Borrowing Brown Blown Out Of The Water

Borrowing Brown's bonkers crusade for a painful cure-all fiscal stimulus has been blown out of the water after 'surprise' inflation figures left him at odds with the Bank of England boss, his chancellor and most of the world. 

Brown's hyped-up Save The World ego tour and London G20 plan is in tatters. 

In the economic La-La Land of making it up as you go along, today's widely predicted inflation figures were supposed to show the Retail Price Index (RPI) sinking into dangerous deflation while the government's much-loved Consumer Price Index (CPI) dropping like a lead balloon. 

Only they didn't. Headline RPI fell to 0 percent in February, its lowest since 1960, from 0.1 percent in January, while the CPI actually rose to 3.2 percent in February from 3 percent. 

But the government is a victim of its own spin and deserves all it gets. The neat trick of the CPI was brought in by Brown during the false boom years as the government's preferred spin to measure inflation. Now it's coming back to haunt them. 

That left Bank of England boss, Mervyn King, who prefers RPI, in a pickle, forced to drop a line to hapless Darling explaining why CPI inflation is more than a full percentage point above the official 2 percent target. 

Darling will be rubbing his hands with glee and then putting two fingers up to Brown who's still bent on a massive borrowing binge and spending spree. 


What is happening is plain to see. RPI is zero because mortgage costs and house prices have taken a dive. Take out housing and CPI, which measures the cost of what people are buying, has risen. 

Any fool can see inflation has increased. The devaluation of the pound in our pocket has made us poorer. Food bills are going up, water rates have risen, while savings interest has dropped.

The price of food and drink is soaring. Cigs are going up. Imported goods like clothing and footwear are now falling less fast because of the weakness of the pound, which has raised the price of imported goods. 

Inflation is the proverbial Monty Python parrot. It isn't dead, it's just resting. And could soon return.

The Orange Party has long warned the government's reckless fiscal stimulus, unprecedented borrowing and printing of money could unleash a huge inflationary hurricane leaving behind the debris of debt.
 

But a much-needed steady hand on the economic tiller isn't happening, as deluded Brown, obsessed with his multi-billion pounds borrowing stimulus is getting increasingly short shrift from many, apart from his new best friend Obama, who has the luxury of four years to run himself out of his economic hole. 

Ben Brogan reports, King dropped a bombshell in his evidence to the treasury select committee.  He doesn't think there is a case for another fiscal stimulus. 

And that's the very same economic stimulus on which Brown is pinning all his hopes at the G for Gordon 20 summit and in the very budget where he's been forcing a reluctant Darling to write his own political suicide note and pump-prime the economy with more of Brown's borrowed billions. 

The head of the European Central Bank, Sarkozy of France, Merkel of Germany, the boss of the IMF and now the Bank of England governor are all backing off from another bonkers borrowing boost, leaving an obsessive Brown increasingly alone in his own little world. 

Making sense of it all is a nightmare for sure but without that steady hand on the tiller, deflation or inflation are economic killers.  

Burning Our Money is, as usual, on the money: "Our currency is being systematically debauched. Interest rates have been slashed, the printing presses are roaring, and savers are being raped."

What's needed is a sound strategy - and a leader. Answers on a postcard to: G. Brown, the Bunker, Downing Street, for when the Supreme Leader gets back from his South American pre-election PR jolly. 

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Printing Money Is A Bad Roll Of The Dice

The government is pinning its hopes on a last, bad roll of the dice to dig itself out of its economic hell-hole, as the Bank of England starts the dangerous and disreputable gamble of 'printing money'. Spun as 'a good thing', this is a short term fix to get the government over the hill of the next election. The wheelbarrow of cash is teetering on a slippery slope. 

The Orange Party is in a long queue of people happy to give sound, realistic advice on how to get out of this hopeless mess without having to resort to borrowing billions and printing money, then spending it all like there is no tomorrow. But for the government of course, there is no tomorrow. 

Playing economic politics with the country and people's livelihoods is a despicable act, leaving others to pick up the tab and clear up the mess. 

The government is drinking at the last chance saloon. Printing money is an admission of failure which will get it off the hook, while a deluded Brown and his hapless chancellor lose control of the country's finances and their senses. 

