In this way lies madness

Dilatory posting today is a direct result of reading some troubling news about the sate of the UK. Particularly on the economy, and the policies advocated by the respected economist Roger Bootle of Capital Economics in today’s Daily Telegraph. More than a few cups of tea were needed to regain a semblance of personal balance.

The essence of his article is that we need more quantitative easing [QE], and that while Bootle recognises that it’s a dangerous policy, which also carries inflationary risk, it’s better than doing nothing. I’m not sure who he thinks is advocating doing nothing. I know of no one.

My view is that QE is a tactical policy, to finance our horrible debts, and to let the banks off the hook. What we need is a strategic policy. Having successfully transformed our economy from manufacturing to financial management, we should do all we can to press home that advantage, both for economic and employment reasons. The managers of wealth, whether national or private, were shaken to the core by the credit crunch crisis. They need to learn to trust financial markets and professional advice – that’s the market the UK needs to be, trusted.

The credit crunch has ‘gummed up’ the gears of enterprise. It needs freeing up. Credit needs to flow to the productive sector, not to support government profligacy. The UK’s entrepreneurial spirit and brain-power is being drained by over reliance on state funding. Just look at the excessive salaries of the many managers our ineffectual quango’s.  We should force the banks to ‘front up’ on their bad debts, introduce a ‘Glass-Steagall’ law that splits banks into ‘boring’ banks and ‘exciting’ banks, and direct QE ‘money’ directly to the private sector by buying corporate bonds, not government bonds.

I agree with Liam Halligan, time we, as a nation, took the lead in banking regulation, and fiscal responsibility.

One thought on “In this way lies madness

  1. Pingback: An under-educated economist « Lightwater

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