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Gordon Brown’s Legacy is Perpetual Austerity. Good.

“Why are you so ANGRY?”, I am often asked. I don’t mind people who disagree. But what I cannot stand are people for whom the managerialist, high-spending government IS THE ONLY WAY. These are the people who will, with graphs and “facts” confidently tell you that because investment fell while Brown was spending all the money, then Brown had to spend all the money BECAUSE THERE WAS NO CHOICE. The other option, that there was no investment, because Brown was hoovering up all the money and people which might have been used to invest, doesn’t occur at all to them. They are dangerous because they are plausible. They sound reasonable. They are confident of their analysis. Many of them are extremely well respected, and they often have the weight of academia behind them.

They all tell you the deficit doesn’t matter, that “austerity” is not necessary or self-defeating and we should instead be spending more.  And like Maggie’s 364 economists, they are wholly, ridiculously wrong. They may be right in every detail. But they were still wrong – the German Army of WW2 can plausibly claim to have lost no tactical engagements. They too were right in detail. They still lost. The 364 economists’ descendants defending the Blairite, last hurrah of the post-war welfare state are wrong because they’re extensively trained in the status-quo, and can see no alternative.

The state is too big. It spends 50% of GDP, and takes 45% or so in Taxes. Before WW2, this was around 25%. The state now seriously considers the contents of school lunch boxes, how much middle-class people drink of an evening or the font on a packet of fags a reasonable part of its remit. We are over-governed.

It’s trivially true, as the managerialists claim that Austerity’s ideological, that deficit fetishism is silly, but that does not make the coalition’s spending cuts insane. What was insane is testing the proposition that public services improvement was simply a matter of fire-hosing money. Most of the money spent went on wages – headcounts went up, and pay (especially if you include pensions) outstripped the private sector. “Austerity” is merely the bleating of a well-paid client state being forced to live within the country’s means once more.

Some spending makes sense: Road and infrastructure building for example – borrow at low rates to build things which generate real economic return. It’s a no-brainer to turn the A1 into a motorway or upgrade the A303 by Stonehenge. Deficit fetishists whinge. But there is no equivalent need to have public sector workers paid more than private sector workers. They enjoy better pensions and greater job security, so pay them less! Freeze their pay till they get the same as their equivalents in the private sector, whose wages are set by productivity, informed by markets.

There needs to be fewer public sector workers, doing less, and paid about the same as those whose salaries are not guaranteed by the tax-payer. No tax-funded salary should be more than the Prime-ministers’. The problem is the state is trying to do too much, and only a slow, continued squeeze on it will bring the public finances back on track. It is only when you come across the public sector at work – four hour meetings with eight people paid over £30,000 a year, in which no-one goes away with any actions, that you realise how much fat there is to cut. It’s not a trim that’s needed. A saw needs to be taken to whole arms of the state, giving PEOPLE back control of their own lives, for good or ill.

If you blew up every Sure-Start centre and fired their staff tomorrow, is there anyone who wouldn’t be able to cope? How many people would be immediately worse off without the attentions of social workers? Of course some would miss it. But many would be better off – think of happy families ripped apart by over-zealous enforcement of state-employees’ decisions. Victoria Climbe and Peter Connelly’s murders happened despite the tender ministrations of the state in these families’ lives. Ministrations which may encourage others in society to ‘look the other way’ in the face of horror, as someone’s paid to think about that sort of thing. Too many people have persuaded themselves “vital” services are vital, when in fact they’re part of the infantilisation of a population which is losing the ability to look after or make decisions for, itself.

On the day after Gordon Brown announced he’s to step down, his legacy is a British public carrying a burden of a state he built, which achieved little, and at enormous cost. The private sector is getting on with doing what it does, creating wealth, and coming up with new ideas, but it is shackled to a imbecile obsessed with box-ticking, and getting in the way. Oh, and the lumbering imbecile is very, very powerful, armed to the teeth, and can pick the private-sector’s pocket at will. Worse, the imbecile actually believes it runs things.

We need to find ways to reduce inequality which don’t involve hundreds of thousands of civil servants. Luckily, there are good solutions: a Citizen’s basic income (or similar ideas like a negative income tax) achieve redistribution, but don’t need a huge bureaucracy to administer. The Coalition’s universal credit is a baby step in the right direction, and very popular with the people to whom it so far applies. Do not be thinking this shrinking of the state will leave poor people out in the cold: on the contrary, it will FREE the poor FROM the social workers and benefits officers who blight their lives with forms and stress, just as the private sector needs to be freed from onerous regulation, which do little but create a vulnerable oligopoly where a chaotic but resilient market once existed.

The only thing we can thank Gordon Brown for is that no Future Chancellor will ever think they’ve abolished “Boom and Bust”; and he tested to destruction the idea that all that was wrong with public services is they had insufficient money or staff. That’s it. Done. The high-point of the post-war welfare state was reached under Brown and Obama. Bless him, Hollande in France is right now demonstrating what happens if you continue dancing when the music stops. The next revolution is that radical idea that the state should be leaving people alone. “Austerity”, in reality the self-interested bleating of people whose jobs to interfere in other people’s lives, has only just begun.

Thanks to Gordon Brown’ complete and total failure as Chancellor, as Prime-Minister, and as a man, “Austerity” is permanent. Good.

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The Crisis Wasn’t Brown’s Fault. The Slow Recovery Is.

Let’s be absolutely clear. The near-failure of the financial system on Gordon Brown’s watch was not entirely his fault. Thus the rise in the deficit from 3% to 11% of GDP isn’t directly Brown’s fault. At least not in the short term. But the slow recovery is his fault. And here’s why.

It’s not just the defict. A 3% deficit once in a while is ok. No Government can balance the books every year. But running a deficit every year for a decade, that’s wrong. Running a deficit bigger than growth increases the debt to GDP ratio. This is fine, when the stock of debt is low, but doing so during a “boom” is wrong. And increasing taxes to fund increased spending isn’t always wrong either. doing so during a boom is fine in moderation. But increasing  spending, over inflation, and during the biggest rise in peace-time taxation in British history, year, on year, on year (as Brown did) was not just wrong, but insane. It’s difficult to over-state how insane Brown’s fiscal policy actually was. He raised taxes during a boom, then spent it all but it STILL wasn’t enough. So he borrowed more, and more, and more, every year on top of booming tax-receipts to keep illusory growth coming. Gamblers call this approach ‘the martingale‘, and it always results in catastrophic losses, because of house limits. Brown believed there were no house limits. But there are, even for Governments.

