Cross-Party Rejection of IMF Increase

As Guido mentioned yesterday, the Statutory Instruments Committee meets today to debate the £9.5 billion the government proposes to export to the IMF en route to Greece and probably the ECB. He hears it is a lively debate and that Labour are set possibly to vote against or abstain from supporting the transfer, potentially forcing a full Commons vote tomorrow…

The day Christine Legarde moves in to the IMF.

IMF Bailout Billions to be Debated

Tomorrow morning the Statutory Instruments Committee in Committee Room 14 of the Commons will consider for 90 minutes the extra £9.5 billion the government proposes to export to the IMF en route to Greece and probably the ECB. That is some £105 million per minute of debate. £9.5 billion is a lot of care for the aged.

Hat-tip: John Redwood

Inflation Outlook: Lindsay Lohan on Monetary Policy


Monetary policy arguments can sometimes seem other-worldly, the modern equivalent of the medieval intellectual battle over how many angels can dance on the head of a pinhead? Guido (neo-Hayekian) has been rowing with Will Straw (neo-Keynesian) for years – our latest skirmish is here. It is a difficult subject to popularise in an accessible way. Straw often cites David Blanchflower, formerly of the MPC and a favourite of Gordon Brown, to back his case. Blanchflower it was who predicted a year ago that if Chancellor Osborne didn’t undertake a £90 billion stimulus package, unemployment would hit 4 million. Osborne ignored him and unemployment is down as we undergo an expansionary fiscal contraction.

In turn Guido cites the noted American actress and legendary redhead bad-girl Lindsay Lohan. She has a manifestly clearer grasp of the inflationary dangers of quantitative easing than David Blanchflower:

Lohan’s analysis is right…

Hat-tip: Fraser Nelson

Ed Balls Take Note, Obama’s Keynesian Stimulus Has Failed

It seems a long time ago that Will Straw, the former Treasury spin doctor under Gordon Brown now turned blogger and think-tanker, was arguing about the need for the Balls/Brown tax, borrow and spend stimulus plan. The voters and the 2010 general election put paid to that and George Osborne has resisted the calls of Balls (and Will) for more government borrowing to spend on boosting short-term growth. Will Straw argued, citing research by a “progressive” American economist, that spending increases were the most efficient form of deficit spending. The theory can now be tested against the outcome.

Obama did implement a massive $787 billion stimulus programme financed by more borrowing of the kind that Will Straw and Ed Balls still advocate. The chart above shows the results versus the predictions. Unemployment is far higher than the supporters of the “porkulus” projected, higher even than they projected it would be without wasting three-quarters of a trillion dollars. Not since the 1930s has US unemployment been so high for so long. Told you so.

+ + + Northern Rock is on the Block + + +

Chancellor tells assembled great and good in the Mansion House that Northern Rock is for sale. Get the taxpayers’ money back!

UK Quietly Contributes £9 Billion to IMF Euro-Bailouts
Equivalent to Adding 1½p to Basic Rate of Income Tax

Douglas Carswell has spotted a Statutory Instrument slipped in before parliament without prior debate, two pages of legislation which will cost the British taxpayer £9 billion, the equivalent of adding some 1½p to the basic rate of income tax. No debate, no big announcement, just another day of propping up the Eurozone on the backs of UK taxpayers.

The Chancellor was at the Bilderberg conference this weekend, where the global elite discuss important matters without tiresome worries like democracy or transparency, among the attendees were central bankers, financiers and investment bankers – the guilty men of the financial crisis. The Chancellor has clearly fallen in with a bad crowd…

UPDATE: Osborne’s PPS Greg Hands has been rolled out to defend the £9 billion loan. The crucial point he makes is that “Because this is a loan, it has no impact on our borrowing – it is a financial asset that will be repaid.” All being well, however all is not well. Institutions like the ECB itself are in trouble, the US Treasury is on credit watch. We may be approaching the financial equivalent of the rapture, when all the reckoning for decades of loose credit will be made. One only has to look at the price of gold to see that people are losing faith in the paper-money financial system.