Floundering in economic cloud cuckoo land, their only way out is a barrow full of banknotes, expanding the money supply with a boost of £75 billion now rising up to £150 billion later. 

The country is hopelessly in debt and borrowing is at a record high. But the government still wants to 'print money' to fund a reckless borrowing binge and ludicrous public spending spree. 

Any government which has to resort to 'printing money' is on its beam ends, with the threat of a new bout of inflation always lurking round the corner.

With the borrowing debt set to run into trillions of pounds, the abhorrent and disreputable 'printing money' option, euphemistically called 'quantitative easing'  is the only bullet left in its depleted armoury.   

Another last roll of the dice came from the Bank of England today with another cut in interest rates down to 0.5%, another blow for savers that won't make a jot of difference in the real world.

The Bank has already tried slashing the official rate with the most aggressive reduction in borrowing costs in 100 years to try to head off a full-blown economic depression.

Now the Bank is planning 'quantitative easing' but inflation will evaporate in coming months. In fact the new fear is deflation. The real economy in the real world of the RPI is already deflating. Printing wads of banknotes, though not literally, will just make matters worse. 

It is a short-sighted and short-term way to reflate but will help get the government of the hook until after the general election. 

In the last few months successive cuts to the bank rate failed to get the economy moving. For Brown and the government the solution is even more reckless, short-term fixes. 

It's clear the government hasn't a cat in hell's chance of funding its ridiculous borrowing binge but printing money is fraught with long-term dangers.

Anyone who takes a scant look at economic history can see that. 

Japan tried and failed. Printing money had disastrous effects in Weimar Germany in the Twenties, leading to rampant inflation, the Nazi Party and people needing wheelbarrows to carry the cash to buy a loaf of bread. 

In modern-day Zimbabwe, Mugabbe prints worthless banknotes. Debt ridden Latin-American countries became a laughing stock, as they tried the same trick. 

Brown's government will be the laughing stock of the world. 

Printing money is a recipe for disaster but it does boost the money supply and inject liquidity into the economy in the short-term. 

Slashing interest rates and printing more money is a quick fix which would release a flood of extra cash but there's no guarantee that would find its way through to the real economy as businesses and families tighten their belts and hang on to any cash to pay off debts.

Printing money is exactly the option used by Obama's new administration faced with a trillion dollar debt, to fool some of the people some of the time. The US Fed tried the trick but with little effect.

Even if it does do the job it could dilute the value of sterling and kick-off inflation, needing higher interest rates to control it. 

The hope is that when the Bank of England decides enough is enough, it can act independently from government interference to make the right decisions on economic not political grounds.

But the trick is knowing when enough is enough and that's a hopeless guessing game.

Lies, deceit and spin go hand in hand with the New Labour project but it's in the death throes of the disaster of the economy where the public feel it most. 

Soon a new government will have to confront the underlying problems in the economy. 

Even the combined might of ex-chancellor Ken Clarke and economic oracle Vince Cable will be hard-pressed to turn the country around.

Picture: Guys and Dolls, Luck Be A Lady Tonight. Illustration, Jody Hewgill

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Inflation Spin Masks Dire Deflation

Government inflation figures are masking the dire state of the economy as ministers have become victims of their own spin. Today's official figures hide what lies beneath, as the country spirals down into dangerous deflation. 

Even the government's own official and well-spun inflation figure has sunk to 3%, craftily hiding the true fall. Things must be really getting bad for the economy.

Inflation dropped to 3% in January, down from 3.1% in December, as measured by the government's consumer price index (CPI), already seized on some with a gleeful "it's not as bad as expected". But that cut no ice with the Times.

The better indicator, the Retail Price Index (RPI), which includes housing, is already falling into dangerous negative territory. It's at a scary 0.1% last month from December's 0.9%. 

And that will send a cold chill down the spine of those whose pay rises, pensions and savings are directly linked to the realistic RPI. 

The fall raises the spectre of deflation which will become negative this year. But the government continues to bury its head in the sand, preferring its own CPI which  kept them in good stead during the boom years. 

