Defaulting banks - where will it stop?

[David Guyatt]

The "market" is trying to scare Brown's government into cutting spending, because, I imagine they believe they can clean up on the immense volatility this will cause.

It's quite sickening really. Not content with being saved from disaster, unable to say thank you, or even now acknowledge the self invoked and ruinous plight they brought on themselves, they now want to ruin the economy of those who saved them.

It truly is time for the government to prosecute some of these buggers for they fraud they were involved with. But that's my wishful thinking. The government doesn't dare do that.

Joe Stiglitz, who I much admire, told Gordon Brown in a private meeting not to fall for this market bullying and that he (Brown) may even need to create another tranche of debt in the short term, in order to secure the long term security of the economy.

http://www.dailymail.co.uk/news/article-...lans.html#

More than 60 top economists write letter to DEFEND Darling's plan to delay spending cuts



By Gerri Peev
Last updated at 10:14 AM on 19th February 2010


Support: Alistair Darling's strategy has been dubbed 'sensible' by economists
More than 60 economists have rallied behind Alistair Darling's strategy to delay spending cuts for fear of choking off a recovery.

They warned that the Tory call for immediate debt repayments is reckless.

Two separate letters in today's Financial Times reject the Tory warning that Britain's triple A credit rating is at risk if the government does not start cutting spending this year.

The emphasis should be on returning to 'robust economic growth', says one letter, signed among others by five former Bank of England interest rate-setters and a string of academics who normally shun political debate.

It was organised by crossbench peer Lord Skidelsky, the biographer of economist John Maynard Keynes.

Another letter backing slow cuts is signed by Nobel laureates Joseph Stiglitz and Robert Solow. They call Mr Darling's plan 'sensible', warning that 'with people's livelihoods at stake, a responsible government should avoid reckless actions'.

The double intervention follows a letter from 20 economists - published in the Sunday Times - which backed Shadow Chancellor George Osborne's warning that the UK had to start tackling its deficit immediately.

Tories claimed that this represented an 'economic consensus' supporting them, but the new letters challenge this.

David Blanchflower, a signatory of one FT letter and a former member of the Bank of England's Monetary Policy Committee, last night quoted Keynes arguing in 1932: 'The voices which, in such a conjuncture, tell us that the path of escape is to be found in strict economy and in refraining, wherever possible, from utilising the world's potential production, are the voices of fools and madmen.'

The world was plunged into the Great Depression after politicians ignored his warnings.

Tories and Labour are sharply divided over when to implement spending cuts. Labour wants to halve the deficit in four years but will not start cutting seriously until next year.

The Tories have said they will start immediately.

The letter organised by Lord Skidelsky asks how 'foreign creditors will react if implementing fierce spending cuts tips the economy back into recession'.

The economists argue that the deficit increase in the last two years was unavoidable, given that the UK has just experienced the most severe recession since the Second World War, forcing emergency government action to prevent the economy 'falling off a cliff.'

Lord Skidelsky said this morning that too swift a reduction in state spending would jeopardise the recovery.

'What the Sunday Times economists failed to explain is how a cut in the deficit will lead to a revival in private spending when the economy is as depressed as it is today.
We do risk jeopardising the not very green shoots of economic recovery we have seen so far,' he said.

'What particularly sticks in my gullet is the assumption that economic policy should always do what financial markets want us to - the very same markets that got us into the current pickle.

'The well-being of our people is not necessarily the same as the well-being of bond traders and I think the balance of risks favours going on with the present policy until we have very clear signs that an economic recovery is under way.'

The letter backing the hardline Tory approach - headed by another former MPC member, Tim Besley - said that 'to be credible' a Government should eliminate the deficit in one five-year Parliament, rather than halve it in four years as Labour have pledged.

Former trade minister and ex-head of the CBI Lord Jones said today that economic policy should not be seen as a 'black and white' choice between cuts and investment.
'Everybody knows that what we want is targeted management of taxpayers' money and that means some cuts and some investment,' he told BBC's Radio 4 Today show.

'At the end of the day, markets want to see the elected leaders and their advisers, such as economists, know what they are doing, have a plan and stick to it. That gives confidence.
'That plan might be promulgated this year for effect next year or it might say we are going to do this bit this year in certain areas - keeping skilled people in work would be a good idea - but on other things, we are going to wait another year.'

TUC general secretary Brendan Barber said: 'Today's letters firmly reject the call for early spending cuts and warn that it could tip the economy back into recession.

'The UK deficit is the result of vital Government action to keep the economy afloat and prevent the levels of unemployment, business closures and repossessions seen in previous recessions.

'Premature spending cuts will send the UK spiralling into a double-dip recession, with mass job losses, lower tax revenues and an even greater deficit. Prioritising economic growth is the best way to get people working, businesses flourishing and boost investor confidence.'

