bonds than first thought which had sent prices up previously. Another unexpected result of all this tumult was that sterling rallied against a whole basket case of currencies and gained 2.25 cents against the dollar.
Opposite Views
As Gordon Brown starts his visit to Washington to basically agree with the US that buckets more spending is the only solution to this economic crisis, Mervyn King was warning the Treasury Committee that the Government should not embark on a policy of further spending to stimulate the economy and was specific that the country should not run up more debt. Instead there could be targeted measures to get us out of the mess.
The Government was quick to point out that there was no rift with King on the stimulus package. We can only assume that either no one knows what the other is saying or Brown will simply tell King what to do - no discussion.
Rumours are that Alistair Darling is sitting muttering in a corner not knowing which way to turn. It will be an interesting match when Darling meets his US counterpart, Tim Geithner, who far from retreating into his shell with a face like a slapped backside as Darling has, he has boldly stepped forward and said that he wants wider powers to deal with financial firms. He claimed that the £173bn spent on bailing out AIG could have been avoided if his predecessor had the powers to have put AIG into receivership. Darling will be shocked at such a notion with the Government having to step in to save 5 major banks falling in the UK, the first of which, Northern Rock, had a strong case for just withering.
Bungling, Incompetence and Negligence
It may come as cruel twist to the saga of Goodwin-gate that in fact the US taxpayers and not the UK's may end up paying the cost of Fred's pension. The RBS Board insured themselves against their own incompetence (what foresight they had) and the main underwriter is none other than AIG. So if the UK Government do sue Fred and by some miracle they win, AIG amongst others will have to cough up. Pigs will be flying snow to Eskimos before the Government will get a penny back from Fred.
But it has been a depressing week for our super hero leader. As he flies like a speeding bullet to several countries to bore them with his monotonous message on spending and non-protectionism, the revelations by the National Audit that after the Northern Rock bail out was done, the highly paid consultants, under the watchful eye of ministers, allowed a further £800m in 125% stupid mortgages to be handed out up to 6 months after. Even a an imbecile would ahve thought to have told Rock management the very first thing they should do was to stop such nonsense - but no the object was to 'save' the bank not to rectify its brilliant lending policies. We then had Lord Myners whinging that he was not to blame for the Goodwin pension fiasco when it was his responsibility to get it right, we had Northern Rock paying its staff bonuses and changing the terms of its loan repayments to us, a sharp rise in unemployment was announced, tax revenues dropped by 10%, deficits rose sharper than anticipated and now we have the Czech Republic becoming the third and most significant country to oust its Government in the wake of the crisis.
As each country reports dramatic bad news after bad news, it is now absolutely clear that the financial crisis and recession has gone far deeper than expected and into the general commercial markets. It is becoming fast apparent that the drop in consumption in the wider sense will not be replaced by the vast spending by central governments. The spiral is beginning to lose control.
What is most worrying is the divided opinion amongst the people charged with getting us out of the mess having allowed us to get into. It is no good turning to the Conservatives as they are struggling to keep up with the niggling soundbites and witty one liners of criticism to have enough time to have ideas on how they would go about it.
Niall Ferguson had a long and technical article in the Telegraph yesterday with his ideas on how to stimulate the economy which I did not understand but what he does agree upon, as many are realising for themselves, is that the anticipated results of pouring a vast pile of money down a drain have been over estimated while the long term borrowing requirement has been vastly underestimated.
The Tories picked up on one of my analogies from some months ago, saying that Gordon Brown was like an obsessed, broke gambler believing it just requires one big bet to wipe out all his losses. The trouble is, he is gambling with borrowed stake money, and the IOUs are underwritten by us. I think we should take a lead after Latvia, Hungary and the Czech Republic and turf Brown and all his incompetent ministers and advisers out.
The sad fact is that we don't have anyone competent to replace them, except for the guy by the fruit machine in the Robin Hood pub last night who advocated bringing back Nigel Lawson, Ken Clarke and John Major led by Margaret Thatcher - his A Team. Er, no thanks.
Go on then, Gordon, have another throw of the dice on all of us. Here's hoping.
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