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Pretty big steps. Does the real Minsky Moment lie ahead?

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Paul Mason | 12:00 UK time, Sunday, 5 October 2008

"We are looking at some pretty big steps which we would not take in ordinary times but we are ready to take them..."

That's what Alistair Darling just told my colleague Andrew Marr. But what can these be? They have already agreed to trade private banking dirt for Bank of England gold, effectively, by allowing US student debt and credit card debt (judging by my stay in Ann Arbor, home to UMich, the two categories overlap) to be traded for crisp new sterling notes. They have already set up a National Economic Council. They have nationalised two banks and brokered the forced merger of a third.

I will now spell it out: I am not going to indicate sources and I view with a mixture of frustration and sympathy the fact that the major decision makers keep coming out with these coy indications. Further down I deal with the intellectual resources that could inform a more coherent response to the crisis, and why all these "comrade Hank Paulson" jibes are missing the point...

1) They are considering taking an equity stake in some major UK banks and financial institutions. I know this for a fact. They are looking at which "public sector bodies" could do this under the February 2008 legislation that nationalised Northern Rock.

2) They will have to cut interest rates. I asked several senior advisers to those who will sit on the NEC on Monday "what is the first item on the agenda"? Nobody could answer. Clearly under the Bank of England Act the government has the power to re-set its economic priorities and order the Bank to slash interest rates, Nothing quite so un-City of London will happen: once the political pressure is high enough Mervyn King will find a reason to do it. Despite the cries of pain from the last inflation hawks in Fleet Street I suspect they will do it fast.

3) Since there is a danger that rival, piecemeal European banking system bailouts will leave the UK at the back of the queue for Asian and Middle Eastern capital needed to recapitalise the banks, they have to be ready to "do an Ireland" with banking deposits even though they think it is madness. By the way, apropos of some crazy blogging suggesting I am advocating this, I am not. The LibDems are advocating it so, as its a matter of party politics I am not allowed to have a public view on it here. But let's put it this way: small Eurozone economies declaring their bank deposits "safe" is about as logical as Wigan Metropolitian Borough Council doing likewise. The end result is going to be that everybody is back to square one, with their savings "guaranteed" by governments that have no money and, now, have to pay higher interest rates to borrow it. In any case Darling has already indicated: every time a bank has actually failed the government has stood behind all savings. 98% of deposit accounts are, as of Tuesday, safe. (But I ask, why not Monday?)

4) The Icelandic collapse threatens to take down several UK businesses. However there is a bigger systemic problem. If you combine Iceland's effective bankruptcy with the nationalisation of Hypo in Germany this morning, and of Fortis on Friday, then a wave of defaults is heading for any banking system in the world that is exposed to these latest casualties. And since London is the rip-roaring capital of international finance, well, stand by your Bloomberg machines on Monday.

5) The E15bn release of funds from the European Development Bank is the most significant move of the weekend. It is intended to provide short term liquidity for small businesses. I am not clear right now how it will avoid being swallowed up into the big banks' liquidity cushion. Answers please.

6) There is one thing they can do, but I know for a fact that some policymakers are nonplussed by the prospect. It's called quantitative easing. The "for dummies" summary is: the Bank of England starts printing money. It's a different deal from the usual mechanism by which central banks try to counteract a slump, which is cutting interest rates. Why? Because you can only cut interest rates to zero and then they stop working. That is why the only time it's been used by a major central bank was in the case of Japan in 2001 when short term interest rates were near zero. However some uber-Keynesians are now arguing it has to be done before a deflationary spiral kicks in. One of the most frightening indicators of the past few weeks has been the rapid fall in the broad money supply - "quantitative easing" is a kind of monetary version of Keynesian pump priming in which, instead of building bridges to nowhere you simply print money. This would be anathema to those who run the financial architecture today, but I expect some academic discussion of it around the fringes of the MPC soon.

7) Other stuff: well the majority of banking crises are solved by so called "regulatory forbearance". That is governments waive the banking regulations and let banks overstate the amount of capital on their books so they don't have to go running to the markets to find new capital (there is none around right now). This would be tough for Brown and Darling because they are big supporters of the Basel II international banking regulations, and have been part of the tightening of those regulations that happened, ad hoc, after the first credit cruch hit in August 2007.

