Articles By John Smith

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Prime the fiscal pump whilst the debt tank is full of water!

I have to hold my hand up. Whatever brickbats I have to suffer in the future for this misjudgment, I do not agree with the fiscal stimuli that are going to be announced for the UK in a pre-budget statement next Monday. That is unless it is specifically and solely directed to the housing market; which it will not be. It matters not whether the quantum is £1, £1bn or the mooted £100bn. It matters not if there is a plan to recoup it. Having pumped huge loans into the lenders, the market should now take care of itself. The market must decide where things go from here, it always has and it always will. To throw money in terms of tax give-a-ways to a particular group of people in the certain belief that they will spend it, is madness. Actually it represents the root cause of the present disease, that is spend and borrow, spend and borrow, and sod tomorrow

Consider this tank of debt. In 1990/91, Government debt was 26% of GDP. By 2007/08, this level had reached 43% of GDP. But, this level does not include the "off-balance sheet" (see article No 10) Government borrowing which, according to the Centre for Policy Studies, and after adding the latest round of loans to and investments in banks, means that actually government debt is 127% of GDP. Now add to this the personal debt of the UK average Joe. Ten years ago it was 60% of GDP; now it is 100%. Thirdly, the banks themselves are much more highly borrowed than even two years ago.

And we intend to encourage people to follow the profligate practice of the Government and the big lenders in the expectation they will start buying houses and cars again. Mindblowingly stupid in my opinion and very, very dangerous.

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