Saturday, 31 October 2009

'At Every Point, We got it Right'

Gordon Brown must prepare for bed each night mumbling this simple mantra to himself and perhaps he sleeps with one of those nighttime self-help tapes playing the same message from under his pillow. That way when he wakes up each day he has actually convinced himself that what he has done in the face of the economic obvious has been right.

It must come as some surprise then that despite all his evening preparations that the reality each morning is somewhat different. I mean, take away the spiteful snapping terriers in the other Parties who constantly fail to appreciate his economic genius, there are those daft sets of figures that just doggedly won't seem to tell the truth.

This week has been yet another bad one in a long succession but the news that Britain still wallows in contracting quarters GDP-wise was bad enough, then there was the news that Italy's economy is now bigger than ours while they are also set to announce the end of their recession, then Brown's good mate, Barack Whatsisname, has prevailed over a US economy that did not just emerge from recession but actually grew at a very acceptable 0.9%.

Britain remains in the dunce's corner.

The saving grace is that no one seems to think that the policies followed by our Government were wrong. From the day Northern Rock was saved, Brown seems to think every subsequent event was met with the right action and that Britain benefited for it. And guess what, it seems the public have agreed. True, there are those annoying issues like bankers earning stunning bonuses having caused the whole crash and the Postal Workers seem to defy all best advice to surrender their jobs, but on the whole the disaster of The Sun not supporting Labour has been averted and Britain believes Brown is the best man in a crisis.

Well that's what the tapes say.

What perhaps was not part of the script was that this week Brown had to go to Europe and start campaigning for Tony Blair to be EU President when patently he would prefer to sit in a bath of hungry piranhas with bovril smeared on his private parts. That was certainly not part of any script but it is the price you pay when you have been 'rescued' by Peter Mandelson. It's almost as bad as having to repay £12,500 on expenses for dry cleaning and such while McNulty, Smith, Blears et al get away scot free in the expense bonanza affair for selling houses.

That's the trouble with reality - it tends to be, err, reality. We could all like to keep saying the same things over and again to our bosses about how well we have done and how things are just around the corner, but there is no arguing with reality. If you do your job badly, reality says that the outcome is rubbish. For all the PM's self-help mantras and tapes, the fact remains that our economic position was nothing like how he described and has not responded to the stimulus he gave it afterwards.

Quantitative Easing (QE) is a classic example. The economic patient lay critically ill on the bed and intravenously money was fed in. Sadly it never got to the vein as an unforeseen valve led the money away to different bank vaults who have just used the money to go play 'casino banking' again and shore up their balance sheets as the FSA wanted them to do while hardly any of it has got into the real world where it was needed. Indeed, this week the Broad Money supply called M4 showed that the amount of money in the country is falling, showing QE has effectively gone down a drain. It has propped up our Government Debt market and that could be equally dangerous when the whole thing finally ends before we descend into being a banana republic.

Our real stimulus money for the wider economy was VAT decrease and scrappage plus a few minor things. Loan Guarantees are a mess because the Government has used the same criteria to lend as banks and the decisions still lie with banks anyway. Reams of form filling and economic data has meant many businesses have just given up on it. Oh, numbers look fine with some 200,000 businesses allegedly going for it but again reality says it was banks just getting the Government to underwrite existing debt - nice fiddle.

Meanwhile Toxic Debt has been the biggest winner. Thanks to our loans, guarantees, insurance and capital, banks have been able to write down debt positions to the point where it all looks cheap again. Guess what? Reality bites and all the banks are making hay by trading in them once more and bonuses are up again.

Our whole strategy was to save the banks and that's what we have done making rich people richer on the back of their failure. The rest of the country has suffered. Meanwhile heroes in Afghanistan die as we equip them poorly while fighting our wars, don't give them enough of the right transport and propose to send untrained reservists.

It's a script you could have been hard pushed to write as it was so patently wrong. Yet that's what happened and our PM still claims he was right. Despite the 47% rise in coffee houses in Britain in the last year, he still can't smell any.

Perhaps the whiff of Government Bull is too overpowering.

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