Saturday, August 02, 2008

I Haven't Forgotten '86

It is possible to oversimplify politics, as indeed everything else. It's an attractive idea, that everything is so much simpler than it appears to be, that decisions of great import and significance are in fact easy, and that it is only made to appear difficult to justify large paycheques.

Gordon Brown is getting a lot of this at the moment, unsurprisingly. It's no fun being the man at the top when circumstances beyond your control cause problems. The rise in fuel prices is being blamed on Government, when they have absolutely no control over the cost of oil; the shaky economy is blamed on Government, when the credit crunch is the result of global financial instability and the arrogance of the banks; even the sudden rise in gas prices is being laid at the feet of Government as a problem they must solve when the industry was privatised over twenty years ago.

Everyone in the pub - any pub, anywhere - will tell you how to solve all these issues in three sentences or less, usually mentioning immigration at some point. People want to believe that politicians are nothing but flim-flam merchants with no more qualification or aptitude for the job than you or I. It's the same as the "my kid could have painted that" school of artistic appreciation: people like to believe that it's all an illusion, a massive scam to do them out of money in some abstract way.

People, and regular readers of this column will already have hazarded a pretty good guess at how this sentence ends, are fucking idiots. Let me present an example.

The Bank of England are responsible for keeping inflation below the Government's target rate of two percent. That's all. Nothing else. The only tool with which they are able to accomplish this is the national interest rate, which they can raise or cut as they see fit. Right now, inflation is rising: the only sensible treatment they can apply is to raise interest rates.

Except they can't. Because raising interest rates makes things more difficult for the consumer and stops them spending as much: this forces businesses to lower prices of consumer goods, thus bringing down inflation. Lovely, except that there is already something else suppressing consumer spending: the cost of credit, especially mortgages. People already have much less to spend, and the sudden (if not unexpected) increase in fuel prices makes things even harder.

Worse than that, there is the small matter of the banks. The national interest rate set by the Bank of England is, in essence, nothing more than a number: there is nothing whatsoever to force the banks to take any notice of it, and this year they have finally stopped even pretending that they need to.

So, the Bank of England is left in an impossible situation. If they raise interest rates, they may dent inflation but at the cost of millions of bankruptcies as banks use the excuse to ramp up credit rates even further. Businesses will implode, big businesses will relocate and the economy will be irreparably damaged. If they lower interest rates, the banks will just ignore them and nothing changes.

The Government's response to this was, frankly, somewhat cowardly - they announced that they were making the Bank of England responsible for economic stability as well as managing inflation, and ran away to hide in a bunker: an acceptance, then, that the problem is insoluble.

I don't imagine many pubgoers are reading this right now, but if you are, I challenge you: solve that one.

Alan Sugar has suggested that Brown fire Milliband and any others that are disloyal to him. Why? The first duty of an MP is to the people who elected them, not the fucking party. That's the difference between a democracy and a dictatorship.

Fucking Sugar. I've never trusted him, not since Amstrad bought up Sinclair.

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