The pips were squeaking long before the market blew up. The private sector was over-taxed and barely put on any net new jobs at all over New Labour’s tenure. Squeezed by regulations and crushed by rising demands, business stopped hiring. A group of workers, the non-financial private sector, which were not growing, nor were they enjoying increases in living standards under Brown, were being asked to fund a massive increase in the number of, and payment to the public sector. All Brown’s “end to Boom and Bust” growth was debt-financed public sector spending. All the net new jobs were courtesy of the Tax-payer. And when those massive tax-receipts from the City which had allowed this to appear OK stopped, the wheel came off.

Brown’s regulatory regime failed its first test, but so did every regime, everywhere. The Greenspan put, which I ultimately blame for the crisis was standard political economics everywhere at the time. Doing the standard thing does not make Brown culpable.

The financial crisis may not have been Brown’s fault, and his response to it was (I’ll grudgingly admit) not too bad. It’s not exactly what I would have done, I’d have let the banks fail, secured depositors only (not bond investors) and used helicopter money to bail out PEOPLE not bank. But Brown’s approach certainly wasn’t wrong, and represented one of the better options on the table. But the fact is Brown appeared to believe he’d ended Boom and Bust beforehand, and left Britain with no fiscal wiggle-room at all. The fact the crisis was as bad as it transpired to have been for this country was absolutely Brown’s fault. Financial crises happen. Brown though he’d stopped them for good. That is pure hubris. The Tory charge, that he didn’t fix the roof when the sun was shining is actually quite accurate.

Brown overspent when he should have been saving. He rose taxes when a prudent government should have been able to cut them. He left a huge, bloated public sector, the cuts to which are slowing down the recovery.  (That the cuts are slowing growth does not mean we should stop cutting and miraculously get growth, nor would that growth allow the deficit to fall). Thanks to the grotesque tax-hikes of Brown’s tenure, there’s no scope for further rises to close the gap. In isolation, each of the defences of Brown’s fiscal policy hold water. Together, they don’t.

Like the Irishman giving directions “Well I wouldn’t start from here”, should form the Tory critique of Brown’s time as Chancellor and PM. We should have been running a 1% surplus in 2007. This means the deficit would have been 7%, not 11% in 2010. We should have been a creditor nation by 2007, having almost entirely paid off the net national debt and been sitting on great piles of T-bills, JGBs and Bunds. Our stock of debt would have gone up, but we’d be rapidly approaching 40% of GDP, not 100%. There would be no need for decades of Austerity. The fiscal fire-power the Government could have deployed to keep the wheels moving would have been much greater.

But counter-factuals are pointless. All that’s left, is the long, slow, grinding process of austerity to bring the insane levels of state spending under Brown 2000-2007, back under control. This will take decades. I will be paying more tax, thanks to Gordon Brown, for the rest of my life. For that, I will never forgive him. For cheering him on, I will never forgive Labour.

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Growth is NOT going to end.

In “Perfect Storm” the head of Research at Tullett Prebon, Dr Tim Morgan predicts the end of Western Growth arguing that the last 250 years were an anomaly of the industrial revolution, which is now over.

To summarise the argument, Morgan identifies four trends which will mean Growth is going to be anaemic or non existent for the long-term, all coming together in the perfect storm. These trends are 1) The benefits of the move away from human muscle as a primary source of power have been largely spent, and there are no further equivalent gains to be had. 2)We are at the end of a credit super-cycle which has been inflating a bubble for the last 30 years. 3) Policy-makers have been blind-sided by rubbish data, and 4) the west is vulnerable to globalisation.

He’s not even half right.

Let’s look at his trends in detail: First he suggests that the debt bubble is equivalent to the south-sea bubble or the Tulip-mania. The UK and US are enormously endebted. There was not just a vast increase in public debt, but also private debt too over the past 30 years.

Gordon Brown, for example, proclaimed an end to “boom and bust” and gloried in Britain’s “growth” despite the way in which debt escalation was making it self-evident that the apparent expansion in the economy was neither
more nor less than the simple spending of borrowed money. Between 2001-02 and 2009-10, Britain added £5.40 of private and public debt for each £1 of ‘growth’… Asset managers have a very simple term to describe what happened to Britain under Brown – it was a collapse in returns on capital employed. No other major economy got it quite
as wrong as Britain under Brown, but much the same was happening across the Western world…

While he is, of course right our economies are more indebted than ever before, the damage to the economy (or at least growth) from this has already happened. There was almost no private sector growth during the Labour years. Almost all the growth was due to immigration and increased public spending. Brown’s “boom” was merely a public spending spree, masking a recession which was already happening.

Much is made of the collapse of investment returns over the period. It’s almost as if that huge increase in public debt sucked investment out of the private sector!

That process reversing would explain the no growth, but rather solid employment numbers that we’ve seen recently. Meanwhile the private and corporate sectors have been busily using the low interest rates to deleverage faster than at any time in history. The good news is the UK and USA are not going to go the way of Japan, because instead of committing to ever more “stimulus” we’re all agreed on Austerity. Japanese debt now stands at 250% of GDP and they’ve enjoyed little growth in the last 20 years as a result. The Anglo-Saxon economies, in contrast have instead purged the bad debt from bank’s balance-sheets (incompletely, but better than Japan in the 90’s), refinanced, and hit the monetary nuclear button (Quantitative Easing) after 6 months, not 6 years.

Yes there’s a 30-year asset bubble to unwind. That’s not what drives real wealth. There is capital for innovative technology, so this isn’t going to stop the long-term driver of growth: productivity. Yes, we’re at the top of a 30-year bond bull-market driven by falling interest rates and falling risk appetites, and yes, interest rates will rise over the next few years. But the overall debt burden (including public, private and corporate) has already started to fall. Let’s not forget the South-Sea bubble and Tulip Mania didn’t derail western growth because the shape of balance sheets don’t ultimately drive long-term growth. Technology does. There’s no reason to suppose the credit crunch will do so in the long-run.

Next up, Dr Morgan channels the Socialist Workers’ Party by suggesting globalisation is a disaster for the west because it’s sucked “production” out of our economies. This is pure “manufacturing is special” wibble. Globalisation has, of course been a boon for Chinese wages, and as a result the phenomenon of offshoring jobs has run its course. Western manufactures now cost about the same, when the extra transport and extended supply-chain of Chinese manufacture is taken into account. Meanwhile, the Chinese, vastly wealthier than they were a decade ago thanks to offshoring, are now clamoring for Jaguars. We’ve created a market for the high-value manufacturing and services which never existed before. We in the west aren’t producing less – the UK is a net exporter of cars for example – we just employ fewer people to make more.

