A little bit of vindication for Osborne

Short the UK

GO's political capital has fallen like the share price of Lloyds TSB.

Let's hope that by taking a few 'obvious' risks he up's his political capital.

He has been lame.

The FTSE could crash to 3,200 in the next couple of weeks, the pound would sink with it. He could be about to get lucky!

The more calls/trades GO makes the more GB is at the mercy of the markets.

Athesius the Facilitator

Hooray for George! He still lacks gravitas but he's no duffer. Despite what Simon Heffer says ( question for one of you journalists. Is Simon Heffer any relation to Edward Heath? Not only does he look like him, he's so grumpy as well) I think George Osborne is a decent bloke and may come to the party now that the gloves are off. Sorry about the "party" pun.

Andrew Lilico

Come on, James! You're a smarter guy than this! That "vindication" story is going to last up to about 30 seconds after some journalist asks an MPC member about it, and that MPC member replies (as is 100% clear from the Minutes and the Governor's comments at the Inflation Report announcement) that fiscal stimulus is (a) possible without significantly raising the spreads on UK debt (ie they flatly disagree with Osborne) and a good idea in that it is likely, because of the special economic conditions we are in, to reduce the recession somewhat (i.e. they again, flatly and directly, disagree with Osborne), and that the reason they want to see how much there is is because a larger stimulus, since it would reduce the recession, will mean that such deep and rapid interest rate cuts are not *necessary*.

I know we are keen to be "on side" and "helpful" at the moment, but we must avoid flailing around and becoming ridiculous in our efforts to find something, anything!, to say in support.

Their line is an Austerity one. It isn't *correct* but it makes a certain kind of sense if they pursue it consistently enough. You should look for (accurate) ways to promote and defend that line if you want to be "helpful".

jon dee

There never was an intellectual argument with George Osborne, only the Brown smear machine trying to retain the headlines and succeeding in the case of the BBC.
Blairism is still with us in the shape of sleazeballs Campbell, Mandelson and Draper with Osborne merely a target.

Alex

jon dee - you are spot on.

I second that

seb

I've just read Martin Vander Weyer's article. It seems that Brown's on the right track, he can borrow any amount of money he wants - why not go flat out for a cool trillion, I say - and the borrowing, as it's such a foolproof tactic, will set us right again pretty soon, and, oh yes, Osborne - the name was, thankfully, spelled correctlly - is a prat. Interesting reading, but is there some sort of economic theory that argues that an economy, per se, is not necessary because the printing of sufficient government securities is an adequate alternative?

David

I see Martin van der Weyer has completely blown a hole in Osbourne's, and Frasers, economic policy.

Hurrah.

Daniel

The Tories have completely blown it in my opinion, and I say this with regret as a party member. They have decided for political reasons to base their response to the credit crunch on the false premise that it is primarily a result of Gordon Brown's earlier mis-management of the UK economy. Attractive tactically, perhaps, but unfortunately it results in a series of completely irrelevant policies based on the quaint notion that government expenditure in a recession is a "bad thing".

It is clear that they have little, if anything, interesting to say about the global nature of the financial crisis, which is characterised by severe asset price deflation, unprecedented banking fragility, and sharply contracting demand. The correct policy response to this is, as it always has been, a sharp relaxation of both monetary and fiscal policy, because only governments can release resources on the scale required to break the vicious circle of collapsing demand. Relying on tax and spending cuts won't work because consumers will place any available savings on deposit with banks, rather than spending them, and banks will hoard the additional liquidity to re-build their balance sheets, rather than lending it to companies and households. And those adversely affected by government spending cuts won't have any scope to increase their savings.

However, for the Tories to acknowledge this, they would have to accept that Keynes' insights into how governments should deal with economic slumps contain more than a grain of truth, and that would never do, would it, as it would offend the blessed Margaret.

By caving into the right wing of the party, who were opposed to the modernisation project in the first place, Cameron and Osborne have virtually guaranteed that the Tories will be unable to form a majority after the next election. All Brown needs to do now is scare an already frightened electorate with charges of "Tory cuts", and he will convert sufficient swing voters to deny the Tories a majority. Expect Crewe and Nantwich to go back to Labour with a respectable majority.

For reasons best known to themselves, the Tories have chosen to campaign on the same economic platform that has just lost the US Republicans the Presidential election. A really smart move guys!

Michael McGowan

What planet do you live on, Daniel? Brown is promising to borrow unlimited amounts of money to refloat the vastly overindebted economy he built up systemtically over 10 plus years. This is the economics of the madhouse and is motivated purely by short-term electoral gain. If you think the Tory Party should be going down the same path, then no doubt you also think that Denis Healey was a wonderful Chancellor and being bailed out by the IMF liek Iceland and Hungary is just fine. The electorate is just going to have get used to the idea that the bills have now come in for ten plus years of kidding ourselves that we could shop our way to prosperity and that selling each other second-hand homes at inflated prices was a form of wealth creation. The most that politicians can do is ensure that a tough and necessary rebalancing of the economy doesn't become a rout.

