Listening to Will Hutton and Polly Toynbee you would think they were actually monetary economists when in reality they are just soundbite savvy talking heads spouting the latest fashions of the metropolitan media elite. Both property millionaires in their own right, three-houses-Polly and Hutton have substantial family stakes in the property market. If they had such great economic foresight would they have got so badly caught out? Rumours circulate as to the viability of Mrs Hutton’s extensive property portfolio.
Toynbee has now realised that Gordon is staying and that her flirtation with David Miliband was just a passing fancy. Her tune has changed, now saying (once again) that Brown is the man for our times when only weeks ago she was telling the cabinet they were spineless not to get rid of him. Laughable.
Polly’s advice and economic genius is as suspect and as reliable as her loyalty to whichever politician she is championing this month. At the beginning of the year she was still loyal to Gordon and chiding Cameron for his new year message which she claimed
smacks of callow point-scoring, with his five repetitions of “Labour’s hopeless” – and it will look even thinner in retrospect in a year’s time if Brown has steered through economic rapids without most voters feeling any adverse effect.
She was confidently predicting
A minor slowdown with neither inflation* nor unemployment rising will see Brown’s old “no boom or bust” boasts triumph this time next year.
Guido suggests we leave Polly and Will to their studio soundbites and ignore their siren voices – they have been advocating their brand of redistributive social democracy as the solution to everything for decades. If policy makers are looking for guidance on avoiding a depression (alas a recession is upon us already) they should dust off the works of Ludwig von Mises and Milton Friedman – Mises wrote the seminal “The Theory of Money and Credit“. If this book had been read by more central bankers outside the Bundesbank we would not be in this mess. Guido once listened to an LSE lecture by a Bundesbank board member speaking in reverential tones about Mises’ thinking. He is the high priest of monetary theory.
If history is not to repeat itself then reading Friedman’s “The Great Contraction, 1929-1933” should be a priority. If you think this is irrelevant to the state we are in you should note that the current Federal Reserve chairman, Ben Bernanke, pays tribute to this work and is quoted in the introduction to the current edition. Whereas Mises is heavy going, Friedman and Schwartz are essential reading.
Guido can summarise the primary policy response to the situation we are in succintly : cut interest rates, to lessen the pain of the inevitable reckoning.
Those in ice-houses should be careful, for only a fortnight earlier where was the so smug and told-you-so financial pages of the Guardian telling readers to put their hard earned savings?
Harvey Jones picked ten of the best places to put your cash, guess which was his number one destination?
Do you need a clue? You’re getting colder….
Guido was unable to reach Harriet Harman’s office for comment.
“I notice over the past day or two some commentators wondering if by chance the current economic disasters might not turn out to be Brown’s Falklands moment.
D’you know I think they’re right. With Brown as Galtieri.”
He has invoked Anti-Terror laws against Icelandic Fundamentalists banks rather than normal bankruptcy procedures. He threatened to freeze the assets of other Icelandic owned companies, without any legal basis. Is he going to arrest Father Christmas at Hamley’s if Iceland doesn’t pay local councils for their losses?
Last night in a BBC interview, during which he smiled randomly like an over-medicated hypermaniac, he told Nick Robinson that “everything was being done” and that “I have to restore confidence in the banking system”. Bonkers – bank stocks collapsed on the open this morning. “I” is the Prime Mentalist…
Lehman’s bonds are trading at 13c on the dollar – and there is $128 billion in bonds outstanding. The banking system is looking at booking a $100 billion hit today. There are an estimated 350 counterparties and nearly 2000 related securities.
Guido thinks that Greenspan could have been right on this, the risk has been distributed, it will hurt, hopefully only just wounds rather than causing major fatalities. If it goes smoothly we could be looking at a monster relief rally… but it is still a bear market…
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Austrian Chancellor Werner Faymann on Cameron’s refusal to pay the £1.7 billion EU bill by December 1st:
“Well, then he’s gonna pay on December 2nd”