Monday, December 15, 2008

Yvette Cooper Doesn't Know her Economics From Her Elbow

The economic illiteracy of Yvette Cooper seems to know no bounds. This is the woman who is Chief Secretary to the Treasury, remember - although it has to be said that she reminds me more and more of Rosa Klebb.

Yesterday she came out with this corker...

"We have never had a policy of targeting the Pound. Our policy has been to target inflation."

So the Pound should be left to wither. Now, call me old fashioned but last time I looked at the laws of economics they told me that a weak currency means the price of imports goes up, which leads to higher prices, therefore higher inflation.

Or does this New Labour clone think people are too stupid to work that out for themselves?

40 comments:

britom said...

Did you mean New Labour CLONE or CLOWN?

Unsworth said...

"Or does this New Labour clone think people are too stupid to work that out for themselves?"

She does.

westminster watch said...

But Iain, you have completely omitted to mention the mantra that a lower pound is good for our exports - pity if you look at the balance of trade and/or balance of payments that imports are higher than exports because that is irrelevent!

schoolgirl econmics/spin

Morus said...

Remind me Iain, what measures the Conservative Party think should be taken to keep the pound artificially bouyant against the US dollar and the Euro?

Which branch of Conservative economic theory would support manipulation of the foreign exchange rates at the expense of interest rates and inflation?

This is a classic Westminster screw-up - she's in trouble for telling the truth, because its an unpalletable truth.

The steadfast refusal of Conservatives to recognise that anything the government says or does might actually be right (albeit accidentally) is getting irritating for us non-partisans. It's the same pathological belief of "done by them, therefore evil" that guides the rampant anti-Americanism of the hard Left.

You're better than this. Stop it.

Womble On Tour said...

I think I see what you're getting at, but if I read Cooper right she's saying that they won't take measures specifically aimed at propping up the pound, which is absoutely right in my view. Major & Lamont spent a fortune trying to buck the markets in the early 90s and we paid a heavy price. If Labour have learned that such interventionalist policies don't work, then that's a good thing.

westminster watch said...

Morus

And pray tell me, what was the benefit of the VAT rate reduction -racking up levels of debt that the global financial markets believe we cannot afford - hence the collapse of sterling and an ever worsening economic environment?!

Tim said...

The value of the pound is determined by market forces. Are you saying govts should try to buck the market? Major and Lamont tried that once, and made Soros a rich man.

More seriously, go on the Birkbeck website, and enroll for their Diploma in Econ - you would be a more capable politician as a result.

labourparty said...

And if you cared to read further in the interview you'd have seen that deflation is the threat, not inflation. Before you criticise others for their economic incompetence, try understanding what the issues are.

Alan Douglas said...

Balls in = balls out.

Alan Douglas

wv : comis

Lord Elvis of Paisley said...

On the contrary Iain, I believe Yvette is lying through her teeth when she says Labour aren't targeting the pound, when it is clear that they are targeting the pound. They have a deliberate plan to devalue the currency to reach parity with the euro, and that is exactly what they are doing. It's not a coincidence that the economy has gone into a tailspin since Brown arrived at No.10, because that's the plan. The complete and utter devastation of UK economically, socially and democratically is what he has been planning all along, and now that plan is coming to fruition. Labour would happily sink this country, and then they'll jump boat for a nice cozy living sucking on the teat of the EUSSR.

Scorched earth UK.

Unsworth said...

@ Morus

What's "an unpalletable truth"?

Something to do with transportation and logistics?

Scary Biscuits said...

Morus, you ask for measures the Conservative Party thinks should be taken to keep the pound artificially boyant against the dollar. Why would anybody want that?

On the other hand, as Gordon Brown himself said, a weak currency is a reflection of a weak economy. A weak pound causes inflation. Infation destroys wealth and makes us all poorer. That's less important for the rich but vital if your already close the breadline. Unless salaries and benefits rise in line with inflation (which they haven't been) inflation also redistributes wealth from poor to rich - the exact opposite of what a progressive government should be doing.

Morus, maybe you and other followers of Gordon the Messiah could explain why doing the exact opposite of what was good for the last 30 years is now the new good. Maybe you could explain why managing our finances 'over the economic cycle' is suddenly jettisoned as soon as the cycle returns?

Roger Thornhill said...

We know the BoE has been targeting PRICE inflation instead of controlling CURRENCY inflation.

I am glad that pinhead has been so honest and self-incriminating.

If you allow currency inflation, which actually means currency DEVALUATION, people's property is eroded. It is, basically, a form of theft.

Newmania said...

..and she is still peddling that insulting lie about how Brown can afford to borrow because he paid back debt . John Major was magisterial in dismissing it .They only paid back debt as we came out of recession and they stuck to Conservative spending for the first two years , ever since it has gone up.

What bothers me is that Yvette Cooper is either deliberately misleading the Public or she actually believes it , site the latter is impossible but either way it’s a worry .

Anoneumouse said...

Is that a pond in your pocket or is it inflation

tomcharris said...

Maybe you're right, Iain. Maybe the government should intervene to prop up the pound. After all, that worked out so well in September 1992, didn't it? Oh, wait - hang on...

