Wednesday, October 20, 2010

The Return of Sound Money?

Earlier this morning I was walking over Lambeth Bridge when I ran into a senior figure in the government. "It's going to be a good Conservative day," he remarked. "Indeed," I agreed. Not because the CSR is going to inflict policies on the country which will inevitably lead to job cuts - no one would want to do that in any normal economic circumstance - but because it means that after a very long time, the British government will be returning to policies based on 'sound money'. Short term individual pain will lead to long term economic gain. It did in 1981 and it will now. There's no way of soft soaping that message. And I firmly believe it is one the British public understands.

If this CSR is to work there will indeed be a lot of painful medicine to swallow. But no one ever said it would be easy - well, that's not quite true. Labout try to make out that armageddon is over the horizon just because the Tories would cut by 5% more than Labour would have, and will be doing it within four years, not five. Everyone knows it's complete hogwash, the rubbish they come out with, and they haven't really got any alternative plan. And they have an economically illiterate shadow chancellor who hasn't an original economic thought in his head. And in his first week in the job has disagreed with his own leader on the issue of banking regulation.

A lot of his will be watching his performance this afternoon to see if he can provide a propoer critique of what George Osborne announces, and to see if he can indeed offer a viable alternative to the CSR. I am not holding my breath.

This CSR is not the end. It is the beginning. Even with the painful cuts which will be announced today, we will only be returning to the spending levels of 2006. There's a lot further to go before we can truly say that the days of 'sound money' really have returned.

UPDATE: Liam Murray has some wise words HERE.


Slagella said...

If we want a return to sound money there will have to be a farewell to the Bank of England in its present form.

Officer Dibble said...

It's not called a CSR.

Steven_L said...

Sound money? Pull the other one Iain you're not fooling me.

If Meryvn's boss Ben cranks up the press again Mervyn will too.

Guido Fawkes said...

Sound money and quantitative easing don't really go together.

Iain Dale said...

Indeed, and I have always opposed quantitative easing.

Arden Forester said...

Sound money is something we haven't had in a long time. Fractional reserve banking means that we allow ourselves to have an economy built on debt. If money is only generated from pressing computer buttons there will be days of reckoning as we have now.

Northern Rock had no assets to speak of yet the depositors were led to believe that their money was safe in that bank. Their money was actually somewhere in cyberspace, fractionally reserved, making the bank millions by lending out what they didn't have. Add a whole bunch of toxic debt, bought second-hand from shysters on Wall Street who in turn had seduced the hapless homeless into purchasing sub-prime mortgages and you have a recipe guaranteed to give disaster to all except the perpetrators of the scam.

I hope George Osborne has one eye out for dealing with the fractional reserve banking con artists.

Roger Thornhill said...

Sound money and politicians operating a monopoly don't go together!

One needs to end the monopoly over issuing currency in the UK to ensure that sound money has a hope.

Unknown said...

one thing I've noticed is that Labour's line is consistently: "the Coalition is taking a huge gamble/risk with the economy." My response to this is: like any gamble, it has a chance of paying off...are you, Labour, therefore in effect saying that this approach might in fact work?

The Military Wing Of The BBC said...

What a weak statement.

Taxation in this country is no longer about rich and poor, it is a transfer of wealth from those not on the gravy train to those that are.

Someone joining government tomorrow will still get a gold-plated public sector pension paid for by everybody else.

So for all the tough talk, they've done f-all except increase my tax.
This is the worst government of all time. They talk tough then ring their hands.

Jimmy said...

What next? The Gold Standard?

Laban said...

Sound money, Iain? Mervyn King wants to know where they print it, so he can print some more.