The big problem with globalisation was that Western countries reduced their production without making corresponding reductions in their consumption… 

Morgan makes the standard pessimist mistake. Making things we can drop on our feet with fewer people means those people not hammering metal in Birmingham car-plants can train to be lawyers, or web-designers instead. We get cars AND websites. We’re richer. We don’t need to cut our consumption, or at least not as much as Morgan thinks we do.

In the interface between these first two trends Morgan identifies, there is a glimmer of truth. Because much of the growth in the noughties was debt-financed and ephemeral, we simply weren’t as rich as we thought we were in 2008. The recession is the process by which we cut our expenditure to meet our income. Great. The economy is healing itself, and has been doing so for the last four years.

Any economic historian could tell you that recoveries from balance-sheet recessions are always slow. The credit crunch was the mother of such, and so the slow growth subsequently is not exactly unexpected, however unwelcome. The enormous private and corporate deleveraging, combined with public sector Austerity should, if the Keyensians are right trigger a depression. The fact that growth is merely flat should be grounds for optimism.

Trend 3) is that the financial statistics used are a grand exercise in self-delusion.

The critical distortion here is clearly inflation, which feeds through into
computations showing “growth” even when it is intuitively apparent (and evident on many other benchmarks) that, for a decade or more, the economy has, at best, stagnated, not just in the United States but across much of the Western world. Distorted inflation also tells wage-earners that they have become better off even
though such statistics do not accord with their own perceptions. It is arguable, too, that real (inflation-free) interest rates were negative from as long ago as the mid-1990s, a trend which undoubtedly exacerbated an escalating tendency to live on debt.

I’ve long argued the current recession’s seriousness is the direct result of Governments’ efforts here in the UK and in the USA to use public debt to prevent a recession which should have happened in response to the .com crash in 2000. There has been little private sector growth in the UK from when Gordon Brown turned on the spending taps in 2000, to the crash of 2009. Furthermore, the use of CPI (which doesn’t include house-price inflation in the inflation number) and failure to deal with the known problems with RPI, left were handy fictions in the public data. This probably massaged the true figures down, helpful to government, which stealthily cuts people’s real incomes. There’s more: open abuse of the disability benefits and education system was used to massage the unemployment numbers.

But you’re not really surprised that I’m sympathetic to the idea Government and bureaucracy will indulge in self-serving self-delusion, are you? The good news is the Coalition has addressed some of these problems.

Because of this tendency for bureaucracy to indulge in self-serving lies, they pose the biggest risk to western growth. Increases in wealth are, as Morgan correctly observes, all about productivity growth. Where is productivity growth weakest? In the public sector which operates without competitive pressure. And which part of the economy has been growing the most for the last 15 years? That’s right: the Public sector. It may take a decade of cuts and austerity for this trend to be reversed, but that’s why I’m optimistic. Europe, the USA and UK have all made a start on trimming the burdens a much-derided but absolutely correct policy of Austerity. The EU is imposing Austerity on the nations with the biggest deficits, and the US fiscal headbangers of the Republican party are using the debt ceiling to impose a modicum of sanity on an unwilling president and the coalition is making cuts to services.

Shrinking public sector headcounts may be hurting GDP growth in the short term, but this is bringing the economy back from the debt-financed insanity. It may take a while, but unlike Japan, we seem to be willing to face the reality. Japan’s experience shows clearly the party cannot be made indefinite.

It’s the final trend: that the growth engine is winding down which is the weakest in the whole piece, yet forms the basis of the conclusion. Morgan suggests the growth which started with the industrial revolution is spent. He’s wrong. The heat-engine: Steam and internal combustion power, hasn’t even been fully deployed around the globe when a billion people are still using the ox-plough or digging stick. We’ve not deployed the technology of the 18th century to the world. There’s still economic growth from crop-rotation, something which was cutting edge when Europe was recovering from the Black death.

Furthermore Morgan suggests there is no further equivalent growth to come. He’s wrong. We’re only just scratching the surface of what telephones for example can do for growth, let alone computers. Less than 10% of humanity has access to the internet, and that 10% hasn’t yet worked out how to use pocket devices with access to all the world’s knowledge available generate money.

The idea there’s no growth to come is just laughable. The agricultural revolution and industrial revolution aren’t even over. The telecoms revolution has barely started, and the information revolution is just a glint in the milkman’s eye. There’s two-centuries of growth for humanity right there. And that’s before we start harnessing fusion power, driverless cars, abundant solar energy or whatever we come up with next.

Anyone who says “this time it’s different” on the way up is wrong. The same is true on the way down.

The only unlimited resource is human ingenuity. That’s why I’m an optimist, tempered by cynicism about Government’s motives and competence. Simply by applying what we already know to those who don’t, we can drag the billions currently in poverty out of it. Even better, when Governments facilitate rather than control the process, we can all get rich doing so. Globalisation isn’t a zero-sum game. Innovation is happening. The credit super-cycle is being addressed (everywhere except Japan). The only thing I’ll agree with  Morgan, is that the public data is rubbish and so too was Gordon Brown.

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Chancellors and Recessions

The greatest lie in politics is that economic growth is in the Chancellor’s gift.

Because the economy is usually growing, it pays for chancellors to claim credit for it, but this is just Game Theory. As soon as it starts shrinking, the opposition start shouting about how the “chancellor’s failed”. They’re both lying to you (and probably themselves too). Chancellors do influence the economy, but more subtly than the simple -/+ve GDP growth number.

I did not credit Brown for the boom, which was global, I did not blame him for the recession, which was global. I do blame Brown for the deficit, or at least that part of it which isn’t automatic stabilisers and bank-bail-outs, but that is NOT the same thing as the recession. I do not blame Brown for the boom and bust because in the main, I don’t think the business cycle is particularly amenable to manipulation by chancellors. And insofar as they are able to influence GDP growth, I don’t think this is the Chancellor’s main role.

So what are chancellors for? Even Gordon Brown knew this: to balance the budget (or nearly so) over the business cycle. This was his “Golden Rule” (remember that?). In this, he failed, spectacularly. This is not about the bank bail outs – that bit of the deficit from 2008/9 is fine. While I disagree with Brown’s policy to bail the banks out, but I don’t regard the policy as idiotic: it’s certainly one of a number of possible solutions to a genuine problem. My problem is with the growth in state spending from 35% of the economy to 50% in 13 years, the over-complex tax-code (which is giving so much wiggle-room to “avoiders” right now) and the borrowing during the boom to fund a worthless army of state apparatchiks, which is causing so much pain now. In running a structural deficit to fund a massive expansion of state employment, Brown weakened the economy, removed the room for manoeuvre when the inevitable bust came, and arguably made the inevitable recession deeper when it did, and the resultant recovery slower.

