Monday, 24 November 2008

Brown's licence to print money - letters

George Monbiot misses the central point about the build up of surpluses and deficits that Keynes's plan would have prevented: they are a consequence of a refusal to share wealth in both the surplus and deficit states (Keynes is innocent, November 18). For example, the growing wealth in China and oil-rich Arab states was not redistributed to their own citizens, but was used to buy assets in places such as the US and the UK, that were intensely relaxed about people getting filthy rich. Many people in the US and the UK were not really better off, but sustained the illusion by borrowing all that money that was flowing in. Their debt got parcelled up and parcelled on - until the music stopped.

We must make sure it's not the poor who pay the piper. The national economic council that Gordon Brown has set up has government departments and businesses and Oxbridge advisers on it. What chance the pre-budget report will be pro-poor and start to fix the problem?
Katherine Duffy
European Anti-Poverty Network

I am surprised at the naivety of the government, the opposition and most of your columnists. A crisis in capitalism serves an essential purpose. It wipes out the least healthy companies allowing the most healthy to thrive. The government should have allowed HBOS and RBS to go to the wall, allowing Lloyds, Barclays and HSBC to thrive. In the early 80s Mrs Thatcher faced a very unhealthy UK capitalism and had the right strategy. She accelerated the destruction of the weak and changed the UK from the weak man of Europe to one of the strongest.

Of course, unemployment will grow, but as long as we can provide new jobs and housing we will end up stronger.

It is equally absurd to reduce interest rates to 1%. Interest should be kept at a reasonable level, otherwise you are punishing the savers. This would also strengthen sterling and allow us to borrow on the international money market.

It is equally batty for the government to demand that banks lend to businesses and people at the end of their financial tether. Surely they can understand that banks are profit-making companies operating in a competitive market?

If the Conservative opposition had the vision of Thatcher, they could do us all a service by following her lead.
Ian Grigg-Spall
Canterbury, Kent

David Cameron would fail Economics 1. (A borrowing binge, November 18). The deficit caused by the current anti-recessional fiscal policy will be largely financed by monetisation of debt: in effect by "printing money". This mechanism is at the heart of Keynesian policy. It can, of course, be abused, and cause inflation if excessive, but in recession-threatened times it is the right thing to do. Borrowing to finance the deficit would raise interest rates, which would dampen the expansionary effect. It is only initially that a deficit appears: once expansion occurs, the deficit will fall.
John Levi
Abingdon, Oxfordshire

OK, so this recession story (Brown claims Tories are alone in opposing tax cuts, November 18) has now got three chapters. 1) Banks can't lend so Brown et al gave them tanker-loads of money. 2) Banks still can't manage it, so the Bank of England cuts interest rates. 3) Still not enough credit coming from banks so Brown et al will cut taxes, to be paid for by ... bank lending. Didn't Lewis Carroll write books about this sort of thing?
Bryn Jones

I was one of the people who lost out as a result of the abolition of the 10p tax rate. As I am now unemployed, I will also miss out on any compensating tax cuts. However, these tax cuts will have to be paid for by increases in the medium term - presumably when I am in work again, so I will have to pay for compensation I never received.
Chris Foreman
Alton, Hampshire

Your leader on the pre-budget report (November 21) rightly highlighted the economic benefits of retrofitting houses to make them more energy efficient.

The government must seize the opportunity to simultaneously tackle economic and environmental challenges by announcing measures to develop safe, clean sources of renewable power and improve efficiency in transport, manufacturing and buildings. This would create new business opportunities, thousands of jobs, tackle fuel poverty and reduce dependency on fossil fuels.
Dr Tim Jenkins
Head of economics,
Friends of the Earth

Over the last year energy companies have increased gas prices by over 50% and electricity costs by nearly 30%, causing many consumers to fall into fuel poverty. Because of this, there is likely to be an increase in winter deaths. We are calling on all the energy supply companies to give vulnerable consumers some peace of mind by knowing that winter fuel bills will be reduced. A failure to do so is likely to cost lives.
Lesley DaviesChair,
National Right to Fuel Campaign

Research, I believe by the Joseph Rowntree Foundation, focused on asking recipients of disability benefits what they would do with the extra money should their benefits be increased. All respondents mentioned services to enable them to live fuller lives, such as taxis, gardeners, hairdressers and home help. This seems a very efficient way of increasing employment while helping those most in need.
Jennie Millie
Ditchingham, Suffolk

My partner is an accountant. Last week we had a fiscal squeeze and this week it was fiscal stimulus. Should I now be looking forward to endogenous growth or is deflation inevitable?
Judy Debenham

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