Unemployment Has Peaked

The whole Ed Balls alternative economic strategy was first predicated on a double-dip recession, we hear no more of that nowadays, then it shifted from warning of a double-dip to lamenting slow GDP growth – even though UK GDP growth is above the EU average. But most incessantly Ed Balls wants George Osborne to stop reductions in the bloated public sector headcount “to hold down unemployment”. Coincidentally Labour’s paymasters are public sector unions…

In reality small firms are hiring workers, driving job creation, and according to the authoritative Manpower survey [PDF] hiring intentions are up 8% in the coming quarter and overall nationally recruitment is 3% above trend, a level not seen since the height of the financial crisis 3 years ago. Balls’ ideological adherence to Plan B is now rendered totally unnecessary…

To Grow Faster, Go Further

Growth is anaemic, that much of the Balls critique is true, the cause is not the government’s spending cuts, they have barely started, the £6 billion down payment on deficit reduction is not even 1% of GDP. Some of the reasons are external; US economic doldrums, Japanese earthquake related supply-chain disruption, cost push inflation and some are internal; lack of business and consumer confidence, difficult credit markets and rising interest rate expectations. So what is to be done?

The IMF report recommends

“…tax cuts are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households, or job creation to increase their multipliers… Simultaneous adoption of deeper long-run entitlement reform would be desirable to safeguard fiscal sustainability and market confidence…”

It also points out that

“The level of public spending as a percentage of GDP in our forecast has reduced by about half a per cent of GDP as compared to the previous fiscal year. However, it remains very far above the pre-crisis levels of spending and represents a long-term high in spending. It’s important to maintain that perspective”

Plan B, the Balls plan, is for higher taxes and more spending, the same plan Brown had which took us to the brink of bankruptcy with the biggest government deficit in the G20. That can be dismissed as a failed ideology, now tried for 13 years and tested to destruction. If faster growth is required the IMF actually recommends an accelerated Plan A, “Plan A+”, cutting taxes for those on low-incomes, cutting welfare payments to those who are healthy yet on long-term unemployment benefits and cutting overall government spending back to where it was before Gordon. The UK is cutting public spending slower than Obama and at a rate slower than even the EU average.

The IMF’s Plan A+ to boost growth should be considered along with supply-side reforms to boost business confidence, if we rolled back government spending there would be more room for income tax cuts to boost consumer confidence. If we want more private sector jobs and to grow the economy fast and sustainably, Plan A+ makes sense. Preferably sooner rather than later.

The Bank of England’s Great Inflation Swindle

Before finishing his term on the Monetary Policy Committee Andrew Sentance warned that the Bank of England is in danger of losing its credibility on inflation. Guido has been warning since 2008 that inflation is not a blip and that […]

+ READ MORE +

Guardian Invested Millions in Hedge Funds During Banking Crisis
Editor Rusbridger on Board Which Approved Strategy

Earlier this month the Guardian front paged a story revealing that the City of London accounted for £11.4 million of the Conservative Party’s funding in 2009 – 10, in lurid terms we learned of the millions passed to Tory coffers […]

+ READ MORE +

+ + + CPI 4% Inflation – Double Bank of England Target + + +
+ + + RPI 5.1% Shoppers Feel the Squeeze + + +

So have you stocked up on beans or gold yet?  Have you taken Guido’s advice?

Inflation is always and everywhere a monetary phenomenon, if we don’t figure out a way to exit QE we will inevitably suffer double digit […]

+ READ MORE +

Government Official Loses Bet on the Economy

This time last year an economist wonk at the liberal-leaning CentreForum took a dislike to Guido’s economic foresight. Deficit denying Liberal Conspiracy made a predictably over the top attempt at playing up the difference of opinion calling Guido innumerate, an […]

+ READ MORE +



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