So Chancellors do have an effect on the economy, but it’s far more subtle than “is the economy growing?”.

The longer the boom, the more painful the bust, and the UK enjoyed 16 years of economic growth (which started under the Tories…). Some of Brown’s policies may have prolonged the boom – the UK version of the Greenspan Put certainly contributed to financial recklessness, but it was an approach shared by the USA and elsewhere. I doubt a Tory chancellor would have done much different. Ever cheaper money certainly contributed to the housing price bubble which has arguably not yet deflated. Even with all that cheap money, the biggest boom was in the state sector, where almost all the net new jobs of 13 years of Labour rule were created.

It is this army of state apparatchiks which kept the boom going, giving the impression of growth, where the private-sector had stagnated long before 2008.. Cheap money and diversity outreach-coordinators can only manipulate the GDP numbers for so long. And it it this Army of state apparatchiks being culled en-masse which forms the biggest component of “austerity”. Yes it hurts for the PCS and UNITE to lose so many members, but those UNITE members are handing in their membership cards and joining the growing Private sector. Even during a slump, which Labour will tell you is the worst since the war, as soon as the Public sector stopped hiring, the private sector started. It’s almost as if there was something in this “crowding out” theory. True many of these new capitalist running-dogs are “under-employed” self-employed or part-time workers, but these are the seed-corn of the next generation of small businesses.

So. Gordon Brown can arguably have made the current recession worse with his policies. And George Osborne’s austerity might at once be slowing growth in the short term, and also be necessary. Just because sacking civil servants depresses GDP, it does not follow that not sacking them is the right thing to do. GDP growth does NOT generate lower deficits when that GDP growth is simply deficit financed spending on worthless, return-free state prod-noses.

In the parts of the economy where the state is dominant, the recession is brutal. Jobs are non-existent. In London and the South-East where the state is relatively small, people are saying “what recession?”. Just as Labour’s boom was an illusion created by a chancellor gaming (deliberately or accidentally) the GDP number by splurging money at the public sector, this “double dip” is the result of a chancellor (in my view) doing the right thing in attempting to balance the books and reign in a state-sector which had been growing over-mighty. When winds of austerity stop blowing through the public sector, we will be left with an economy carrying a much, much smaller burden of state jobsworths, with a lot of under-employed people in the private sector. This sounds like a recipe for growth to me.

The other lie politicians tell is the deliberate confusion (by both sides, when it suits), of debt (the size of the mortgage, if you like) and the deficit (the amount extra borrowed each year to cover income shortfalls). The deficit is falling, yes, slower than expected or desired, but it is falling from nearly 12% in 2010, to 6% now. This doesn’t look to me like “failure” on reigning in the debt. However thanks to Ed Balls’ former master, we still have a deficit therefore the debt is rising. Pointing out that the UK is borrowing more now than it did 5 years ago is just dishonest. It is obscene chutzpah from Balls to blame Osborne for failing to deal with what was, and remains the biggest deficit in the western world in just two years,when the biggest part of the extra borrowing is … wait for it… debt interest. The solution to this growing part of Government expenditure is not Ed Balls’ solution of “investment” (by which he means ‘spending’). It involves driving interest rates down, and hoping inflation does the work for you.

The point is the boom pre-2008 wasn’t as good, and the bust post 2010 isn’t as bad, as the politicians or the GDP numbers would have you believe. GDP numbers are a lousy way to judge a chancellor’s performance.

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That S&P Downgrade. The Music’s stopped.

It’s important to understand exactly what the ratings agencies do. Their ratings are merely opinions. They are not regulators, though regulators take their work rather too seriously. They do not set rates – the market sets rates – though they take rather too seriously the ratings agencies’ opinions, mainly because it allows lazy traders to price the risk of a given security according to their rating without doing that boring maths stuff, or any tedious analysis.

The USA is not about to go bust, but the deficit is rising, the debt is rising, and rising at an increasing rate. This is President Obama’s “stimulus” program, and it has failed utterly, just as every other stimulus program everywhere has failed during this crisis. The problem is that of decades of Governmental overspend. In the USA the benefits of relatively low tax-rates are eaten almost entirely on increase health care costs, something Obamacare does almost nothing to address; it just moves the burden a bit from private to public. So the western world entered the financial crisis with Government spending between 40% and 50%, as Governments found it easier to deliver jobs by borrowing to build a bloated state bureaucracy and generous but inefficient state services.

During the cheap-money boom running from the late 90’s to 2008 economic growth was accelerated by the money borrowed by Governments, and the money borrowed by people against the rising value of their homes. Public and private debt across the western world grew as Governments and home-owners spent cheap credit. It was the household debt, sliced and diced by ex-ratings-agency employees in ways to game the algorithms to generate the necessary grades to allow investors, who don’t look too closely under the bonnet, to buy them.

House-price inflation is just inflation, but this was not captured in statistics used by the central banks to set interest rates. Gordon Brown chose CPI, which excludes most housing costs, instead of the far more appropriate RPI, which doesn’t when setting the central bank free to set rates. As a result, British interest rates were too low during the 90’s or 00’s. Similar sleights of hand happened in the USA. Of course it was the private sector credit which went pop first – and the web of debt, and the financial instruments secured upon it fell apart and banks went bust. Ireland and Iceland were bankrupted by the cost of bailing out the banks.

A chunk, but not the lion’s share of the UK’s public debt is the cost of bailing out the banks. But the UK was running a deficit BEFORE the crisis, as was the USA. Governments were trying to keep the party running by borrowing money. Eventually the music stopped. The size of the UK’s and Ireland’s deficit is partially due to the collapse in Bank’s tax-bills which had underpinned public spending. In the USA, the Bush-era tax-cuts (and discretionary war-fighting) are the main reasons for the deficits. the Bank bail-outs (and that of motor manufacturers!!!) were the main reasons in the US. Governments desperately trying to keep the music playing by pulling the “stimulus” levers on their monetary (low interest rates) and fiscal (excessive state spending) levers.

So the wheel came off the financial system, leading to lower tax receipts from that sector. The correct response would have been to cut spending to reflect the new reality. But for the last 2 years, countries with open economies and floating exchange rates, whose policy makers surely knew that the fiscal multipliers were probably less than one, sought to “support” the economy with continued state spending.