8) One statement on Friday will bear further scrutiny: that "financial stability issues are addressed through the existing standing tripartite arrangements". Well the "arrangements" between the Bank of England, FSA and HM Treasury were not enough to prevent two banks going bust and UK competition law having to be suspended. If, as the government wants, there is to be a cross-cutting and holistic response to the various aspects of the crisis, how can this be done if it's all farmed out to three bodies that are still trying to decide who does what, and with - in the case of the FSA - a new managment still repairing the failures of Northern Rock and B&B? Well read the statement again: the "stability issues" will be dealt with this way. But the government's economic policy, as outlined in recurrent remit letters to the Bank, is stability and growth and full employment. This raises the tantalising question: could the government now take charge of a growth-oriented economic policy which removes responsibility (and as some in the financial world would see it the taint) from the Bank of England of having to chuck money at the situation (which its leadership has plainly felt queasy about at every turn)? Could it turn the Special Liquidity Scheme into something more permanent that in fact supports, overtly, the solvency of the banking system? Could it do what Sir James Crosby suggested and underwrite the entire mortgage market with government debt? That, the bank bosses know, is an urgent question. Let's have a clear answer.

9) Finally it is all being briefed to the papers that on Wednesday at a lecture (again, why not Monday in parliament?) Alistair Darling will signal the changing of the fiscal rules so he can raise debt to above 40% of GDP. Banking crises, says the recent IMF study, always have a high fiscal cost and we are about to find this out.

10) There is a massive regulatory challenge here: we have a commerical banking system allowed to be monopolised by public fiat on 17 September; we have large amounts of taxpayer money at risk. Designing the new regulatory system will be difficult because the whole of the dodgy lending, offshore hedge-funds etc that has brough us to this point was effectively designed by lawyers and accountants to get around the Basel II regulations. And it will take time. But the current light-touch regulatory regime cannot stand scrutiny. To give just one example: how is it right that B&B savers can earn 7% on a one-year investment when there is no risk to their money? If I, the taxpayer, am bearing some of that risk then I want some of the reward. Thus there is a capitalist, freemarket, Smithian logic to the demand that B&B's management becomes subject to public participation and has severe limits on its profitablity and competitiveness imposed: if it's right to rein in the Irish banks from aggressively touting for business, should it not be the same for British B&B? The logic of this is that parts of the banking sector become socialised. Actually part already is: National Savings and the Post Office Savings Bank - and these two institutions are, anecdotally, doing a roaring trade, the same as gold bullion offices are. Even if you don't officially socialise them, the banks are already on the way to becoming the new utilities - heavily regulated and prevented from reaping super-profits from their uncompetitive position.

In summary: with many debts socialised, some banks completely socialised, and the taxpayer acting as lender of not even last resort but right now first resort - could the ownership and control be socialised without imposing huge stagnatory factors on the economy; what would be temporary and what permanent; and what kind of new regulatory system will emerge?

Here's a final thought for any minister or permanent secretary mugging up over a bacon sarnie this afternoon in readiness for the first NEC meeting. Or for opposition politicians getting ready to respond to Darling's "pretty big steps". By now you will have heard the word "Minsky". Hyman Minsky was the man who explained why stuff like this happens. His explanation of the role of the financial system in creating crises on a scale of 1929-31 is virtually a handbook in US banks and hedge funds, just as surfers like to study shark fin ready-recognition guides.

But very few have studied his policy prescriptions. I will throw just one at you, from his book John Maynard Keynes, just republished:

"As socialisation of the towering heights is fully compatible with a large, growing and prosperous private sector, this high-consumption synthesis might well be conducive to greater freedom for entrepreneurial daring than is our present structure". (Minsky, HP John Maynard Keynes, New York 2008, p164-5)

We've come to think of the "Minsky Moment" as a catchphrase for the crisis. But his solution, a more stable form of capitalism with a different mix of private and social ownership, is what politicians seem to be grappling blindly towards (see this recent Levy Institute paper for a very readable explanation).

The book, as I say, is worth a read. I am not advocating any specific policies - but I do think the job of journalism is to go beyond hand wringing and the ever decreasing circles of received wisdom which is making some UK newspapers virtually unreadable.

Start with the final chapter if you are phobic about algebra and graphs. And hit the comments button.


