Suli Shah, on CentreRight, has an interesting plea to save the economy by bold action. As I mentioned in the comments, it has the right tone but I am not so sure about the policy suggestions. I think it fails to recognise that, as Charles Moore says, "everything is different now," and that we need to change the system rather than save it as it is. Here is why:
1. He wants to reduce "the base rate to zero." - This is an option, but it does not address the underlying problem of bad debt that remains in the system. Interest rates at zero might encourage more lending, but inevitably it will perpetuate the lending of money to people and companies that should not be borrowing - this is the problem not the solution; we need to purge the system of bad loans and that takes pain. I would even advocate a self regulating interest rate tempered only by a stable money supply; how do you know that zero is the right cost to put on money? You do not and neither does anyone else. A zero interest rate will also encourage more borrowing from idiot consumers who will merely get themselves into more debt storing up greater problems in the future. We need level heads and stout hearts, not knee-jerk panic and perpetuation of the underlying weaknesses of our system. It will hurt, but if you stick your hands in the fire, expect to get burnt.
2. He also wants to send every tax payer a tax refund cheque and to double the tax free allowance? - Fine, but who pays for it? If he wants to do this by funding it through compensating reductions in other government spending then great; we should be doing that anyway. But if it is funded through more borrowing then we merely perpetuate the problem of reckless levels of debt. Debt, used in the right way for capital investment is useful but the way we use it today to hide balance of payments deficits and let people have things they cannot afford is obscene.
3. He also argues that "Labour did not cause the largest global economic crisis in living memory." - Yes they did, but in concert with other governments (who took a lead from the UK and US) running loose monetary policies and ignoring errors in the banking system. This vicious cocktail of expanding money supply and rogue banking practices was catastrophic. The inflationary bubble it caused, most keenly observed in the property markets, burst all over us and it was Labour that was on the end of the pump. If the public doesn't understand this then they need telling again and again and again until they do. Anything else is to capitulate to the bludgeoning Labour narrative that shifts the blame onto anyone and anything other than itself.
4. Finally he talks of telling "the hard truths," and how we are "going to limit the damage and eventually recover." - Quite right, but what does this mean? The hard truth is that we have been living beyond our means and a recession is inevitable, even necessary if we are to get it through our thick heads that if we want something we must pay for it from real wealth, not the fictitious wealth we call debt. And we can only limit the damage by not doing stupid things like vastly increasing government debt and reckless lending.
He is absolutely right in that "we are fighting for the very survival of our economy as we know it," but I do not want to preserve this deluded, fantasy economy. Indeed, the events of the last year are the reality telling us that it cannot be saved; as Charles Moore said: "everything is different now." We do need to take action, but not to save the economy as it is, rather to change it. All we need is a stable money supply, balanced budget, reduced debt and the humility to live within our means, and everything else will take care of itself.
God save the Queen and preserve Britain from stupid people.
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