This attempt to keep the party going was doomed to failure. Now for the good news. The US and UK political systems and indeed democracy, are mature enough to call “enough”. The Tea Party caucus stopped Obama’s lunatic stimulus program and demanded a return to balanced budgets, and crucially they called for the majority of this fiscal contraction to come from spending cuts, not tax rises. In the UK the electorate was persuaded that ever more spending was not the answer and elected a Conservative-led coalition which had not shied away from the need for spending cuts. In the UK spending cuts are about to start, or “bite” as the BBC keeps telling us. This may be expansionary, if it means that confidence in money and the economy returns.

The UK and USA are going to be Okay. Our public finances will be brought under control. The USA will regain its AAA rating in time, and we may even experience growth while doing it. (This will surprise the Keynesian and the BBC).

The economies of Southern Europe don’t have the excuse of bailing out banks for their crisis. That can be laid squarely at the door of the Euro, a political vanity project which is now destroying economies and lives, because sharing a currency doesn’t make Greeks or Italians into Germans. The ultimate cause though is the same. Decades of cheap money artificially boosted the economy leading to an asset price boom. Governments unshackled from the constraints of the markets were able to borrow to buy votes, until bond traders noticed that the Greeks and Italians were not behaving like those parsimonious Germans and started to drive down the price of their bonds. The music has stopped, the money must be paid back, and Governments MUST cut their cloth according to their means.

Who’s going to spend more to close the gap? Well that’s obvious. The Japanese people have to start spending their savings (while their government reins in its spending). The Chinese government will find the returns available on its surplus heading to zero if it continues to buy dollars to keep the Yuan down. They will have to start running surpluses and let their currency appreciate.

It ain’t all bad. The world has plenty of demand – 2 Billion south and east Asians are getting richer faster than ever before in the greatest expansion of wealth in history. Why aren’t we celebrating this, and seeing it as an opportunity? What we need is Governments to realise they can’t and shouldn’t run deficits or surpluses for ever, and the less they manage the economy, the better that economy functions in the long-term. Indeed neither should people run surpluses for ever: You can’t take it with you. The world’s financial crisis are simply shocks which change behaviour to iron out these imbalances. It works, eventually.Link

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Real Wages, After Tax.

Politicians need to be measured on their performance. Typically Labour ones like to be measured by how much they spend (they use the word “investment”) on public services, because they think the NHS is a proxy for morality. (The established church concurs). Both Tory and Labour ones like to be measured by GDP growth. Tories like tax rates. Liberal Democrats are motivated mainly by facial hair and sandals.

All like to be measured by unemployment, which is reasonable. But the cause/effect loop is much, much slower than media and politicians seem to believe. A government’s action has it’s effect 12-18 months into the future – unemployment is steady and high, and it’s still labour’s fault and will be for a while, in so far as the effects of Government action can be separated from the vastly larger effects of the business cycle. Most of the fall in unemployment expected in 2011 will not be down to George Osborne’s budget, but to the brute effects of the business cycle.

Most of these measures of politicians’ performance are deeply flawed because they measure things that don’t, in themselves matter, or are only marginally affected by politicians. GDP is only part of what makes people feel richer. In addition to employment, what actually matters to people is disposable income after tax and housing costs (so long as the housing costs aren’t reduced by house prices going down). On this measure, Labour is one of the worst governments in history. Real wages (adjusted for inflation) are lower than they were in 2005, and the tax-burden is higher. Housing costs may have dropped for the 20% of households on floating rate mortgages, but remain stubbornly high for everyone else. Only in the great depression did real income stagnate for so long. When you take the effects of Labour’s lunatic rise in the tax burden, people’s disposable incomes have fallen steadily since 2005 and were stagnant even before the crash. That is the Labour legacy.

How does this compare with our competitors?


Well if you look at 2000-2008, the UK under Labour was towards the bottom of the OECD’s table. Of the major economies only Germany (whom Labour now exhort us to emulate – despite their lamentable record on youth unemployment and economic growth) and Italy fared worse. Britain’s Post-tax disposable household income rose only 14% in those 8 years, and 2008-2010 were much, much worse. Labour’s economic record, as felt by the population as opposed to that reported by the press, was dire. I can’t find the data, but if the Bank of England Governor reckons the situation’s got worse since 2008, then who am I to argue. Gordon Brown’s lunatic tax-binge, no private sector growth, all helped cause it. A devaluation of the pound may help keep exports flowing out, but the people pay for it in much higher fuel and food costs – over and above the rise in their dollar price on world markets. Once again, the people pay for the politician’s focus on GDP. If Mervyn King is right, the result of 13 years of Labour is almost NO improvement in real wages after tax. None, in 13 years.

This is why the people are sullen and angry – they were told that a boom was happening prior to 2008, but because the flawed measure GDP was being used, they couldn’t work out why the boom wasn’t happening to THEM as they had to struggle harder and harder to make ends meet. The blame has been successfully laid at the door of the banks because of the credit crunch, but a lot of the leg work in screwing the economy was done by Labour prior to the crash in stagnating private sector employment and increasing the tax-burden. There was no Net Growth in private sector employment under labour’s watch, and despite the “booming” economy youth unemployment rose. I blame the minimum wage for pricing the young out of the labour market for starter jobs, which have been taken by immigrants instead. But that opinion marks me out as a savage right-wing nut-job who would bring back slavery, because the left tell me all the time that the minimum wage has had NO effect on unemployment.

On top of a rising tax-burden and the pricing of young unskilled people out of jobs, the burdens of council snoopers, intrusive government and ever poorer services meant the people who paid for the whole shooting-match couldn’t see the benefits of their sacrifice either. Labour forgot that tax is money taken from the people who earned it, in final analysis, by the threat of violence. Pay or the police will eventually kick down your door and take you to gaol. Politicians have to deliver something to the people who pay it, instead of feather-bedding a client state of ever more generously funded welfare claimants and public sector prod-noses. These prod-noses take resources FROM the public services – money which could be spent mending roads or supplying a heart-transplant is instead deployed on a Labour-voting fuck wit with a clip-board saying “no” to people. Would you rather have your pot-holed road re-surfaced occasionally, or a Diversity outreach co-ordinator for one year? Me too.

Now, with the deficit running at 10% of GDP as a result of over-generous benefits and a vast client state, the Government is borrowing £1 in every £4 it spends. Spending cuts (making services EVEN WORSE, as bureaucrats don’t cut their own preferring to slash the “front-line”) and tax-rises are set to remove even more of people’s money. Furthermore rampant inflation, not captured by Gordon Brown’s fudged CPI measure, serves to further reduce people’s standards of living. The sins of a decade of Labour’s criminal mismanagement of the economy are going to be felt in materially lower standards of living for the next couple of years. All of the rises in living standards under the early years of Labour (themselves nothing to crow about) are going to be proved to be illusory in the next few years.