  • Comment number 1.

    in another oracle article called Libor gone crazy we read

    ..It is much like 1982, when every major US bank thought it was a good idea to loan lots of money to Latin American countries. It was a most profitable business, right up until the countries decided to default. Then every US bank was more than just technically bankrupt. In a mark-to-market world, every large US bank would have collapsed. It would have been the end of the world as we knew it.

    What did they do? The Fed let the banks keep the loans on their books at face value. Over time, they worked their way through the debt, making enough money to be able to write down the loans. That was done simply to give the banks the ability to buy time...

    the options are few.

    the best for HMG is the Buffet model. Banks crazy for a cash fix are 'taxed' by the Treasury through Buffet type deals that sees the public offering long term debt for short term debt at very good prices.

    one area to be looked at are the british tax free zones [channel isles etc] that are not just tax free but rule free with nice sweetners like no borrowing requirements or audits needed. You can't refloat a ship if there are people still making holes in the hull?

    the basic maths is the deleveraging has to take out 50% of the market because that is what was supported by short term funds. Main st will have to refinance its 3 month loans soon. Where is that going to come from when the banks are occupied with playing musical chairs as the music gets quicker and with increasingly fewer chairs.

    i'm sure, as a contingency, in whitehall there are def con 3 type proposals that we will only learn about in 30 years.

    after that we get into 'a national day of prayer' territory.

    i'm not so gloomy. It maybe a good ticking time bomb thriller and it may result in 20 years of quasi state supremacy but i back the self interest of the financial oligarchy to, one way or another, keep their golden rice bowl working. They always have.

  • Comment number 2.


    Cosmology employs a lot of scientists who create a complex mythology within the entrenched guess of a Big Bang universe. They all earn a living inside the lie, and few will gainsay.

    When Douglas Adams had the giant computer pronounce '42' as 'the answer' it also remarked that no one seemed to understand the question.

    As an outside observer of the Money Mess, I hold the view that global money, while it might, or might not, have it '42' the 'question' is understood by no one. But like the cosmologists, it pays more to act as if you do than to challenge the edifice.

  • Comment number 3.

    To use the vernacular, this is doing my head in. I'm a reasonably intelligent, articulate member of the professional middle-class. I'm trying my damnedest to follow events as they unfold. I read all of the credible commentators' blogs: yours, Peston, Conway, Halligan, Roubini etc. With each passing day I become evermore convinced that out political elite have not the faintest idea how to handle this. They are permanently on the back foot, responding to each new crisis as it slams into them.

    The underlying sub-text is that we're witnessing the end of debt-fuelled economies, themselves predicated on endless economic growth, in turn predicated on an infinite supply of cheap energy (ending now = the REAL problem). The financial system is collapsing around our ears and our politicians' response is to, er, jack up the debt (print money) to almost unimagineable levels as if, somehow, this will solve the problem. Are they kidding?

    As a layman, I simply cannot believe what's going on here. The potential for economic and social catastrophe grows with each passing day as our glorious leaders stumble around, mouthing ludicrous platitudes about 'doing all that it takes ...' (= print money and spray it into the economy) whilst all along not having a clue about what is really needed to avert disaster (if, indeed, it's not too late).

    My simple mind says that, despite the misguided efforts of our politicians, bankers and others, the global financial system is fundamentally flawed and it WILL, therefore, collapse; it WILL just fall apart. My concern is that the social consequences are going to be dire. Everyone is scared to death of talking about a depression.

    At this rate, we'll be talking about another Dark Age soon if somebody doesn't step up to the plate and propose some credible and workable solutions to this unholy mess.

  • Comment number 4.

    'could the ownership and control be socialised'

    of what - are you suggesting??

  • Comment number 5.


    If Mandy was being brilliant in trade at the EU as the Money Mess gathered itself to pour forth, and if he is now so perfectly equipped to tackle the aftermath, WHY DID HE NOT SEE IT COMING and warn the Labour Family to which he has allegiance?

    See #2 above for the answer.

  • Comment number 6.

    Why not just continue the Special Liquidity Scheme and either suspend 'mark to market' or accept that the market does not give accurate prices on certain assets in times of stress?

    It now appears that when Mr Darling made his derided interview with the Guardian about the worst conditions in 60 years (I thought he was bonkers at the time), he knew what was coming. Makes you wonder what else is on the way.