And at a time when the Treasury are most worried about deflation, you're worried about inflation getting out of hand? You want to stop reading Osborne's "economic" briefings.

Iain Dale said...

Tom,
It wasn't me who raised the inflation point, Yvette Cooper did. All I was doing was pointing out the illogicality of her argument.

Glad to know you think a plummeting Pound is a good thing, though. Any point at which you think it has plummeted enough, perhaps?

Wrinkled Weasel said...

It is not a question of "propping up the pound". It has been dismantled by the application of low interest rates coupled with devastating levels of public borrowing which in turn has led to the ebbing of confidence in sterling. The consequence of this has been the flight of investment out of the country by people who do not believe the lies.

Labour have now sanctioned the printing of money and have abandoned the pound to freefall - a decision which dwarfs anything that happened under the Tories. The ERM fiasco, that everyone is fond of quoting cost a fraction of the Billions that have been thrown away on bailing out moribund banks.

I see Mandy is about to try and rescue Vauxhall. So, just like Rover, we shall all line the pockets of the great British car worker until it is no longer politically expedient, and then give the firm away with sweeteners to someone who will take the money and run and then they can all go on the dole.

It is gratifying that as things get worse, the Labour idiots on here get more and more hysterical and less and less interested in the facts.

Man in a Shed said...

Tim/Morus - Mrs Balls intervention is key as it removes uncertainty from the market. Traders may have wondered if the govt might act to support Sterling, now they know it won't.

The most likely explanation is that the government wants Stirling to drop more. But why ?

The Brown debt binge and smash and grab election strategy needs to suspend market disbelief a while longer. What are they up to ?

ChrisManchester said...

Talking of Mrs Balls. What do people think of the fact that she was allowed the right to reply to John Major's interview on the Andrew Marr programme last Sunday? Has that happened previously?

Morus said...

Westminster watch - you're right. The VAT cut was a silly measure - at best ineffective, at worst it seriously damaged my industry (transport and logistics - which might explain one of my typos, as ably picked up by Unsworth!)

Scary biscuits should read more carefully. Iain is attacking Ms Cooper for not protecting the pound - I was asking him to name the Conservative policy for artificially protecting it. Such a policy doesn't exist, because no sensible Conservative would do it. It's called reductio ad absurdum.

You fall for the classic ad hominum which is if someone doesn't vent their spleen at Gordon they must follow him as a Messiah. Brown has done plenty of damage, but implying as Iain does, that the Government is wrong for not interfering in Forex is stupid. Firstly, deflation is more of a fear than inflation at the moment, and secondly, because they are seeking to manage inflation outcomes, not every possible influence on it.

Labour have done huge damage to the economy, but sometimes, by accident, they do the right thing. Failing to recognise that makes Tories seem like trolls.

Man in a Shed - possibly, but you could equally say that the Market will have faith that the rate of exchange is the true strength of stirling, rather than always short selling under the false belief that the Gvt is secretly propping it up. Not sure, but good point.

dalesman said...

Who was it that said, "weak pound = weak economy = weak government"?

Couldn't have been SuperGord, could it?

Dominic Allkins said...

Of course, another explanation as to why this useless government won't be trying to support the value of the pound is that the coffers are empty.

Thanks to having two economically inept Chancellors for the last 11 years we have no money to support our currency, whether we want to or not.

The country is broke and if we keep borrowing, expect a call to the IMF with the spin saying "We tried everything, but it all started in America" or some other such bulls**t.

CityUnslicker said...

OK. targeting the pound makes people think of the ERM debacle. Rightly so.

However, as the Government is set to borrow billions, a falling currency a will encourage guilt strike, a further run on the pound, a worse guilt strike and ulitmately sovereign default.

We are on a path to this, hopefully won't happen; bu the road is clear to see.

the way to avoid it is interest rate policy and tax rises.

not very nice is it? but that is what happens when you break an economy.

Also re deflation - why when infaltion was high and measured badly did we all belive we had low inflation? Now the tables are turned everyone is happy to believe government statistics. They are always wrong, have been for a long time. Inflation will come back strongly at the end of 09. the government just won't tell us.

Dr Snuggles said...

Every time she is interviewed, she talks about 'the right thing to do' and 'the wrong thing to do' like a grumpy infant school teacher. Charmless and talentless.

Tim Worstall said...

"Glad to know you think a plummeting Pound is a good thing, though. Any point at which you think it has plummeted enough, perhaps?"

But neither you nor I....or indeed any individual....have tio try and work that out. The price is set in a market. So it will have plummetted enough when people start buying it in greater numbers than they are selling it.

That's why we actually use markets. To replace one person's (highly fallible) view with the view (less fallible) of all concerned.

Moderator said...

The last time anyone 'targeted the pound' it was to adjust interest rates so that the over-valued currency would stay within limits of the Exchange Rate Mechanism. Crash went the pound! Crash went the policy! Crash went the Tories!

A floating exchange rate is a market valuation of the pound - effectively equalising UK labour productivity with other nations, by dropping the international purchasing power of our wages. It's the right thing to do, and I don't think the Tories are mad enough to try to do otherwise.

