Sunday, 17 February 2008

Well Done Darling

What a humiliation for this government - having to accept the inevitable of nationalisation of Northern Rock (according to the BBC some minutes ago). The government has mismanaged, but this they have mismanaged like no other. They were scratching around trying to find a buyer, even having Branson on a trip to China with our hapless Prime Minister - when anyone could have told them that the collapse in worldwide credit that brought Northern Rock to its high-risk fall was the same reason they could not raise money to create a bale-out. The government has massively increased public debt to rescue one small bank. Why did they not listen to Vince Cable, who foresaw the inevitable outcome and simply plan for it? The government cannot find money for this, that or all sorts, and yet it can for the wars it fights and suddenly could in huge quantities for this Newcastle based bank.

Meanwhile we head for a mirror image of the 1970s - rising (cost) inflation and restrained output, so that we enter a new form of stagflation. The answer to such inflation is not to try and wrench it out of the system, because this will but create an early 1980s all over again - which is not necessary as industry and business is, this time, reasonably efficient. In fact there is little in the way of successful manufacturing left, and communications means that many service industries go abroad too. This is why the financial system is in such turmoil - it redistributes money via Western ownership but not Western activity (except financial and the later end of the production-distribution chain) but relies on debt to keep up spending - when the actual medicine is the need to save. Do that and unemployment will rise sharply. This is the stagflation trap that we are in - there is no further room for manoeuvre.

Well done, Darling. Your boss knew when to move on - but as was said recently, the good staff player does not necessarily turn into the good overall manager. One takes researched decisions, the other takes quick choices and acts with decisiveness. Here he did not, and his new staff player has been overpromoted. Indeed the whole cabinet is a bunch of minnows to leave but one fish, the Gordon himself.

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