Labour’s solution in office: Pay people in the public sector to do unnecessary jobs. Their “growth policy” opposition: Continue to pay people to do unnecessary jobs. Whilst it MAY support GDP numbers in the short term, because of the debt burden it creates merely delayed the day of reckoning with reality. However much Labour bleat, the cuts are Labour cuts, they are the result of a decade of criminally wasteful overspend across the whole public sector. We might as well have been paying men to dig holes and fill them in again. In fact, that might have been better, because those men would not be getting in the way of the productive elements of society by standing there with a clip-board saying “you don’t want to do it like that…. “

In truth, Labour admit that the deficit needs to be cut. In private, they will agree that 2011 was the year that LABOUR CUTS would have started. The Tories may be going a little further and a little faster, but CUTS! are the only show in town. However Labour choose to present it, they know it’s their fault. And deep down, so to the British people.

What is necessary to prevent this insanity recurring is a measure of Government performance which takes into account the tax-burden as well as growth. That takes into account the benefits of state spending but reflects the actual prosperity of the broad mass of the British population: Disposable income after tax which should be compared to disposable income after tax and healthcare costs in other countries. If people get richer, the Government should be praised, if they get poorer, the Government should be punished. Steadily rising income makes people happy. Having to struggle makes them sad. This simple economic measure, if more widely reported than the illusory GDP would render moot Cameron’s Gross National Happiness. It would reveal the lie at the heart of the Brownite plan of the Noughties to shovel ever more state spending at unreformed public services, and instead reward Governments for tax-cuts.

My guess is that cutting taxes (starting with corporation tax) and slashing spending whilst simplifying the welfare state and marketising both health and education in the pursuit of economies in the public services, is exactly the medicine the economy needs to improve household disposable income after tax. I don’t say this because I am a Tory. I support the Tories because I think they have the right plan.

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The Bush-Era Tax Cuts Stay. Wrong Call.

When the Guardian reports on President Obama’s cave-in over the Bush-era tax cuts by saying…

Paul Krugman, the Nobel economics prize winner, called on Obama to stand firm against the Republicans’ “tax-cut blackmail” which will cost the US treasury $4 trillion in revenue over the next decade and prompt a “major fiscal crisis”.

they’re quoting an “economist” whose long-since abandoned serious research and become instead a parody of himself. The fact is, Krugman has worked out that there are an awful lot of people for whom no taxes are high enough (especially when applied to someone else, usually “the rich”) and neither can spending ever be high enough, and having a Nobel Laureate pander to their prejudices pays rather well. As he recently argued that the deficit was not big enough, to suggest that NOT RAISING TAXES which is what not allowing the Bush cuts to expire amounts to, is fiscally catastrophic when you’ve been arguing for a far higher level of Government spending funded by borrowing, Krugman is dishonest at best. The reality is more complex.

The jury is still out on whether “Fiscal stimulus”, using government spending to kick-start the economy by boosting demand, is possible at all outside the “automatic stabilisers” of welfare provision. But because most people are utterly ignorant of economics, they think state borrowing is a magic money-tree, which means you don’t have to tax in order to spend, this allows politicians who should know better to call state spending over and above that received in tax “investment” in the boom and “stimulus” in the bust. These are big, important-sounding words that make it seem that insane profligacy is backed by some proper economic thought.

Such “stimulus” can take two forms tax-cuts and state spending on services. Whilst keynes argued for the state to use slack demand in the economy to build roads and public works (a position close to coalition policy…) in practice, the neo Keynsians argue that it’s the borrowing that puts money into the economy, by increasing demand. This frees them to spend on their priorities unconstrained by tax reciepts which are rarely roads and public works which actually benefit joe ordinary, and instead consist of make-work schemes for a client state. Because this spending is of marginal utility, people are not better off in the long-run.

The arguments in favour of tax-cuts as stimulus are slightly stronger: by leaving the money in peoples pockets, some is spent on things people find worthwhile (ie NOT TSA Crotch-Fondlers and Diversity Outreach Coordinators), generating VAT and sales taxes and cycling through businesses leading to an increase in corporation tax. Some of it is invested (actually invested in the hope of an above inflation return as opposed to “invested” in public services) in businesses leading to extra employment, raising income tax receipts, stamp duty and CGT receipts, should the investmet go well. Some will be invested in Government bonds, which has the effect of lowering the interest rate paid by the Government. Of course, whether this increase in other taxes as a result of the tax-cut is greater than the “cost to the exchequer” is moot. I suspect, in the long run generally a well-designed tax-cut (ie not the ones Obama has just extended) may pay for itself in extra growth generated as explained above, in the short, run they just increase the deficit, with exactly the same effects as extra spending.

The absolute size of “the state” is not important here (even if I generally favour a smaller one), nor does the form the stimulus takes, extra spending or tax-cuts matter a great deal. What IS important, however is what Krugman himself once derided as “the old-time religion of sound-money”. Something the Republican right has abandoned with unfunded tax-cuts, and the British Left has never thought about in the first place with its insanely profligate love of ever-higher state spending.

Politicians risk stagflationary catastrophe (if they’re lucky…) by running these huge deficits, and it matters not whether it’s spending or tax-cuts which did it. The effect of deficits is the same – inflation as money is printed, high interest rates as the bond markets lose confidence; high intereset rates potentially cause the economy to stagnate, leading to currency weakness, raising the price of imports and effectively making people poorer. Furthermore, people save to offset future tax-rises and use artificially low short-term interest rates to pay off debt, negating much of the effect of the “stimulus”. So there’s not much if any extra growth in the economy for a great deal more debt hanging around the tax-payer’s neck. The way Governments spend money in practice means the tax-payer hasn’t even got good infrastructure for all that debt, which MIGHT have led to higher growth because extra state spending is often, in effect, like paying men to dig holes and fill them in: work of no utility at best. Leftists like this because they like lots of lovely government spending, and because, in the UK at least the neo-keynsians and leftists are the same people, the “stimulus money” gets spent on diversity outreach coordinators and assorted prod-noses, who actually hold back economic growth in a sea of red tape. In the US the punk-keynsians are on the right so the stimulus money is spent on more prisons, TSA crotch gropers, expeditionary warfare and the “war on drugs”, crippling the country in pointless security theater. Does any grown-up think this spending increases utility in the economy?