Deflation is the killer punch for any economy. Any hope of a boost by increasing consumer spending, is either short-lived or just doesn't happen. People shop around frantically looking for the cheapest deals and put off spending, preferring instead to try to clear a mountain of debt. 

The CPI is a neat little device used to set inflation. It works by carefully selecting what government wants to measure and then a cunning weighting is dropped in to make those final tweaks and adjustments.

Inflation used to be measured by the retail price index (RPI) but New Labour ditched that in 2003.

The CPI is a less effective measure of price falls than the old RPI, but it's much easier to manipulate. But even the spin cannot hide the downwards spiral. 

As the government and Bank of England run out of magic bullets for the economy, the next step has to be to print money, lovingly disguised as 'quantitative easing' and a barrow full of banknotes. 

It's clear the government hasn't a cat in hell's chance of funding its ridiculous borrowing binge but printing money is fraught with long-term dangers.

Brown has steadfastly buried his head in the sand, refusing to shoulder any blame for the current economic disaster. The Orange Party has warned time and again the government is in denial about the dire state of the economy. 

There are realistic ways out of the depression recession, apart from massive government borrowing and reckless spending and printing cash but that would mean the government would have to own up to past mistakes and stop believing in its own spin.

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Only A Disguise Will Stop Public Ridicule

Two million on the dole, a home secretary fiddling expenses, Brown sucking up to City pals refusing to budge on bonuses while his favourite banker is fingered for sacking a whistleblower, the country in deep recession. Who'd want to be seen as a New Labour MP? 

Public anger over bankers, jobs and the government's economic mess is turning to ridicule but ministers still bury their heads in the sand.

Today Bank of England governor, Mervyn King, told voters what they can see and feel all around them -  the UK is facing a deep recession. It's a sorry state of affairs but unlike the greedy bankers, no-one in government has the guts to say sorry.

Blair's ex-deputy, John Prescott's on-line battle of the bonuses may be capturing the mood of the nation but more importantly it's reflecting the anger and frustration of backbench Labour MPs. 

Brown needs to get a grip and stop the dithering. Just say what everyone wants to hear - bonuses must be scrapped when the taxpayer is a shareholder in any bank. 

He won't because he can't. The whole New Labour project was based on the fundamental flaw of sucking up to the City to keep them sweet and the government in power. 

Labour's born-again working-class hero, Prescott, was happy to go along for the ride if that meant power and glory. Those days are long gone. Now voters are deserting in droves and Tories and LibDems can outflank the government when the public's on their side. 

The sorry sight of the former bankers' mumbled and staged outburst of remorse before the commons treasury committee left voters cold. 

The Orange Party dozed off watching a pointless and carefully managed PR charade unfold but woke when the finger pointed at Brown, as three of the four guilty men lorded it up with their Ks and Ps on full view - all thanks to their government pals. Failure now brought ample rewards in the past. 

But it's Brown's close ties with his knighted economic advisor, Sir James Crosby, which struck at the heart of the problem, when former HBOS head of risk, Paul Moore revealed he was fired by Crosby, then the bank's CEO, after repeatedly warning about the bleedin' obvious. 

On top of all that unemployment is at a monumental high since New Labour grabbed power and two homes Smith is praying her homes scam will go away before it blows the lid off government sleaze and corruption. 

Today at PMQs Cameron has a chance on so many fronts to prove that he really is the true Mr Angry and Brown's reported "anger" is just part of the Downing Street spin. 

So what can New Labour MPs do? Backbench MP, Frank Field, has an answer: "This anger is likely to be such that the only way that Labour MPs will be able to go out in public will be in heavy disguise - such will be the public ridicule."

UPDATE 11.46am: Brown's buddy, Sir James Crosby, has quit as deputy chairman of the useless Financial Services Authority, just minutes before Cameron could get really angry, during PMQs. Did he jump or was he pushed?

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Not Just A Bail-Out, A Mandy Bail-Out

When is a car bail-out not a car bail-out? When it's announced in the Lords by Brown's deputy Mandelson. It must be galling for MPs to hear about the latest government "loans for cars" scandal from the BBC but hey, that's democracy for you. 