THE 60 ECONOMISTS WHO SUPPORT LABOUR


Lord Layard, Emeritus Professor of Economics, LSE; founder of the LSE Centre for Economic Performance

Chris Allsopp, Reader in Economic Policy, University of Oxford and former member of the MPC

Alan Blinder, Gordon S. Rentschler Memorial Professor of Economics and Public Affairs, Princeton University; former Vice Chairman of the Board of Governors of the Federal Reserve

Sir David Hendry, Professor of Economics, University of Oxford

Sir Andrew Large, Former Deputy Governor of the Bank of England and former member of the MPC

Rachel Lomax, Former Deputy Governor of the Bank of England and former member of the MPC

Robert Solow, Nobel Laureate and Emeritus Institute Professor of Economics, MIT

David Vines, Professor of Economics, University of Oxford, and Fellow of Balliol College

Sushil Wadhwani, CEO, Wadhwani Asset Management and former member of the MPC

Lord Skidelsky, Emeritus Professor of Political Economy, University of Warwick, UK

Marcus Miller, Professor of Economics, University of Warwick, UK

David Blanchflower, Bruce V. Rauner Professor of Economics, Dartmouth College, US and University of Stirling, UK

Kern Alexander, Professor of Law and Economics, University of Zurich, Switzerland

Martyn Andrews, Professor of Econometrics, University of Manchester, UK

David Bell, Professor of Economics, University of Stirling, UK

William Brown, Montague Burton Professor of Industrial Relations, University of Cambridge, UK

Mustafa Caglayan, Professor of Economics, University of Sheffield, UK

Victoria Chick, Emeritus Professor of Economics, University College London, UK

Christopher Cramer, Professor of Economics, SOAS, London, UK

Paul De Grauwe, Professor of Economics, K. U. Leuven, Belgium

Brad DeLong, Professor of Economics, U.C. Berkeley, US

Marina Della Giusta, Senior Lecturer in Economics, University of Reading, UK

Andy Dickerson, Professor in Economics, University of Sheffield, UK

John Driffill, Professor of Economics, Birkbeck College London, UK

Ciaran Driver, Professor of Economics, Imperial College London, UK

Sheila Dow, Emeritus Professor of Economics, University of Stirling, UK

Chris Edwards, Senior Fellow, Economics, University of East Anglia, UK

Peter Elias, Professor of Economics, University of Warwick, UK

Bob Elliot, Professor of Economics, University of Aberdeen, UK

Jean-Paul Fitoussi, Professor of Economics, Sciences-po, Paris, France

Giuseppe Fontana, Professor of Monetary Economics, University of Leeds, UK

Richard Freeman, Herbert Ascherman Chair in Economics, Harvard University, US

Francis Green, Professor of Economics, University of Kent, UK


G.C. Harcourt, Emeritus Reader, University of Cambridge, and Professor Emeritus, University of Adelaide, Australia

Peter Hammond, Marie Curie Professor, Department of Economics, University of Warwick, UK

Mark Hayes, Fellow in Economics, University of Cambridge, UK

David Held, Graham Wallas Professor of Political Science, LSE, UK

Jerome de Henau, Lecturer in Economics, Open University, UK

Susan Himmelweit, Professor of Economics, Open University, UK

Geoffrey Hodgson, Research Professor of Business Studies, University of Hertfordshire, UK

Jane Humphries, Professor of Economic History, University of Oxford, UK

Grazia Ietto-Gillies, Emeritus Professor of Economics, London South Bank University, UK

George Irvin, Professor of Economics, SOAS London, UK

Geraint Johnes, Professor of Economics and Dean of Graduate Studies, Lancaster University, UK

Mary Kaldor, Professor of Global Governance, LSE, UK

Alan Kirman, Professor Emeritus Universite Paul Cezanne, Ecole des Hautes Etudes en Sciences Sociales, Institut Universitaire de France

Dennis Leech, Professor of Economics, Warwick University, UK

Robert MacCulloch, Professor of Economics, Imperial College London, UK

Stephen Machin, Professor of Economics, University College London, UK

George Magnus, Senior Economic Adviser to UBS Investment Bank

Alan Manning, Professor of Economics, LSE, UK

Ron Martin, Professor of Economic Geography, University of Cambridge, UK

Simon Mohun, Professor of Political Economy, QML, UK

Phil Murphy, Professor of Economics, University of Swansea, UK

Robin Naylor, Professor of Economics, University of Warwick, UK

Alberto Paloni, Senior Lecturer in Economics, University of Glasgow, UK

Rick van der Ploeg, Professor of Economics, University of Oxford, UK

Lord Peston, Emeritus Professor of Economics, QML, London, UK

Robert Rowthorn, Emeritus Professor of Economics, University of Cambridge, UK

Malcolm Sawyer, Professor of Economics, University of Leeds, UK

Richard Smith, Professor of Econometric Theory and Economic Statistics, University of Cambridge, UK

Frances Stewart, Professor of Development Economics, University of Oxford, UK

Joseph Stiglitz, University Professor, Columbia University, US

Andrew Trigg, Senior Lecturer in Economics, Open University, UK

John Van Reenen, Professor of Economics, LSE, UK

Roberto Veneziani, Senior Lecturer in Economics, QML, UK

John Weeks, Professor Emeritus Professor of Economics, SOAS, London, UK