Data released today showed that public sector net borrowing rose to £14.8 billion in September, the highest ever level of borrowing on record for the month, increasing from £8.7 billion a year ago. Gordon’s big and bloated government is overspending by £493 million a day or £20 million an hour, 24 hours a day, every day. More money is going out on the costs of failure – welfare payments – than is coming in from income tax.
Gordon’s economics are a sham based on debt, government debt and consumer debt resulting from cheap credit. Remember prudence? The nation is now more indebted than ever before. Remember an end to boom and bust? This is the mother of all busts.
Thatcher was right: “The trouble with socialism is that you eventually run out of other people’s money.”
The Public Sector Borrowing Requirement for July came in at £8.016 billion. That means the government was over-spending by more than £258 million per day last month, which is living beyond our collective means by more than £10 million an hour, 24 hours a day, seven days a week.
Gordon Brown and Ed Balls reckon the government should spend even more. John Redwood blogs “No wonder the Governor thinks we ought to print some more money – who is going to lend us all this?” The Zimbabwean dollar rose 15% against the British pound last month…
UPDATE : The FT reports that this morning “saw another lacklustre gilt sale from the UK Debt Management Office.” Surprised?
The Bank of England and most consensus economists, including most right-of-centre monetarists, are stoking deflation fears. The MPC voted to print £50 billion more this month. Which is very convenient for Gordon Brown and Alastair Darling, it allows them to justify printing money, which they can then use to buy their own escalating government debts. Which is a little like eating your own leg to stop you starving.
The economic debate on this is confusing, the data is mixed and to some extent depends on your time frame. The drop in oil prices and other commodities post-crunch had a deflationary effect. Against this you have U.S. and U.K. government debt levels which are extraordinary. Terrifying. Gilt yields (interest rates) are being held down by the Bank of England printing billions of pounds to buy gilts from the Treasury and artificially hold up gilt prices.
The Bank of England’s own pension fund however is heavily invested in inflation protected securities – which is odd given their public stance is that deflation, not inflation is the threat. Consensus economists are sheep and we need not worry too much about their bleating, more surprisingly some right-wing monetarist economists, such as those on the IEA’s shadow monetary policy committee (who tend to work in the City for investment banks) are also believers in deflation. Guido’s theory is that the reason they have supported expanding the money supply so drastically is they panicked, remember all those articles in the Guardian and the FT about the “end of capitalism”and the end of investment banking as we know it? Their morale was low, they were afraid. Printing money and flooding the market with liquidity would be a short term fix that would shore up the banks and save their jobs. Hence all these right-wing economists became born again Keynesians and could be found all over the Square Mile screaming at the Bank of England to turn on the printing presses.
Well capitalism survives and thrives. Some of those economists are now wondering about the wisdom of printing all that money. Nigel Lawson’s biographer, Eamonn Butler of the Adam Smith Institute, changed his mind on quantitative easing a few months ago, the IEA’s shadow MPC is no longer unanimously in favour of quantitative easing.
Nassim Nicholas Taleb yesterday warned of the inflation threat, Cameron conceded the possibility of a British debt crisis. Guido thinks it highly unlikely Britain would ever default on it’s debt so long as it has a sovereign currency – we would just devalue and pay foreigners in devalued pounds. Though Britain could have, as Cameron said, foreign investors demanding higher risk premia, higher yields. That could see mortgage rates above 10% again – both here and in the U.S.
Warren Buffet yesterday was quoting John Maynard Keynes’ road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Protect yourself from the coming inflation. Like the Bank of England’s pension fund…
Officially there are 2.38 million unemployed, in reality there are 5.4 million not in work who should be available for work. That is equivalent to 17.3%, or one-in-six of the labour force. The left leaning economist Chris Dillow argues that capitalism can’t provide enough work to go round. In reality it is only economic growth that can provide jobs. You can’t tax and subsidise your way to sustainable economic growth…
The sheer madness of Gordon’s state of denial became clear yesterday. He stood there at PMQs and claimed spending would grow 0%. He has set himself a dividing line alright, it is the line between economic reality and economic fantasy. He is on the wrong side of that dividing line.
Andrew Grice reports that the rest of the Cabinet, including the Chancellor, wants him to take a reality check. They have agreed to admit there will be some cuts out of necessity, but to argue that the Tories will cut more, this was the position that Mandelson argued for originally. At PMQs Cameron and Clegg were united against Brown – the LibDem leader accused him of “living in complete denial”. It appears the Cabinet agrees. It remains to be seen whether or not they can get the Prime Mentalist to change his “no cuts” tune.
If you wade through the numbers in the Treasury’s recently released Public Expenditure Statistical Analyses 2009 (page 83), you can see the Tories are right about the government’s own plans to cut spending on services in real terms in 15 out of 25 departments in 2011. Gordon’s lying has lost him the argument about cuts, the reality is it that it is a question about the degree and timing of cuts.
The UK economy contracted an horrific 2.4% in the first quarter of 2009, its biggest quarterly decline in 51 years, according to the latest ONS data released today. This comes on top of the OECD saying we can expect a severe recession to come. Didn’t brown and Darling tell us last year that the economy would be on the up by this July? Still a day to go…
Mervyn King’s testimony yesterday was shocking, he made public that the Bank of England was not consulted on Alistair Darling’s plans for the reform of banking regulation. Call Guido old fashioned, but he somehow thinks that it might be a tad useful if the former student Trotskyite turned Chancellor, Alastair Darling, consulted the professor of economics turned career central banker, Mervyn King. This is not mere student politics, this is the trillion dollar question of the moment. Mervyn confirmed that the current tri-partite regulatory regime designed by Balls and Brown “was a mess”.
As if that wasn’t bad enough figures released yesterday showed that Britain has the biggest budget deficit in the world. The best placed economy to weather the global crisis (© G. Brown) had government borrowing hit £20 billion in May, which means the government is overspending by nearly £30 million an hour. Gordon is spending way beyond our means and putting our children into debt at an unheard of rate. He actually boasts that he is going to spend, spend, spend…
Mervyn basically testified yesterday that the government needed to cut spending much more dramatically than it is planning to do or else we will be ruined. If Gordon is hoping for a recovery (as Alastair officially predicts) to save him in time for a general election the news from the OECD will not be encouraging. The OECD said yesterday that Britain is in “severe recession” and that it was downgrading it’s expectations for the UK economy, predicting it will shrink by 4.3% this year…
Here is the futures price chart for the generic Gilt. All that is stopping that chart going further south faster is that the Bank of England is printing money (though printing isn’t the way it done nowadays, the Bank just changes amounts in the electronic ledger). […]
That has worked so well for Britain. Not.
UPDATE : Guido didn’t see C4 News but a co-conspirator over on HPC reports Mandelson on the subject of IMF bailouts as telling Jon Snow
PM : “We won’t be at the top of the queue”
JS : “You didn’t say we won’t be in the queue”
PM : “I don’t think we will be in the queue”
Honestly he didn’t want to say that last bit.
A governor of the Bank of England has never had an audience with the Queen before. King had just told a stunned Westminster that there is no more money for another fiscal splurge. Perhaps Her Majesty is worried that the currency adorned by her face is being recklessly devalued. […]
The money markets though say different, clearly they think it is a possibility. How probable is a bail-out?[…]