Whether it’s tax-cuts or spending increases, deficit spending doesn’t work to stimulate the economy beyond the Automatic stabilizers, especially in the long-run. The message to politicians is simple: Don’t cut taxes if you’re not going to cut spending. Don’t raise spending if you’re not going to raise taxes. In economics, there is no such thing as a free-lunch. Whether you favour a big state or a small spending MUST be paid for. Small deficits in a recession are fine – no-one’s suggesting that the budget be in balance every year, but deficit must be matched by surplus in the good times. And that happened under those much derided and much under-rated politicians: John Major (and Gordon Brown, for a couple of years, until he abandoned TORY spending plans, which is why I don’t give him credit) and Bill Clinton (how clever of him to hide unpopular fiscal sanity by shagging a fat lass)

So last night, Obama took the easy option and gave into the Republicans over Bush’s tax-cuts, and already American debt is falling sharply on the news, heralding higher interest rates for all, which will negate much of the stimulus effect, as millions pay more on their mortgages. Obama wasted all his political capital on futile Health care reform, and had none left to fight the Republicans where it matters. He seems to neither know, nor care about the danger of a big deficit. Indeed, he’s unwilling to cut spending, and appears to welcome a deficit as “stimulus” so he’s as much of a stupid Punk Keynsian as Ed Balls. He wants to Spend, Spend, Spend on Government programs. But like all politicians, he won’t ask the voter to pay for it – he may be able to blame the Republicans for half of the problem, but that’s a political call; he’s demonstrated his priorities. If you beleive in “stimulus” why not cut taxes as you raise spending? Politically, it makes sense: The voter’s kids, the poor dupes who are going to pay for it all eventually, don’t have a say. Of course America is a big, rich economy so the wheel will come off a long time after he (and Bush, who it must be remembered caused the problem in the first place) have left office.

Obama, the politician who entered office on a wave of Optimism not seen since JFK has failed to stand up to a recalcitrant congress and within two years become, fiscally at least, a nightmare love-child of Bush Junior and Gordon Brown. It is debasement of the currency caused ultimately by unfunded “bread and circuses” for the mob which eventually did for the Roman Empire. Unless we return to “the old-time religion of sound money”, and stop taking listening to that dishonest purveyor of pretty lies, Paul Krugman, western civilisation is doomed.

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Gordon Brown: The UK’s Saviour?

Is there anyone who still thinks it would be a good idea to abandon Sterling and join the Euro? Of course we euro skeptics are enjoying saying “I told you so” to all those who thought disparate economies would all suddenly become Germany simply by adopting the D-Mark. For that is what the Euro is – the D-Mark, and if your economy is running up too fast with unsustainable asset bubbles and construction booms (Spain, Portugal and especially Ireland) then you cannot use monetary levers to calm your boom, unless Germany is too, which means the bust, when it comes is especially painful. Ireland is a case in point. Having lost control of the monetary levers, they lost control of their economy.

Ireland ran a surplus in 1999, 2000, 2001, 2002, 2003, 2006, and deficits in 2003, 2005, 2007 so from 2002 to 2007, during the boom, the Irish budget can be said to be broadly balanced, erring on the side of a surplus. Whereas Britain’s deficit was a direct result of idiot policies by a spectacularly venal and incompetent government, Ireland’s was due to a collapse in tax revenues as the boom came to an end and was replaced by an epic crunch. Tax revenues fell from €47 bn in 2007 by 30% to €33 bn in 2009. Expenditure of €41bn in 2007 rose by a modest 9% to €44bn in 2009. Financial services and construction, mainstays of Ireland’s (and Britain’s) boom were especially hard hit.

Spend, spend spend.

Compare this with the UK where tax revenues from 2007/8 to 09/10 fell by 9% whereas expenditure rose by 16%. Remember Britain was running a Maastricht-defying deficit of 4% of GDP in 2007, prior to the ‘credit crunch’. Despite this the response to the crisis was keep spending. Our deficit is as a result of spending. The Irish, a collapse in revenues.

The Irish Government were persuing a reasonable, low-tax, high growth strategy with a balanced budget. Reganomics, this was not. Of course they were unable to do anything about thier boom, nor were they able to devalue their way out of the bust: the Euro remained stubbornly high hurting the Irish badly during the bust. The bust was as bad as it was because for a decade, the Irish economy was subject to inappropriately low interest rates: The bigger the party, the worse the hangover. What happened to Ireland was EXACTLY what the Euroskeptics said would happen to the UK were we in the Eurozone, and for the same reason: Our economy is not aligned to that of Germany.

As it happened, we had an idiot chancellor, who spent a decade firehosing money unsustainably at the public sector, running insane deficits at the top of a boom; but because we are a large country able to borrow in our own currency, and with one of the few flawless track records in repaying debt left in the world, the Government got away with it. Imagine if we were borrowing in Euros. Imagine if we couldn’t devalue our currency in responce to a catastrophic financial crisis.

Leftists will look at that data and conclude, self-servingly, that it was the “stimulus” (by which ‘punk keynsians‘ mean ‘a big deficit’) which kept Britain’s economy, broadly afloat. The fact is that confidence in the UK government’s ability to maintain its AAA rating hung by a thread in 2009, and this was maintained largely due to the expectation of a Conservative victory in the May 2010 election. UK bondspreads were correlated to polling numbers. Had the Labour party won, the markets may have lost confidence in the Government’s plans to bring the public finances under control; there would have been a run on the pound, interest rates would have risen sharply and people would be feeling more like Ireland now, and less like a country pulling steadily out of recession, as Britain is. Where the multiplier effect of government spending works is in a gold-standard country with a small state. In Gordon Brown’s UK the state was already consuming half of GDP, and was already crowding out private sector employment. Ricardian equivalence and the lack of availabitily of credit saw to it that consumers (70% of UK GDP) snapped their wallets shut and deleveraged at an astonishing rate during the crisis. There was therefore no overall stimulus from Government spending, not in the UK, where the effect was more likely to be negative, as people hunkerd down and waited for the inevitable tax-rises. Extra state spending PREVENTED an equal and possibly greater amount of private expenditure.