    That said as Paul said about January, we are probably past the point where fixing the financial system will do anything other than mitigate a very very nasty recession.

  • Comment number 7.

    Your colleague Rob Peston believes it might be the setting up of some new state pension scheme which will exchange public money for good cheap stock.
    Couple of points. I just finished reading Galbraith on 1929, some parrallels. One was the end of classical economics as any guide to state action.
    Second, a collapse of money in circulation you alluded to above, because of banks hoarding. This should lead to recession and deflation: fall in prices, wages, unemployment, no investment etc. remember the crash was spectacular in 1929 but took several years to reach its bottom 32-33.
    The way out of it was actually for the US state to intervene and put tariffs on goods to artificially raise prices, could a globalised world put up with this?
    Third, printing money. classically a recipe for inflation although the other choice of not printing may be worse. But there is a serious point that JKG said about the measure of money, which is now far more than notes and bank deposits, it includes all that fictional stuff that got us in trouble in the first place – the state doesn't and can't control that. Any expansion of the money supply would have the danger of sparking off another credit bubble.
    Deflation or inflation: choose your weapons.
    BTW, recent events should consign that Kondratiev long wave adjustment stuff you recently spouted to the bin, the real world rarely fits 50 year cycles.

  • Comment number 8.


    The second and third paragraphs (below) in the No 10 announcement, look a bit shrill to me. With all this global override of national good order, you might expect J Gordon Brown to have concentrated on creating a GLOBAL council! I detect a double dose of 'wasn't me guv'.

    "Britain is facing a period of immense economic challenges, which are global in origin and affect the work of many Government departments."

    "Financial instability as a result of conditions in global financial markets, high and volatile global oil prices impacting on household fuel bills, and high global food prices have changed the economic landscape."

  • Comment number 9.

    I do not have anything more than a basic grasp of economics and I will leave debate to the more erudite posters. I do, however, have a firm grasp of constitutional matters and political science.

    The government appears to be treating parliament and - by logical extension, the British people - with something verging on contempt. As you rightly point out, the right and proper place for Darling to make major policy announcements in the House, not some lecture room. It appears, as you wrote recently, that we are heading towards lots of orders in council which is government by diktat. This is in marked contrast to the States where the Paulson package has had to be redrafted twice in order to get it past law makers.

    There is a real and disturbing disconnect between the conduct of the business of state and the democratic process. It is either to do with the arrogance of condescension - parliament and the people do not have the necessary technical grasp to be consulted (just as we would not understand the Lisbon Treaty and juries cannot understand fraud evidence) - or the government has decided to bypass any potential opponents altogether.

  • Comment number 10.

    Threnodio Post # 9

    Superb observation. Let's hope that the BBC and our newspaper community pick up on this point and harry our glorious leaders to distraction. It is indeed shocking if not scary (is this fascism?) that the handful of incompetent individuals currently running our country and doing it with no reference whatsoever to its people (ie parliament).

    Can Newsnight not explore this matter in some depth. Let Paxman loose.

  • Comment number 11.

    Okay - so what can we do about the lack of democracy?

    It's our country.

    (BTW - did you notice that no one is complaining about 'nanny state' any more - the old neolib refrain has gone quiet)

  • Comment number 12.

    Dear all - thanks for all this; I am ashamed to be mentioned in the same breath as Nouriel Roubinin - who along with George Magnus and Graham Turner et al spotted this coming.

    However I will answer one question: socialisation of what? The banking system: I should have made myself clearer. I would not be as critical of the tactical handling by our incumbent politicians and their appointees: this is a combination of Pearl Harbor and Operation Barbarossa. It will take them weeks to stabilise things and their entire world view has been shattered. It can be done and their operational decision cycle will be entirely determined by the crisis until it is.

    What matters now is not really the tactics but the pro-active determination to elaborate a new strategy. I am waiting to hear if anyone has one who is remotely close to power.

    Politicians will have to draw on their own resources to do it because it's the brave official who will say: "guys you are all wrong I have a different suggestion".

    The update is, as on the Ten O'Clock News, the Germans cannot be contacted to be asked the question "what the fricka-und-freya are you playing at?" HM Treasury *CANNOT CONTACT THEM*

    That was how it stood before Tess of the D'Urbervilles came on anyway.

