Evanomics

I agree with Evan. It is very unhealthy for the UK government to borrow when the economy is in a so-called boom. However, this is no usual upturn. It is based on credit and psychology. If we were ever to employ real economics, i.e, cutting one's cloth according to one's means, what on earth would happen?

Alistair Darling on the Politics Show said that the Tory policies on Inheritance Tax and Stamp Duty were unsustainable because they would have to borrow rather than raise the cash from Non domiciled people.

He claimed this was not acceptable.

Accordingly, if the pre-budget statement requires extra borrowing he will be guilty of precisely the issue he claims his oponents are guilty of.

It is up to the likes of you to hold him to account.

NuLab's policy has been to take a big punt on the same basis as Northern Rock - and the end result will be the same. The BoE has never been independent as most of the MPC are Treasury-appointed and, knowing what is good for them, have kept interest rates about 0.75 - 1% below where they should be. Most dreadful was the decion to push rates below 4% (the UK liquidity trap). This pumped consumer (private) demand with cheap credit and poured petrol on the flames with rising asset prices, which made consumers even more confident that they could cope with the debt.

Likewise, the Government knew it would be borrowing over the economic cycle, despite the mirage of the Golden Rule (fatally holed when the start of the cycle was moved back to include two Tory surplus years), but could not tell the truth about that. At the same time, PFI has just taken large additional borrowing off-balance sheet (known widely as Enronomics).

The overall result is like all failed authoritarian regimes - they ramp up demand initially in the hope that gropwth will cover the borrowings, but due to frictions in the economy, the additional pay for workers does not all go into demand, so the tax revenues do not materialise.

GB will regret not having kept quiet, let the Tories rip themselves up and then gone for an election.

Evan says "the new chancellor might wish his predecessor had sorted out the borrowing earlier on"

The 'NEW' Prime Minister and 'NEW' Government have arrived with a 'NEW' brush to sort out all of the problems created by the 'previous' 10 year government !!

Does that mean the 'NEW' Chancellor is going to stand up in Parliament and deride his predecessor ? (but don't mention his name !!)

"the chancellor was overly-optimistic by about 13 billion" - No just move the 'goal posts' and everything will be fine except the rest of us in the real world will have to live with the consequences !!

Why isn't there the big media condemnation of these figures not adding up (including the PFI loans which are off the balance sheet) but a huge outcry that the Conservative IHT plans might be half a billion out?

Brown and Darling not only copied the Tory ideas on raising Inheritasnce Tax thresholds but showed themselves to be hypocrites in the process.

The government argued that Tory plans were unacceptable as they would lead to a rise in government borrowing and the transcript of BBC's Politics Show last Sunday is evidence of this. Yesterday, Darling lessened the burden of Inheritance Tax and, guess what, concurrently announced that government borrowing would rise. Blairist spin and lack of trustworthiness continues to be the order of the day for Labour.

Evan, much of the increase in taxation and borrowing has been spent on the NHS and education, but it's a constant thorn in the side of the government that the public can't see a revolutionary change in service delivery. Are there any statistics that illustrate how much of the increase in funding went into creating administrative jobs and increasing public-sector wages?

As you said in your front-page article, further increases in performance need to come from improvements in efficiency. So that we can get a global perspective on this, how much do other countries spend on key services such as health and education and what do they get for their money in comparison with the UK?

Note how the tories interest in the wealthiest people and their cloud cuckoo land finances has forced a move on IHT - requiring borrowing where it wasnt required. Apparently the haves are now the needy. The conservatives and the media should be ashamed of themselves.

"However, this is no usual upturn. It is based on credit and psychology."

What rubbish.

All upturns are based on credit because all our money is credit and all borrowing is based on psychology. It's been this way for hundreds of years, as long as we've used Fractional Reserve Banking.

If we (attempted to) pay back all of our debt, all of our money would vanish in a puff of nothingness. Ooh look, instant depression, just add ignorance for full effect. The scary thing is these people are allowed to vote too.

You want to get rid of boom & bust? Switch to Full Reserve Banking or some similar monetary system.

Evan,

do you really believe they will get away with all this borrowing both in the public and private sector and just 'grow' their way out of it? I can't believe someone of your perspicacity can be persuaded by this line.

Look at what is happening to the banks in the US who have proposed a 'Master Liquidity Enhancement Conduit' 100bn$ fund in which to park all this debt. Stock prices of Citigroup and its peers are going down wevery day becasue no-one believes this stuff will be worth anything wherever they park it.

It may be one of the first economic lessons that the Governmanet never pays off the National Debt but it's not quite the same when it comes tothe private sector. Nobody having their home repossessed with -ve equity is allowed to plead this cause; they are sent the bill for the difference and spend the rest of their live paying it off and not consuing as a result. The alternative is to declare oneself bankrupt and we're back to the argument that these loans are worthless. Both scenarios will now play out to varying degrees and neither the Prime Minister nor his Chancellor can escape all of the blame.

Don't forget that the end of the smaller, Thatcher and Lawson boom, took four or five years to unravel. All of the same clinging on to hope that we could grow our way out of these problems took place. ALl of the same insurmountable hubris was exhibited then that is being exhibited now. Please think of the parallels.

We are moving into a very rough patch with the Gold price over 750$ and oil over 87$ it is a racing certainty that inflation will pick up and the Prime Minister and his Chancellor have some very blunt instruments to deal with it.

Command economies always go wrong in a much more spectacular way than market driven economies (look at the fall of the USSR) and I'm afraid whether we like to acknowledge it or not we have been living in one for the past ten years.

I await your reply with interest.