The “stimulus” didn’t save us; the pound’s moderate decline in 2007-09, the continued confidence ability of the British Government to borrow and repay in its own currency saved the UK from a catastrophic financial crisis. We euroskeptics were right, and you federasts were wrong. Keeping the UK out of the Euro will remain the only positive contribution the Rt. Hon. Dr. James Gordon Brown (Ph.D from Edinbrugh on James Manxton & the History of the Labour party) made to his country in a carreer of self-serving ambition, bullying, hypocrisy, willful ignorance, arrogance and socialist lunacy. The real reason for Brown’s opposition to the Euro is probably control freakery: he just did not want to giva anyone else a say. History may just be kind to him for his right decision for the wrong reasons, but it will have to have forgotten his insane (and almost certainly corrupt) fiscal recklessness by the time it does.

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Labour’s New Leader


So, Milliband minor has pipped Milliband major to the Labour leadership post. And many some a few a tiny handful of people are interested in my opinions on the subject. For the fact is even I am not interested in my opinion on Labour’s new boss. Anyone who thinks they know what this means for the electorate, is lying. But as this isn’t going to stop pundits from all parties and the commentariat, I’m going to guess what this means.

I suspect that Labour will unite under Milliband minor. But this was always not going to be a problem. Labour’s tribal psychology suits opposition. They’re idealists who are quickly revolted by the necessary compromises of Government. They have united quickly around the Balls/Brownite position of opposition to “cuts” under all and any circumstances. And I don’t think “red Ed” will change that. Perhaps Milliband Major would have led the party to come to terms with the need to scale back state spending, but he would have been resisted every step of the way if he did. So the choice for the leader is either economic insanity and party unity OR a reasonable appeal to the electorate and a decade of infighting. They’ve gone, sensibly for unity for their decade in the wilderness.

Now Labour is riding relatively high in the polls. This is for a number of reasons: first the regular coverage granted to the Labour party election helps. Who’s on the news gets a polling boost. Secondly the BBC endlessly describing the cuts as “painful” helps sell the Labour “cuts! Waaaaa!” narrative. Opposition to cuts from the union Barons can coalesce around a leaderless Labour party, who at the same time provide no target for the Government to shoot at. Finally, freed from the pressures of Government, Labour politicians can say what their supporters want to hear and this has led to an increase in membership. The Labour tribe is much happier in opposition to the EEEEeeeeevil Tories than it ever was in Government.

One thing I always notice is that Labour party politicians talk of their party as if it’s the country. Only Tony Blair was able to shake this habit, and he’s reviled in the party. Ed Milliband may talk about “supporting the squeezed middle” but that middle has not forgotten that the previous leader saw them as pips to be made to squeak. He then immediatley goes on to promise a life-time of higher taxes to that “squeezed middle’s” children.

Nevertheless, I suspect that the Labour party will soon get sustained 40% plus polls. I suspect there will be a “Noo Ledah” bounce as there was for the God-awful shit-bird, Gordon Brown. And Millibrother minor is nowhere near as gut-wrenchingly dreadful as the one-eyed son of the Manse. But there is a LONG way to go to the next election, and Ed Milliband is not a politician in the same class as Tony Blair or David Cameron. With his election, The Coalition will have a target to fire at, one who wrote the manifesto which propelled Labour to its worst performance since 1982. Finally the cuts will be nowhere near as “painful” as the Labour party and the trolls in the public sector unions are trying to make you believe. The Labour tribe may believe that the only growth possible comes from public spending, but private sector profitability is rising, demand is following business confidence up and the Private sector will, by the next election be shouldering the burden of growth in salaries and employment that has been bourne by the tax-payer for most of the last decade, to theextreme detrement to the country’s finances. The Labour tribe’s (in which I include the BBC) promises of “pain” will not be matched by people’s experience of the recovery from Brown’s fiscal insanity. I suspect Labour will enjoy a few months or a year riding in the polls, but as the election approaches, and the economy improves, the Electorate will be asked to choose between David Cameron, and the Ed Milliband, and the Tories will win an electoral mandate to Govern alone, even if they then choose to continue in coalition.

Labour pundits will talk their own book, and talk their man up, but the habits of opposition are already too entrenched in the Labour movement. It is, after all, where they belong. The Unions’ strikes will be the mud that sticks to Ed Milliband, who is already being described as “the Unions’ choice”. The only predicition I will be confident to make about the new leader is that Ed Milliband will never be Prime-Minister.

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Punk Keynsians

A phrase coined by John Redwood which I shall be using more often to describe the deficit loonies, and especially Ed Balls, who has expunged all my recent tweets mentioning him (I spent yesterday during a computer crash of our co’s systems trolling his supporters on twitter).

Anyway, Keynes believed that public spending could stimulate an economy, but only if a surplus was run during the boom. Of course that describes neither the USA nor the UK during this recession, so any ‘stimulus’ from massive deficits is offset by greater costs of borrowing, inflation, and the hoarding of capital against future tax rises. The deficit loonies should not be called ‘Keynsians’; to do so is to damage the legacy of a great economist. The money quote from John Redwood:

In the UK Mr Ed Balls has warned that there could be an economic hurricane hitting as a result of the Coalition government’s “cuts” in public spending. In the US Ben Bernanke has pursued low interest rates and quantitative easing as the President has run very large budget deficits. Despite this, the word is that the growth reported for the second quarter of 2010 is about to be revised down substantially. Ben and Ed have some explaining to do. Why did Germany grow the fastest of the major western economies in the second quarter, when they were running a relatively low budget deficit and announced spending cuts? Why did the Uk record reasonable growth in the second quarter when Labour had already legislated to halve the budget deficit,imposed a range of tax increases and spending cuts to capital spending and the Opposition made clear its intention to press on more rapidly with deficit reduction? Why didn’t the combination of QE and a large deficit with no immediate plan to cut it boost the US economy to the top of the pile?

Ed Balls is an idiot, and a disgrace to parliament. He called deficit spending ‘investment’ during the boom, and ‘stimulus’ during the bust when it was what it was: reckless, spendthrift lunacy for short-term party advantage.If socialists could reconcile themselves with markets, as have the ‘left-wing’ countries of Scandinavia, and with sound money, without which no German would get elected, then perhaps their redistribution policies might work. But simply shouting Banzai!-like for ever more state control, top down management and ever more deficit spending means that Labour will always, always ruin the country.Ed Balls is by far the worst of the leadership contenders. The Millibrothers are plausible, if slightly risible. Millibrother Major will probably play best in the county, Minor will better unite the Labour tribe. Balls however represents the worst of the Brown regime: top-down bullying, authoritarian, bureaucratic socialism; unleavend by humanity and compassion and motivated only by Hatred of the Tories. Labour should be ashamed that they’re even considering him as an MP, let alone leader.Ed Balls is Grima Wormtongue to Gordon Brown. If Labour is to survive as a political force, then please let it be under someone less hateful and blinkered than him.

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