James

Why do I get the impression Daniel is not a Conservative party member but one of New Labour's cyber trolls?

seb

@ David
Vander Weyer's article, it would seem to me, is more about wishful thinking. It's implied message is precisely what Brown would like people to believe can and will happen, viz. The amount of borrowing does not matter at all. We've reached two thirds of a trillion purely on government bonds, a fifty per cent increase to one trillion is neither here nor there because - wait for it - this sort of strategy will work and it will work soon, and we'll all be flush by Christmas 2009 and have forgotten anything bad ever happened.
It's an article in which mass unemployment, repossessions, bankruptcies and our reputation and creditworthiness in the eyes of the rest of the world appear not to figure. It's the dream world of Mr. Brown, who's entire existence would have no meaning if he wasn't the Prime Minister, bringing fairness and abolishing greed by bashing the foolish, amoral scum that call themselves the Tory Party.
Blown a hole in Osborne's economic policy? I'd says it's a daydream. As for the opposition's economic policy, it's a bit like asking a ship's pilot to apply principles of marine navigation to the Titanic after it had sunk so that it could reach New York. What would you suggest opponents of this lunatic premier actually do after he's spent eleven years sinking our boat?

seb

David! Are you a Labour cyber troll? If so, do you get to write your own stuff or is it handed to you by a secret source?

PS - who's existence = whose existence. Tut. Sorry.

Ted Tedford

David: Of which party are you member? You lapse into 'otherness' surprisingly quickly and easily: e.g. 'the Tories' where 'we' would have been more appropriate.

I smell a Dollytroll.

Icarus

From the minutes:

"Third, a key concern was the degree of surprise to financial markets. Too large a surprise couldpose upside risks to the inflation target if the resulting depreciation of sterling was excessive. There
was a risk that such a move might be misinterpreted as a change in the Committee’s reaction function,
which would damage the credibility of the inflation target. That suggested leaving some of the required monetary loosening until after the Committee had had an opportunity to explain its change of view on the outlook for inflation in the November Inflation Report, and to assess the market reaction to both the Report and the decision."

They didn't want to frighten the horses

Daniel

James, you think I am not a member of the Conservative Party because I can think of something good to say about John Maynard Keynes? That just about says it all, really, doesn't it? I rest my case: Cameron's tenure has not transformed the Tory Party after all. It is still basically Thatcherite, despite three successive election defeats. I hope you enjoy the fourth.

What is becoming clearer and clearer by the day, is that Gordon Brown evokes particularly strong feelings of hatred and animosity amongst some Tory Party supporters - perhaps for good reason - to the extent that it seems to be clouding their judgement on the bigger picture. You need to understand that this event is not just about Gordon Brown, any more than the Second World War was just about Neville Chamberlain. Sometimes there are larger issues at stake, and a party that wants to win an election needs to make the right judgement calls on the big issues that affect voters' job security and prospects. Since it's pretty obvious that the UK economy, along with the rest of the world, is heading into a slump, not merely a mild recession, the Tory Party's apparent determination to adhere to the principles of "sound finance", which were intellectually discredited by Keynes in the 1930s, does not augur well for its electoral prospects. If I am wrong, why is the consensus of City economists, as reported by Martin Vander Weyer, with the Government and against Osborne? Are they all closet Labour Party members?

Michael McGowan

Ah Daniel, so much faith in experts! Don't you remember that 364 of them wrote a letter to the Times telling us that Mrs Thatcher's policies were wrong? And aren't we talking about the same experts who told us that subprime was a purely American problem and that Europe and Asia would be able to decouple from the US? How many trillions would you like Mr Brown to borrow?

David

I'm not a member of any party, although I've voted Tory all my life, and am likely to continue to do so. I was a member of CF at university.

As to references to the Tories and we, I'm likely to swerve between the two for no other reason than I don't pay particular attention to whether I say one or the other.

Martin is a valued contributor to the Speccie, and always seems to know what he is talking about. I have no reason to doubt his conclusions, or indeed his reports of how others are viewing the policy.

I certainly disgree with the idea that Brown has had no contribution to the state of our economy. A global recession it might be, but the options open to us are bad due to his poor record.

Ted Tedford

@David - I meant Daniel. My apologies. Too many 'd's. Depression, deflation, downturn, and...

@Daniel: I cannot begin to speculate about why so many 'City economists' might be 'with the government' now. I suspect it might be a derivative of Stockholm Syndrome.

I instinctively question the 'expert' view on the best way out of a situation which so many apparently failed to predict - McSnotty included. Untrained bloggers like Cynicus Economicus have been warning for some time, and they too fear that borrowing for pre-election bribes is a silly idea.

And perhaps these 'experts' make the assumption that Brown wishes to save the British economy, as opposed to saving his own political hide. Knowing what we do of his record, I think his instincts are for self-preservation, not the national interest. Hence unfunded bungs to the Statist clients.

Now, it would be grand if he can indeed turn this around. I would very happily see the current government manoeuvre us out of the hole - as long as they are roundly punished at the polls for their role in getting us into it in the first place. McSnotty deserves no credit for correcting his mistakes, which he has started to do only after the evidence of his failures were unignorable. Still less does he deserve 'another chance', unless therapy is to become the driver for votes. He deserves contempt, ridicule and reckoning for his arrogant claims to have ended boom and bust, and for his mendacious attempts to brush off all criticism, however erroneous, as unpatriotic. If he can make good some of the damage of this hubris, then all well and good - but he has had his chance, and he blew it.