    More tomorrow, I would imagine.

    Yours, from Stonehenge, Paul.

  • Comment number 13.

    #9 and 10

    Great, government by referendum...

    The point at which we should start getting worried is in 12 months time, when and if noises are being made of either a national government or an outright suspension of the due election!

    Half the problem at the moment is that the problem changes almost hour by hour, yes it would have been nice had Parliament been recalled but can you hear the howls of protest from the Tories had Brown done that - 'you are doing it just to scupper our conference' - and who says that a recall wasn't offered and turned down, who says that a recall would have been a logistical nightmare (due to the works that are carried out during the summer recess)?

  • Comment number 14.

    #9, threnodio wrote:

    "I do, however, have a firm grasp of constitutional matters and political science."

    and then:

    "It appears, as you wrote recently, that we are heading towards lots of orders in council which is government by diktat."

    and also:

    "There is a real and disturbing disconnect between the conduct of the business of state and the democratic process."

    It is unfortunate that your "firm grasp of constitutional matters" leads you to be surprised by this.

    For decades, we, the citizens, have sleep-walked our way into this situation. We have sat by as Acts of Parliament gave ministers ever-greater sweeping powers, to be exercised at their discretion, leaving Parliament as a talking-shop for concepts but not the nuts-and-bolts of how things actually work.

    This situation has, of course, been supported by the entrenched civil service, in whose interests this very much is.

    As an extreme example, if you own a map, then you're guilty of the offence of "possessing items which could be of use to terrorists". But don't worry - the "British way" is that, although this sweeping power rests with the relevant Minister, it will only be used against people who, err, "we know are terrorists". "Trust us" they say, "we have lots of safeguards to prevent us from rounding-up the innocent".

    In light of the current situation, trusting them is the last thing we should be doing.

    YOUR elected representatives allowed this to happen. By extension, YOU AND I allowed this to happen.

    These are my immediate thoughts as to how to fix this...

    We need immediate separation of powers. The only way to "get ahead" in Parliament is by toeing the party line. We need to separate the executive from the legislature, and prevent MPs from holding executive positions, so that there is no reason to follow the whip.

    We need to allow the executive or the legislature to change the civil service to suit their needs, so that the people who draft the legislation and implement it are actually committed to it and, more importantly, so that their continued employment depends upon their meeting the needs of the electorate.

    We need a written constitution with firm constraints upon the powers of the executive and the legislature. In particular, we must curtail the ability of the legislature to simply delegate the detail of how the laws operate to the executive or the civil service. It is simply unacceptable, in my view, to continue on this path whereby most Acts simply say "the Chancellor of the Exchequer may make such provision as he sees fit" or whatever - the terrorism provision I mentioned above is a prime example of how this deeply flawed system works at present.

    We need an elected English assembly, so that "more local" matters can be delegated down to that level nation-wide, leaving Parliament to discuss in more detail the matters that we need it to address.

    What about in the mean time? Well, for a start, the Opposition could actually live up to the name. We need Statutory Instruments to be debated, which means somebody needs to trigger the debate, rather than just letting these things go through "on the nod". If that means Government grinds to a halt, so be it - the parties will soon work out a compromise to get things going again.

    And, in case you're wondering, then, yes, I think this probably requires some sort of revolution to achieve. The current system of government is so deeply flawed, and so deeply open to abuse (and so frequently abused) as to be beyond a joke. The patriarchal "trust us, we're the government" attitude to everything from war to tax to criminal justice to policing and everything in between is untenable in a modern society.

    Of course, the system has been broken for decades. But even Thatcher recognised that the APPEARANCE of democracy was critical, and she turned up in Parliament regularly and respected the "traditions" which had kept the lid on the whole thing for so long. It was Blair who first realised that, not only did he not HAVE TO engage much with Parliament, but that the world wouldn't end if he ACTUALLY DID NOT DO IT, so he didn't.

    Whilst I think he was high-handed to do so, I also think he did us all a favour by demonstrating how little Parliament matters in the issues which affect us most of the time.

    Returning to your original point, the reason Brown can do this is because, more-or-less, the British executive now has at least as many powers to do as it pleases as, say, Germany's pre-WWII government wielded.