Business secretary Mandelson is due to outline his latest wheeze for UK carmakers in a statement to the House of Lords because he's not allowed to face the music from elected MPs. 

But you can read all about it on Brown's BBC 'news' website, courtesy of Robert Peston's blog, in a glorious technicolour dreamworld, with all the government spin in place. 

Car manufacturing has been among the first big industries to be hit as the recession turns into a US-style Great Depression and people face fear and anxiety over jobs. 

But the government continues its reckless policy of throwing good money after bad. That didn't work in the US in the 1930s and it won't work here now. 

So what's the cunning plan for a nation crippled with debt? Get us all into more debt by enticing customers to take out whopping loans for new cars. Er, aren't we supposed to be trying to kick the habit of a debt culture that cause all the problems in the first place? And who can afford a new car in these harsh days of recession?

The widely-reported package for carmakers is supposed to help with jobs. But allowing car manufacturers to apply for credit, which they can use to provide loans to new car buyers, is  all part of the wonderful world of borrow now pay later. 

Downing Street has been bending over backwards to shout out that Mandy's measures were not a "bail-out". So exactly where does the cash come from and whose pocket does it go into?

With 80% of cars in the UK produced by overseas firms and the vast majority bought on credit, the government's 'loans for cars' plan, will go straight into the pockets of the overseas firms and the City finance houses. Nice work if you can get it. 

There is a solution, a short-term fix which would end once and for all the ridiculous taxpayers subsidies and borrowed cash for bail-outs which is drying up as overseas investment banks say No. 

That's to take the big strategic industries into short-term full public ownership. But that wouldn't go down well with the government's foreign pals, industry bosses or the City. 

UPDATE 3.45pm: Mandelson played the old 'green card" as he outlined a £2.3 billion package of car industry loan guarantees  including £1.3 billion from Europe and a government guarantee of a further £1 billion. He said the package was "not a bail-out" but would "reinvent" the industry "for a low carbon future". The Orange Party thinks it stinks and even a £2 billion loan guarantee is a pittance to help with jobs. But maybe that's all the government can now beg and borrow?

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Set For A Barrow Full Of Banknotes

With the Bank of England slashing interest rates to an historic low, speculation is rife the government will print money to get it off the hook. Brown and his hapless chancellor are losing control of the country's finances and their senses. 

Floundering in economic cloud cuckoo land, their only way out is a barrow full of banknotes. 

The Bank of England's cut to 1.5% is a welcome last-ditch bid to kick start the economy. The Orange Party has predicted before it may well have to come down to zero percent. But with that cut comes the fear of deflation. Printing wads of bank notes is a short-sighted and short-term way to reflate but will help get the government off the hook until after the general election. 

Where the US leads, sadly the UK follows and printing money is exactly the option now being considered by Obama's incoming administration, as faced with a trillion dollar debt, attempts are being made to fool some of the people some of the time. 

It's clear the government hasn't a cat in hell's chance of funding its ridiculous borrowing binge but printing money is fraught with long-term dangers.

Anyone who takes a scant look at economic history can see that. Japan tried and failed. Mugabe prints worthless banknotes. Debt ridden Latin-American countries have become a laughing stock, as they tried the same trick. Germany tried it in the Twenties, leading to rampant inflation, the Nazi Party and people needing wheelbarrows to carry the cash to buy a loaf of bread. 

Brown and Darling have steadfastly buried their heads in the sand, refusing to shoulder any blame for the current economic disaster. The Orange Party has warned time and again the government is in denial about the scale of the economic crisis as it colludes with the BBC to label the recession a 'downturn', in the vain hope one day it will all go away. It won't and the government is fast running out of options.

Bailing out the banks with £37 billion of taxpayers' cash has failed. Now the banks want more money pumped in. Unemployment looks set to rise well beyond three million. Even using the government's smoke and mirrors way of fiddling with off balance sheet accounting, national debt has risen far more than the 44% of GDP, as Brown was forced to rip up his fiscal rules.

For Brown and the government, the solution is even more reckless, short-term fixes. But the political prognosis doesn't look good. 

