Friday, February 19, 2010

The economists' spat

Hearing about the newspaper letter-writing spat between two groups of economists reminded me of the "Fear the Boom and Bust" video, which I imagine most readers have already seen:

For what it's worth, I'm with the Austrian.

I still don't get what was supposedly surprising about this bust. Seriously over-inflated asset prices, easy money and a binging government - these statements were all common currency among my friends and me.


NickW said...

There is nothing wrong in principal with Kenesian economic policy. The fact is it is rarely ever practiced by Governments.

In short Keynes said - in booms reduce down Govt spending, increase tax take, pay down debt, use interest rates if necessary. In recessions increase govt spend (capital projects) lower taxes, lower interest rates.

In reality what we got from the politicians was- spend, borrow, spend, inflate, blah blah blah, blah.....

Liebour have effectively done the opposite to Keynes. Pumped an over inflated economy in a boom making it uncompetitive and now when it needs a fiscal stimulus the kitty is bare.

Vince Cable (who does know what he is talking about and should defect to the Tories) spotted this 10 years ago and was quite vocal about it

Andrew Bower said...

Hi Nick,

You can hear that point in this interview - Hayek effectively says that what was done in Keynes' name would have horrified Keynes.

I don't buy into Saint Vince's supposed prescience about the credit crunch - I think this was effectively pierced in the Paxman interview! I don't know about what he was saying 10 years ago, it must have been obscured by the rest of the Lib Dems egging on Labour to tax and spend...

NickW said...

Hello Andrew

To quote Keynes;

'When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done'.

Sums up the UK economy for the last 15-20 years and most notably the 'City Culture'

Overall I think Cable has the best appreciation of what has been done to the UK economy. Routinely I can find PMQ from Cable about the indebtedness of the Consumer and Govt back to 2003.

Given how much was spend on Quantitative 'stealing' to prop up the banks I generally agree with VC's view that the best approach would have been to let them go bust and then nationalise the rump corpse. In such a scenario, leaches like Goodwin would have walked off with £27K not £17 Million.

The finanical crisis has shattered the illusion that the City is of any benefit to our economy. It is a parasitic load on the rest of us and our Grandchildren will still be picking up the tab when we are dead and buried.

The title 'INVESTMENT' bank is one of the biggest misnomers of all time. They do not invest in business (real business). They speculate and game markets,destroy businesses on masse, and inflate commodity prices at the cost of everyone else and cause untold misery in the developing world.

The tricks they have pulled off would of seem them dangling from nooses en mass in Countries like China to name but a few.

When they threatened to leave when the Govt proposed a bonus tax the UK should have said just GO. They could then go and pull off their scam tricks in Dubai and various Far East locations;-)

What a golden election opprotunity for Labour which they squandered. This just told me that Labour are even more in the back pockets of the banks than I thought.

The bail out of the banks was nothing more than Socialism for the rich.

Rant over!

Nick W said...

On the subject of opposition MP's the Conservatives would do well to poach - did anyone hear Frank Field on Radion 4 this morning at 8.15am?

Absolutely spot on about the welfare state - as he was in 1998 when Bliar sacked him for Honesty.

Andrew Bower said...

Nick, you are right that he made an excellent contribution to yesterday's Today programme but he's already said he wouldn't cross the floor.

Nick W said...

I can't understand why Field stays with Liebour. He was originally a conservative in his youth and only left because his conscience (rightly so) could not square with the Conservatives refusal to condemn South Africa's Apartite policies at that time.

If he was a lefty socialist fair enough and if liebour was a socialist party fair enough but its not.

Field would sit comfortably on the left wing of the Conservative party and Liebour are just corrupt - fleecing the productive base of this country to fund an over bloated public sector and welfare state (in return for votes) and feather bedding their bankster backers with tax bailouts (in return for political donations).

'Trickle up economics' - take off me and give the money to the rich or feckless.