Blog 2023 Malcolm Blair-Robinson

Sir Mervyn King, whose grasp of the fundamental problems facing the Western economies five years after the credit crunch is far sharper than many less astute economists give him credit for, warns that under-capitalisation of  banks which still harbour over valued assets in their balance sheets, which they are in denial about writing down, will inhibit the progress of whatever recovery other measures encourage.

He talks also of the dire risks of the UK Government writing off the one third of its own debt, which it in effect owns via the Bank of England’s purchases with quantitative easing, or the use of further QE to finance direct investment or budget deficits. He suggests that the time is fast approaching when the hard truth, that much borrowed money across the developed economies can never be repaid, will have to be faced and the losses written off to allow a complete economic fresh start. The alternative of  acute austerity and ever more borrowing to repay borrowing guarantees only stagnation and decline.

This blog is in agreement with all of this, save for the use of quantitative easing to buy government debt. £375 billion of new money has been pumped into the financial system of the UK. It has been used to buy government bonds. It is not clear whether it is aiding economic recovery, although it has probably driven up the price of shares and better quality property. It has made the rich richer, but the poor are getting poorer. That has the potential for social explosion.

This blog believes that QE should never be used to finance debt in any form. This is because money is a measure, not an intrinsic commodity, and to remain sound, must only be used to measure the creation of wealth. If new money, it must finance new wealth, not old debt. Imagine the effect on the economy if all the £375 billion had gone into infrastructure renewal, industrial expansion and new start ups, school rebuilding, new affordable homes, upgraded rail capacity and so on.

GDP would be growing steadily, tax revenues would be buoyant, every able bodied person wanting a job would be able to find one and the deficit would be shrinking. Demand driven inflation could be suppressed by interest rates and taxation, but would not harbour the fear of hyper-inflation through a debased currency printed to pay down old debt. Essentially that is how China got started and came from nowhere to a financial superpower in a couple of decades.

As stated in previous posts, this blog believes that the strategy to get out of the present crisis is to aim for full employment and industrial and agricultural self sufficiency. It is a big ask, but team GB can do it and every step forward eases the problem and the pain, motivating the nation in its common purpose. Too bad none of our political leaders can think this through.

The Culture Secretary, Maria Miller, was right to send a letter to the Chairman of the BBC Trust, expressing anxiety at the chaos surrounding the Savile scandal, made all the more glaring by the unfortunate and embarrassing appearance of the Director General before MPs.

Lord Patten, whilst acknowledging that all was far from well, reminded the minister that the BBC is independent of government. This is indeed the case for editorial content, but is very much not the case in a scandal of a BBC sponsored icon turning out to be the biggest serial sex offender ever unmasked, with much of the criminal activity of this man, who now repels, taking place on BBC premises, at its headquarters no less.

The BBC’s income is derived from a levy or tax, called a licence fee, which everybody in the country with a television has to pay, whether they tune into a BBC channel or not. It is compulsory and to watch or listen without one is a criminal offence. In a democracy such taxes or licences cannot be collected without the responsibility and control of the elected government. On the taxpayers’ behalf  the minister rightly raises concern, and this blog hopes she will continue to demand of Lord Patten that he gets the nation’s broadcasting organisation in order. If he does not like that he should consider his position. His recent appointment of Director General is already in the departure lounge.

There appears to be another muddle at the heart of the cancellation of the proposed badger cull. Notwithstanding that, animal rights campaigners are delighted. This blog hopes for a more reasoned approach, as the present rationale for the cull appears as muddled as the delay which has stopped it.

If there were powerful evidence to demonstrate that badgers spread TB to cattle and that reducing their numbers by seventy per cent would greatly reduce or even eliminate the disease which causes much loss and heartache to farmers, this blog would support it. Unfortunately this is not really the case. Cattle will still catch TB from each other and the cull would only reduce, at best and with the most optimistic interpretation of the data, by fifteen per cent. This is too small an uncertain margin to set against the slaughter of tens of thousands of badgers.

TB in cattle should be controlled by vaccinating the cattle. It may well be necessary to control badger numbers in some areas of over population, for their own good and for ecological reasons, in the same way as deer and foxes, but this does not mean wholesale slaughter, nor is it linked to the spread of TB. The problem with the cattle vaccination is that it is not yet possible to differentiate, when testing cattle for TB, whether an animal showing positive either has the disease, or is vaccinated. Because no untested cattle without an all clear can be exported to the EU, a market worth about £1.5 billion to farmers, there is a reluctance to spend money on a vaccination which would effectively halt beef exports to a very big market.

This blog does not consider a cruel and unnecessary slaughter of a rather wonderful and iconic animal, many of whom live happily close to my cottage, is the right way to deal with this. Better surely to find a way of separating the identity of the vaccinated from the diseased. This cannot be that difficult a problem to overcome surely?