    The best definition of "revolution" I've come across over the years was actually from the pen of the late LJK Setright, who described it as the process by which many citizens stand up and cry "never again shall this happen". That is what we need today - unless we fix the ways and means of government, in a revolutionary fashion, then I can see far worse and more radical events occurring a little further down the line. Civil disturbance, even some form of civil war or coup, would not be beyond the realms of possibility.

  • Comment number 15.

    #13: there was no need to recall Parliament - Parliament have already delegated all the powers to the executive to "deal with" this crisis.

    In the old days, even Thatcher would have recalled Parliament to maintain the appearance of needing to do so. Blair and Brown decided not to bother with such things.

    The problem isn't that Parliament wasn't recalled. The real problem is that Parliament didn't need to be recalled. That is the major, even critical, flaw in our current system.

  • Comment number 16.


    How awful of those Germans - no British government would behave like that.
    After all, we are all Good Europeans now. One for all and all for one.
    I mean! An EU member state behaving badly in the financial arena - what will Brussels have to say about that?
    Next thing you know, there will be statist jokes flying about concerning sour Krauts.
    The centre cannot hold - but then it was never going too, was it! Rule Britannia! (If we still have a small corner of this foreign land left as ours.)

  • Comment number 17.

    Paul (or anybody really),

    Taking the following items from your list (with my paraphrasing)

    2) cut interest rates

    6) print money

    9) unlimited government borrowing.

    Isn't this just a recipe for rampant inflation?

    As I understand it one of our big problems is too much borrowing (maybe that should say far, far, far, far ... too much borrowing) and too little saving; yet high levels of inflation punish savers and tend to reward borrowers by eroding the real value of their debt. So how does deliberately boosting inflation help?

  • Comment number 18.


    Yes to revolution - we need a hero. As I have said before: Nobless Oblige.

    Incidentally, as of today, Blair's tally is one war unjustified and the other unwinnable.
    Would that he had been held to account.

  • Comment number 19.

    RE: 14 skwdenyer

    I sympathise with the general sense of what you say and I'd like to join in with the revolution you propose. (Do you think two of us is enough?) Unfortunately what you write reminds me of two comments I came across in the past, both as readers' letters in newspapers.

    One, at a time when the government and police were being criticised for some heavy handed policing, observed, "we should trust the government - the government keeps us safe". The other, following the belated release of yet another wrongly convicted innocent person, condemned the _media_ for undermining the police and then observed "we need to believe that our police and judiciary are doing their jobs honestly and well".

    People who think like that do not want a revolution. They probably don't even want much in the way of democracy. They do want to be patted on the head and told that it will all be fine. Recent decades suggest to me that they far outnumber those of us that expect something better from elected officials.

  • Comment number 20.

    #18: there is an interesting facet to Blair's kow-towing to the Bush administration.

    Up to now, it has been the USA that has, arguably, never won a major military encounter. Ever.

    For our own part, we have been pretty successful. Afghanistan is definitely "Blair's Vietnam", whilst Iraq has all the makings of "Blair's Suez".

    You do have to hand it to the man, however: Blair's knack for timing didn't desert him when it came to "suddenly" giving in to Brown's pressure and quitting ahead of schedule.

  • Comment number 21.

    #19 SPOT ON

    I think Jaded Jean will have something to add to your observatons. Your 'quiet life' citizens are those who always swallow the 'One rotten apple' mantra, failing to realize that the barrel itself is, serially, inducing rot.

    I hereby apply to be No3 in the revolution.

  • Comment number 22.

    #19, hants_gw:

    Every revolution needs to start somewhere. The two of us would do as a start. Lacking a directly-elected Prime Minister / President, of course, the system is strongly stacked against a frontal assault. But that does not mean it is impossible to achieve, nor that - by copying the success of countless multi-level marketing operations - our efforts can't be multiplied ten thousand-fold in a short period of time.

    As to your observations as to the citizenry, of course, you are right. The "British" way (or, at least, the "English" way - the Welsh and Scots seem to have come out of their shells a little in this regard with the dawn of their Assemblies, which is perhaps a clue as to why an English Assembly is resisted by those in Whitehall) has been to trust in the judgement of our "betters".

    Historically this was class-based, but that broke down around the time of World War I, not least because so many officers from the upper classes were witnessed by so many enlisted men making stupid, lethal decisions. The myth of class-based superiority was shattered, and the shortage of manpower after WWI (and after the consequent Spanish Flu pandemic) meant that the old ways simply couldn't last.

