Interest Rates In Britain Are Cut. But The Damage Is Still Being Done To The Economy By Brown & Co

March 6, 2009

In what looked like an act of desperation the Bank of England cut interest rates yesterday to 0.5 per cent. Supposedly it is going to help revive the British economy. But if banks are not lending you can cut the interest rates as much as you want and still nothing would happen. It has also been announced yesterday that BoE will be printing £75 billion in new banknotes to inject into the economy by buying up government gilts from the secondary markets.

Why government securities and not shares in private companies that are struggling to find investment, is another matter. But considering that there are around £80 billion of banknotes in circulation in the country that would mean that the pound sterling would be worth 50 per cent of its value now.

The biggest problem is that the government generally and Prime Minister Gordon Brown in particular have no idea how to get out of the current financial mess. It got so bad that Chancellor Alistair Darling has even spoken about the need for taking responsibility for the wrong decisions taken in past. Brown would not hear of it and insisted that he has nothing to apologise for.

The Prime Minister seems to be in denial and believes that he had done everything right during his 10 years time as Chancellor and later as leader. Like selling off the gold reserves of the nation at a time when gold prices were at their lowest for more than a decade. Or pillaging private pensions to the tune of around £100 billion and closing his eyes on personal debt spiralling out of control. By the way, it is quite amazing how very few people realise that the British economy was mostly driven during the boom years by personal debt and artificially inflated home prices. It had nothing to do with Brown’s ‘wise decisions’. It was just like a ticking bomb waiting to explode. And his irresponsible borrowing during the boom is also hitting the economy hard now. He should have building a war chest for the future and not wasting money on social engineering.

But the biggest problem of all was that Mr Brown has not just sleep walked into the current financial meltdown – that is the least of everyone’s worries now – but that he is actually continuing to fuel the crisis by choosing the wrong sort of measures to tackle the recession. You do not have to be a great economist to realise that bailing out failed banks at a time of economic turbulence would only exasperate the crisis. Brown has never run a business in his life and never invested his own money into anything. He is a failed former Marxist, who changed his colours for political convenience but never really grasped the realities of the fee market. The real free market, that is; not the one dominated and manipulated by the money men. That is why he simply does not understand that throwing good money at bad does not work.

Common sense should have told Brown that throwing money away to help the middle man, i.e. banks, does not solve any problems. Banks have always been and still are middlemen between the producers and the consumers. Banks produce nothing and the fact they have been paying taxes to the state still does not make them anything more than parasites. You might as well start taxing drug dealers and prostitutes and claiming that, as they contribute to the Treasury, they should be considered as valuable for the economy. What rubbish!

Unlike venture capitalists banks do not even risk their own funds. They gamble with other people’s money and if they hit the target they take a huge commission. But if they lose, they just say that it was bad luck and that they acted with the best of intentions. The people who pay the price are the investors not the money men. That is why it is essential that when bankers are found to have behaved irresponsibly they should be forced to pay out compensation to their customers. That will teach them to behave responsibly in the future.

Does Prime Minister Brown think along these lines? No. Just like an incompetent banker, he wastes tens of billions of public money on idiotic schemes to save Britain and the whole world. Instead of saving producers and helping consumers to ease their debt burden thus boosting consumer demand he is propping up failed banks mostly run by lawyers and former accountants. They will never change their ways because they do not know how to operate properly.

So the biggest danger that Brown poses has nothing to do with his stubborn reluctance to accept his past mistakes; this Labour government has been one big mistake all along. The real danger is that the current Prime Minister continues to steer the economy in the wrong direction, thinking that his bluff might pay off. It won’t, because you cannot blow a fortune on measures that are bound to fail.

When I was in college, studying Britain’s modern history, we were told by our lecturers and tutors that the Labour party in Britain traditionally screwed up the economy and afterwards it took years for the Conservatives to sort things out. We were also told that British voters never really gave Labour a chance to cause irreparable damage to the country as it was never allowed to stay in power for too long.

This time the British voters seem to have lost their sense of self-preservation by allowing this lot to run things since 1997. Let’s hope the country manages to survive in this madness.

– End –

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