Guido Fawkes on Gordon Brown

After Labour was voted into fourth place in the European elections, a flock of ministers resigned, and 5 MPs called for him to resign at the PLP earlier this week....

Gordon has had a damascene conversion to democratic renewal since little over 5% of eligible voters supported him at the polls last week. The irony of a PM who avoided facing election to be leader of his own party and has no democratic public mandate wanting “democratic renewal” is striking. If he really wishes to reconnect with voters he could always call a general election.

1980s redux, part two

The trading gap shuffle, the trading gap shuffle,
We're in a heap of trouble,
Doin' the trading gap shuffle, yes sir!

1980s redux

The deficit rag, oh yeah, the deficit rag,
Those budget gaps can be a twelve-digit drag.
I'm telling, that's the deficit,
They really made a mess of it,
That's the deficit rag.

On a High Inflation Future

Just got back from Barcelona where Willem Buiter gave a characteristically insightful and witty presentation on the outlook for the US (relatively quick bounce-back) and the Eurozone (much longer recovery, maybe into 2011.) The one killer point was about social cohesion around the task of rebuilding the public balance sheet. Previously, whenever public debt has exceeded 100% GDP the cause has been an expensive war. The public, Buiter suggests, is willing to suffer fiscal austerity on the back of a unifying national shock. But the public will prove to be less willing to pay higher taxes and/or suffer public spending cuts to pay down the debt incurred, according to the caricature, by greedy bankers earning phat fees by speculating wildly. The result will be high electoral resistance to necessary fiscal prudence.

Worse still, Buiter suggests that politicians will not have the necessary gumption to impose fiscal restraint. In the US, "the Republicans will not impose higher taxes and the Democrats will not impose spending cuts." As to whether the Fed will, Volcker-style, do the job for them, Buiter is sceptical. The government will simply "install Larry Summers at the Fed". The result will be monetisation of the Federal debt, and inflation in the high single digits or low double digits.

I see no reason why the same argument wouldn't apply in the UK. The only difference is that Sterling is not a safe haven, reserve currency. Whether the combined threat from the bond market and the ratings agencies will be enough to scare UK politicians remains to be seen. And of course, it's much harder to co-opt the Bank of England, but not impossible.

So it's seems we're lining up for 1970s style stagflation. Below trend growth: above target inflation. And once again, Germany (and her post Euro hinterland) will be the only exception as the Buba-isation of the ECB continues....

On the Chinese buying Hummer

An historic moment, as the manufacture of an iconic US vehicle shifts to the Communist Super-power. How are the mighty fallen.