So whilst you may find Yvette Cooper annoying, she is right in this case and deserves a moment of humility and contrition from you.

tapestry said...

Iain, I don't agree with your economics. -

The thing is that as the Pound falls, commodities have fallen faster. Take oil which is $40 now, not long ago $150 a barrel. That is not untypical. Manufacturers have had to squeeze margins to cling on to market share and retailers cut margins, and the government VAT.

Interest rates are 3% not 5% and soon will be 1% or less. Rents are tumbling. The Pound could fall to parity with the Euro not to mention the $ and still see a fall in inflation, if not a deflationary environment.

Cooper's motivation is entirely political - to get the GBP into the Euro as soon as the government can do it, and parity with the Euro would seem the ideal moment.

The only thing is that the GBP might fall so fast that it is 10% below the Euro within a few days of reaching parity, and could be equal to the US$.

I'm not willing the GBP to fall, but it would be highly amusing if it did fall to US$1 and went from .7 Euros to 1.25 before the political classes could net it.

Castelli said...

Ian, you are right. I am an economist, and I agree that a weak currency is a sign of a week economy/country/government and... in a democracy, weak media and therefore people, I'm afraid.

But it would be futile to try to tamper with the indicator of it - the currency. As it would be futile to cool down a thermometer to reduce a fever.

The only solution is to strenght the country, via sensible financial management, investment in infrastructure and in human capital, etc.

The falling pound is the invisible hand of market forces at work. And in the short term, it is positive, as it presses us to buy less imports, to travel less abroad, and incentives foreigners to buy more British products, and to visit us more.

Savonarola said...

FFS the pund is a freely convertible currency. You could only support it by

1 Putting up interest rates to 6%

There is no 2. It is too late because the other way of having a strong currency is by following prudent economic policies.

What Cooper should have said is

"Markets decide the price of a currency. We have been found out and this vote of no confidence is a telling indictment of the PM, his adviser my husband Ed Balls and myself. I apologise to the British public for this mess which will take the next administration a decade to sort out. But Ed and I will be comfortable on our IL pensions and other perks. Thank you very much"

African Mum said...

Alistair Darling said he could print more money. That should worry everyone. Idi Amin once asked his finance Minister to print more money to counter falling value of his currency. When told that the currency would be worth the same as toilet paper, he had the minister shot, asking 'do you call my money sh*t money?'

The Wilted Rose said...

Iain, you are absolutely right that a weak pound = higher cost of imports.

I see some commentators here have objected to government intervention to strengthen the pound.

However, it is bad Government intervention in the first place that has allowed the pound to take such a hammering! This is what we get after 11 years of Brownian economic policy. And Yvette Cooper is an exemplar of that.

Chris Paul said...

Iain - you know SFA about Economics so stop this right now. And inflation is the key target. Exchange rates interact with interest rates and the direction of current movements is therefore no great surprise. No surprise at all. Also the bank shorters have switched to currencies. The swine. And amazingly imported goods are going down in price as we become less able to pay the old price. Which knocks your tosh into a cocked hat. Yvette knows a good deal more about Economics than you do and you should stop your silly showing off.

Chris said...

If that's your level of understanding of economics, thank God no Tory constituency association has seen fit to select you. There's nothing to add to what Tim Worstall says, really, but while a weak pound may indicate a weak economy, it does so because the economy is weak. That's an indicator. Artificially boosting the exchange rate doesn't make the economy strong; it only disguises the weakness. In P.J. O'Rourke's memorable summation, you may not like that the scales say you weight 270 pounds, but passing a law to make yourself weight 180 won't do the trick.

Iain Dale said...

Chris, instead of hurling insults perhaps you could critique what I actually wrote as opposed to what you seem to think I wrote. Does a weak currency lead to higher prices of imports or not? It's a simple enough question.

Jimmy said...

Iain,

All things being equal, the answer to your question would be yes, but for the reasons given in a number of posts above, that is not the case here.

Jimmy said...

p.s. And yes, as one comrade to another, Chris should stop being so rude.

Chris said...

Yes, a weak currency leads to higher prices of imports. So what? You, not I, have been asking people, in the comments, to specify the right level of exchange rates. That is what I was commenting on. That is something you wrote. It is an immensely stupid question to ask. If you stood in my constituency, I wouldn't vote for you, and I have not voted anything but Conservative since 1983. Rude? No - one man's signal to the market for politicians.

Shuggy said...

Chris, instead of hurling insults perhaps you could critique what I actually wrote as opposed to what you seem to think I wrote. Does a weak currency lead to higher prices of imports or not? It's a simple enough question.

I'm not Chris but there is a comprehensive critique of what you have written in various places - including your own comments (see Tim Worstall, for example). The answer to your question is often it does but not always. But the key point is that this does not in any event necessarily lead to higher inflation. Yet not only do you insist it does, you seem to think this forms part of something called the 'laws of economics'. I'm sorry but I'm kinda fascinated by this in a watching a car wreck sort of way - you shouldn't stop to look but you can't help it. What on earth are you doing?. I mean look at the title of your post - just look at it.

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