Malcolm Blair Robinson

The completely dysfunctional energy market controlled by speculators is one of the most spectacularly poor outcomes of privatisation and deregulation. Added to well meaning, but over zealous efforts of the green lobby to reduce energy consumption, there is now a burden of spiraling costs on every household and business, acting as a very real brake on economic growth.

When the Energy Secretary is able to stop thinking about driving licence points, he may be able to come up withn a plan. We will not achieve economic recovery without one.

The problem with our piecemeal taxation regime is that it does not provide an effective rudder to steer the economy at times of stress. Had the government had the guts to reform it to a single rate of income tax, as a constituent part of three linked but flexible core elements of taxation, income,vat and personal allowances, it would now be able to do something positive, without risking a debt led boom.

All the details are set out in the appropriate chapter of my book 2010 A Blueprint For Change. I know for a fact some of them read it. Whether they understood is another matter.

This blog has said before that the rule in a civil war is not to recognise rebels as a formal government until they overthrow the legitimate government. We applied the rule during the American Civil War and all civil wars since.  Moreover it is important to recognise that disparate forces can join in revolution only to burst apart after victory, creating endless strife. It was a mistake to formally recognise the rebels. Give them help, money, aid, but keep diplomatic channels on a legal footing.

Their reward for this endorsement has been to murder their top general, whom some suspected of treachery. Col. Gaddafi is laughing his head off. Once again, sadly, the Foreign Office looks naive and incompetent. Like so many decisions of the Tory half of this coalition government it was a poor judgement call. This blog wonders if it came from 10 Downing Street, like most of the others.

We have drawn comparison from time to time, more often recently, of the similarity between the Euro crisis and the deadlock over financial policy across the Atlantic.

One difference is now worth emphasising. There is broard consensus in Europe of the need to fashion a plan to reduce debt and strengthen governance of the euro zone. In the UK the political parties argue about degree but not principle. Right across Europe there is a broad political vision.

In America there is not. There is a fundamental schism, and has been from the very beginning of the nation, about who governs, who pays, how much and for what. The United States sees itself as a single unit with a common agenda, moving towards a European model of universal benefits funded by fair, but higher taxation. Americans believe in the American Dream. This is all about individual responsibility, personal effort and freedom from the dead hand and huge cost of big central government. The idea is that Americans govern their lives individually and when collective effort is needed, their home state can do most of it. Above all, they should keep what they earn to to provide for what they need. In return for the state not burdening the individual, so the individual will not burden the state.

These two positions, many hold both at once, are a contradiction and incompatible. Sometimes the schism is patched over in pursuit of a common cause. Sometimes great tensions cause it to burst apart. Such a time is upon us now.

There is no clarity of where it will lead.

Just a thought for the cut less borrow more enthusiasts. If we did not have our current debt mountain, the government would have £50 billion each year to pump into the economy either directly or by reduced taxation. Think what that would do for growth.

The activity on this blog must reduce for a while, some months, as I am now engaged on a major book project, which must take priority. There will be posts, but they will be short pointers, rather than argued analysis. Meanwhile there are over a quarter of a million words in the archives of the old posts alone, even without the comments. Maybe it would be good to dip and see!

As the brinkmanship in Washington continues the UK is beginning to wake up to the fact that the biggest crisis of all is now in the making and may, or may not, be averted. It is this blog’s view that so much money is owed by so many to each other that sooner or later there will have to be a general default and a fresh start for the Western economies.

This is how it works. Britain, like other countries, buys foreign debt. The total owed to us by the US is $350 billion. The total owed to us by the troubled Euro Zone economies of Greece, Ireland, Spain, Portugal and Italy put together is $418 billion. In other words the UK has an investment of  $768 billion collectively in these troubled economies. If this starts to go bad and we start to be hit by losses, at some point we will have to adjust what we can pay to others on money we owe them. And so on it goes, because everyone is on the merry-go-round and when it starts to spin, all spin together.

The alternative if that the western economies struggle on, weighed down by debt, unable properly to grow, with their populations becoming increasingly restive as they peer into an opaque future from ever lengthening dole queues. The situation is made more dangerous because neither the Euro Zone nor the U.S. has any kind of coherent plan to bring its house into order. It must be said that the Euro governments have woken up at last to the deficiencies in their currency’s structure and they are beginning at least to work on it. In America there is no plan from either side that goes anywhere near resolving long term structural issues. It may be that, as in the credit crunch, it is in the highly stressed US part of the whole system’s fragile structure, where the rivets first start to pop.

Vince Cable drew attention yesterday to the serious situation developing in the U.S. He described the Republican Tea Party people as nutters and went on the claim that this was potentially far more serious for the UK than the drama in Euro land. You may not agree with the nutters bit, but his analysis is spot on.

Any problems with American debt will hit those countries who have lent it most, worst. Top of the list is China with $1.1 trillion. Second is Japan with $0.9 trillion. Third? Yes. The UK with $0.35 trillion. In old figures this is a staggering $ 350 billion. This is why the UK is so closely tied to the US economy. It is not just that there are many business links. We are the third highest owner of American debt in the world.

We cannot afford for this to all go pear shaped. Time for phone calls from Numbers Ten and Eleven Downing Street. The moment has come for some straight talking.

We are all Norwegian. So said the Prime Minister of Sweden when he heard of the bombing and the massacre. He spoke for the world.

There are no right words for such pointless murder on so great a scale. It is impossible to express enough emotion to do justice for the sympathy and horror we feel. That it was carried out by a fellow countryman, one who the victims instinctively trusted, but who had been driven to madness by prejudice and intolerance, must make the pain even worse.

The Norwegians are a tough and brave people. They are shaken, but they will not buckle. All the world is with them.

No, but it is a late start. Much of what is now happening should have happened long ago. It is clear that none of the indebted countries can pay what they owe and at the same time grow their economies.  It is not clear, yet, whether the package for Greece will work, nor whether the concessions to Ireland and Portugal will be enough, nor whether all of it will relieve pressure on Italy and Spain. At present there is optimism everywhere.

What is clear, however, is something of such significance, that it ranks above all other considerations. The Euro countries now accept that they cannot have a currency without it being underpinned by centralised financial governance and economic policy. Once you hand over the management of you financial affairs to others, you lose a degree of control of your life. The extent to which the member counties are willing to surrender that part of their sovereignty and the extent to which that financial structure is democratic, will determine whether the euro  survives as a currency for multiple nation states. In the end that will determine the final outcome for Greece, Ireland and Portugal.

For the UK the issue of financial governance in Euro land is not our direct concern. The controlled Greek default, since this is what it is, should be. We are not at all sure what the knock-on exposure of our banks actually is. We do half our trade with Euro zone countries. We also have extensive business ties with the US. Whereas in Europe, politicians are gradually waking up to the need to act and are now actively planning resolution to multi threaded problems arising out of past folly, in the US no such coherence to tackle equivalent problems exists. That might need to concern us a whole lot more than anything else.