    Old habits die hard in this country, it seems, and the traditions of the overly-paternalistic society run deep. It can be argued that, whilst Thatcher was a politician almost entirely cut from the cloth of principal, Blair (and, to a lesser extent, Brown) fully embraced the concept of giving "opium" to the people in order to sugar-coat the introduction of their own particular ideas.

    In fact, the seeds of the current crisis can be identified in a desire on behalf of TB and GB to "give the people what they want" - cheap credit, ever-growing "wealth" in housing, apparently-limitless consumer spending.

    You are quite right that there is a deep "need to trust the organs of state", but I believe we are getting beyond that now. There may soon be a tipping-point, where those organs of state start to be distrusted sufficiently for a full-scale breakdown in parts of society to occur.

    In that regard, at least Boris Johnson has had the gumption to warn off Sir Ian Blair, irrespective of the rights and wrongs (or the politics) of that situation. Blair was the unacceptable face of the establishment as far as many Londoners were concerned.

    But we still have the growing criminalisation of whole swathes of the motoring public through speed cameras; such a crisis of forged pound coins as to be a real threat to the day-to-day process of commerce; a growing realisation that the government have plundered our present and our future to pay for "improvements" which have improved little; an entire generation who view it as "normal" for the Police to not even bother investigating the vast majority of crimes; and, soon, a recession bordering upon a Depression.

    In some senses, we almost need the "Groucho Marx" approach to politics ("I'd never belong to a club that would have me as a member") - the entire "political class" need to be disbarred from power on principal. We need to enjoin those who have the vision and tools to make a difference, but who are not a natural fit to the prevailing political "greasy pole" system, to come forward and make that difference. We need those who can actually engage with the sections of the population that are becoming increasingly marginalised. And we need those who are unafraid to move on from matters such as our Imperial past or our over-dependence upon the USA and to (if you'll forgive a Tebbit quote) "bat for Britain".

    Is this easy? Oh no. Is this even feasible? I believe it is. Is the time right? Maybe, but perhaps we have to let matters play out just a little longer to forge an appropriate springboard.

    PS - although I've mentioned quite a few Conservatives above, I don't - now - have any particular party allegiances; those examples just came to mind first.

  • Comment number 23.

    hants_gw (#9) "People who think like that do not want a revolution. They probably don't even want much in the way of democracy. They do want to be patted on the head and told that it will all be fine. Recent decades suggest to me that they far outnumber those of us that expect something better from elected officials."


  • Comment number 24.

    #20 - skwdenyer

    I entirely agree and you will find that a surprising large body of opinion does. If you have been following threads on Nick Robinson's blog and also, more for the Scots, Brian Taylor's, you will have noticed a healthy debate going on about what is to be done with some quite detailed proposals.

    This has to be a phased process. Firstly, we need to stop in their tracks any further pieces of legislation which tend to further diminish personal liberty. The 42 day thing has to buried once and for all, the ID card either scrapped or, better, morphed into something useful to the citizen (as in many EU countries) as opposed to a control mechanism.

    Secondly, we have to start 'roll back'. I suspect this will not begin during the life of this parliament because, as you rightly say, the Whips have never, in my memory, been so powerful and dictatorial. I think a good thrashing for the government as SNP gains ground will start to focus the political mainstream on the democratic deficit in England and any sign of the emergence of the English Democrats ought to focus their minds.

    Thirdly - and this will certainly not happen until after the next election - we can start to address the reforms that you propose. I am disappointed that HM's loyal opposition as so focused on wrong-footing the incumbents that they have not had the courage to emerge onto the sunlit uplands of the big issues but maybe a surge in public opinion will help.

    I do not want to hijack Paul's blog to go into a detailed consideration which belongs elsewhere but the urgency of the current economic crisis is such that a more general debate about constitutional matters will have to simmer on the back burner. We - and that means parliament mainly - have to be vigilant that it is not used as an excuse for further inroads into the liberty of the people.

  • Comment number 25.

    The Times is reporting that Darling will be making a Commons statement tomorrow. It also reports that the German guarantee is for 'individuals' which implies to me that it does not extend to corporate depositors.

  • Comment number 26.

    I'm number 4
    How do we get more?


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