This morning I listened to John Humphrys interview British Prime Minister Gordon brown on BBC Radio 4′s Today program. Quite a good interview, Humphrys pushed Brown fairly well.
Humphrys tried to pin the Prime Minister down on a couple of points. He posited that while Gordon Brown was Chancellor he had bragged endlessly about prudent stewardship of the British economy claiming that he had “abolished boom and bust”. This false promise had encouraged everyone to borrow on the assumption that the economy was in safe hands. So much so that this led the the economic mess in which we now find ourselves.
Mr. Brown’s response to this was that previous “busts” had been caused by high inflation and that Brown had not let inflation get out of control. He claimed that the credit crunch had been caused by property loans being packaged up into derivative financial instruments where the risk could not be easily assessed.
Gordon is TALKING BOLLOCKS!
If one reads The Economist one discovers that the generally accepted view of the cause of the credit crunch was low interest rates.Yes, the impenetrable derivatives exacerbated the situation but the cause was cheap credit which was made available by the likes of Gordon Brown (as UK Chancellor) and Alan Greenspan (as chairman of the America Federal Reserve).
Cheap credit might normally give rise to inflation but China became a member of the World Trade Organisation in 2001 allowing it to supply cheap products to the developed world keeping high street inflation low. Note that inflation stayed low not because of Brown and Greenspan’s low interest rates but in spite of them.
But the cheap money that Brown and Greenspan were making available had to go somewhere so it went into fueling aasset price bubbles in equity and property.
This is not the reasoning of one lone blogger but a précis of the opinion of main stream economists as reported in The Economist newspaper. However, speaking personally, I recall that around the year 2001 the silicon chip maker ARM was trading at a Price Earnings Ration which would mean it would take a thousand years to pay back it’s offer price! If I could see this was absurd how did the situation evade the Chancellor of a major world economy? If taxi drivers could see that providing mortgages to people for more than the price of their home without checking their income was reckless why did this escape Gordon Brown?
It is worth noting that The Economist had been warning of the asset price bubbles for years before the credit crunch arrived. If they knew then Mr. Brown should have known. So when Mr. Brown claims that he kept inflation low he is either incompetent or deliberately misleading the general public.
I suggest that Gordon Brown is like any number of technocrats who are amazingly knowledgeable about a subject but have no judgement or understanding. Mr. Brown read of the mistakes made with inflation in the past, learnt the accepted remedy and then blindly applied this remedy without once stepping back and seeing the enormous bubble in property and share prices.
Mr. Brown is like some bureaucratic ticket collector, deaf to the beseeching cries of the passengers, he insists on following rules and clipping everyone’s tickets while the train careers across a cliff.
Mr. Humphrys pointed out this morning that the stock market valuation for The Royal Bank of Scotland had grown larger than the UK economy. Even with this alarm bell the size of the Mount Everest Mr. Brown did not think that there had been any indication of the impeding disaster.
This morning, on Radio 4′s Today program, Gordon Brown was TALKING BOLLOCKS!
Even during the boom years Gordon Brown was spending more than the exchequer was raising in tax. The Budget deficit in 2007 was 2% of GDP! If he was borrowing in the good years then what on earth did he think he would do in the bad years? The truth is that this arrogant fool thought that he was so clever that he had ensured that never more would there be bad years. Now we have the bad years New Labour have resorted to the same tactic as Robert Mugabe’s Zimbabwe – they are printing money which in turn is devaluing the pound.
Gordon Brown has presided over a decade in which the United Kingdom has morphed from a leading developed country to a major debtor nation. The UK has never defaulted on it’s debt before but now there is talk of the UK losing it’s triple A credit rating meaning that investors consider default a possibility.
That this moron considers that his record shows prudence and competence only serves to underline that he is not fit to be in government let alone Prime Minister.
If readers are undecided on which party would be best placed to lead us out of the economic mess then consider that judgement and understanding will be necessary and Gordon Brown has neither. Also consider that, as imperfect as Western democracy is, the one advantage it has is the ability to throw out a bunch of leaders who have messed up.
New Labour and Gordon Brown especially have messed up big time and should be thrown out by the British electorate!