Thursday, April 16, 2009

Borrow today and forget about tomorrow

That old clown Anatole Kaletsky is at it again. His article in today's Times was truly shocking. As we draw closer to Darling's hellish budget statement, he advised us that we shouldn't worry about excessive government borrowing.

The idea that public finances could improve of their own accord alongside an economic recovery, without any need for the Chancellor to announce tax increases or spending cuts in next week's Budget, may sound like irresponsible wishful thinking. Can I really be recommending that the Treasury should just carry on borrowing and hope for the best? The answer is yes. Hoping for the best is a more responsible and realistic policy than committing many years in advance to large tax rises or public spending reductions.

This sort of advice reminds me of a chronically obese person going to a doctor and being told: "Keep on eating. Who knows? you might suddenly become thin".

No government can borrow 10-12 percent of GDP without at the same time expecting severe long-term consequences. Like households, governments have budget constraints.

All the debt, including public sector debt, must be repaid, either through higher taxes or higher inflation. Governments who borrow excessively should also expect to pay higher interest rates, which displaces social sector expenditures.

The idea that the government should just keep on borrowing and forget about the consequences is just foolish.


  1. Why do you bother reading this fool?

  2. Come the revolution, Anatole will join the others against the wall - viva!

  3. The utter refusal to accept reality by some commentators, and the Labour party, leads me to believe that we are close to a fundamental shift in how much the govt can spend and do. From 1945 onwards there has been a constant ratcheting up of govt spending, and interference in peoples everyday lives. This has accelerated under Labour govts but has not be reversed by Tory ones, with perhaps the notable exception of Mrs T.

    I think that the leftwing commentariat, and Labour, now realise that this ever upward graph is in danger of reversal. We no longer earn the wealth to spend on social spending, and have been living on 2 windfalls for 25 years. Firstly North Sea Oil, and recently the house price boom and financial services.

    Oil is running out, and tax revenue declining. Financial services will never again produce the tax revenue it did in the last 10 years. There is no other pot of gold to keep us in Racial Awareness Officers, and Bin Monitors, and Health'n'Safety zealots.

    The Left know the end of the road is nigh, and that once the State starts to be rolled back due to lack of money, rather than any ideological reasons, their client voting bloc will start to be eroded. They are therefore deperate to keep the money flowing, whatever the cost, however much they load debt onto the next generation. Everything depends on being able to spend NOW, forget about 5 or 10 years time.Its a classic Ponzi scheme - once the money stops coming in, the whole thing collapses.

  4. Sold out for New Labour.
    I think so too.

  5. All the debt, including public sector debt, must be repaid, either through higher taxes or higher inflation. Why? Why not just acquire as much debt as possible, then default? Happens all the time in Latin America.

  6. sobers: perhaps our next windfall could be the opening of our coal pits. We still have large reserves there. And if we sell clean-coal technologies too then it could turn into a nice little earner...

  7. @anonymous14:55: I'd love the coal mines to be opened again, as long as we didn't end up with a new Arthur Scargill holding the country to ransom. But you'll have to fight the environmentalists first. I think they might not agree......

    Plus if by some miracle the whole 'climate change' thing was shown to be the crock of sh1t I believe it to be, and coal was suddenly 'OK' to use for power, there's a lot of coal around the world, most of which is a lot easier and cheaper to mine than here in Britain. So I can't see how it could be a massive earner for the nation.