The Tories are having a hard time getting clear and simple economic messages of thrift and good housekeeping across, as Brown spin goes into overdrive. For the LibDems, Vince Cable, seems to be getting perilously close to a deal with the government, which the Orange Party has previously predicted could happen. 

Slashing interest rates and printing more money is a quick fix which would release a flood of extra cash but there's no guarantee that would find its way through to businesses and families as people tighten their belts and hang on to any cash to pay off debts and hold off for better High Street deals.

There are realistic ways out of the recession, apart from massive government borrowing and reckless spending, if only the government and the BBC would have the guts to admit we are in one. 

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£500bn Bail-Out Won't Work For Us

An eye-watering £500 billion is being pumped into the UK banking system, interest rates cut by half a percent. Both measures prop up the banks. Neither will curb soaring inflation, rising unemployment or people struggling with insurmountable debt. These are measures for the City and by the City. As the banks sail off into the 'wild blue yonder', the legacy of this monumental bail-out will be with us for years to come.

Brown and Darling may have written their own suicide note as, in the months ahead, the true scale of the bail-out hits home. 

The subdued response in the commons from all Parties said it all. Generally, they took it lying down. 

The government spin has been swallowed hook, line and sinker, with few stopping to think of the dire consequences. Talk of part-nationalisation with a £50 billion taxpayer stake is a disturbing prospect. 

But Northern Rock was nationalisation. This is not. Taxpayer's cash is being used to buy preference shares in the banks. Control still remains with the shareholders with no publicly accountable voice on the board.

£450 billion (of which £350 billion is 'new' money) will be available for bank borrowing and guarantees. That cash will have to be borrowed on international markets, blowing any fiscal golden borrowing rule out of the water. At a time of tightening our belts the government is doing just the opposite. 

It saddles the UK with colossal debt for years, decades to come. Borrowing such a huge sum comes with strings attached. No one, not the IMF, is gong to lend cash without commitment to tighten the belt - and that means cuts in public services and public spending. 

Cutting interest rates may get thing going - for the banks - making it easier for them to lend to each other through the inter bank lending rate. But the Bank of England has, until now, been reluctant to cut interest rates. 

There's a price to pay. Any big cut means higher inflation and higher unemployment. That concern has been thrown out of the window.

No-one has stopped to ask how we got into this sorry state. All the attention is focussed on the struggling banks. Who gives a toss about the banks. They and bad government caused this mess in the first place. 

The spin now is of bold, decisive action by the prime minister and his chancellor. Like Bush in the US, they are using the current financial disaster to make themselves look good and dig themselves out of a hole of their own making.

Borrow cash by all means - to kick start the economy - particularly to invest in manufacturing which has been decimated by the government, relying instead on an economy based solely on the financial world of the City. 

If the government was bothered about people, not their pals in the banking world, they would have taken the simple step of guaranteeing all savers deposits, as in Ireland and tacitly by Germany. That would not cost a penny and only kick in if a bank folded. 

Cash would only be used for people genuinely struggling as they come off the fixed term loans and mortgages. Others will have to face up to the harsh truth that they borrowed money too cheaply, without any checks and now, unlike the government, have to pay the price of reckless borrowing. 

In the US, Bush has pumped $700 billion of taxpayers cash in the banking system and the Fed billions more. It is having little effect. Treasury secretary, Hank Paulson, is today warning that some banks will still fail. The same could happen over here. 

People want jobs, affordable housing and tax cuts to help them through the hard times. The country needs a strong manufacturing base. The measures announced yesterday simply benefit banks not people.

As liberal economist, JK Galbraith, observed:

"For now, free at last from all threat of government reaction or retribution, the market sailed off into the wild blue yonder."

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Brown Bails Out His Banking Buddies Again

More than £50 billion of taxpayers hard-earned cash is being pumped into the discredited banking system by Dithering Darling and Banksy Brown, along with £450 billion for bank borrowing and guarantees. What a couple of bankers. 

The High Street banks went cap in hand to the government for a blank cheque to oil the wheels of their day to day operations after it became clear they didn't have the cash to lend to each other. 

Now taxpayers have a stake in the part-nationalised banks and building societies to the tune of £2000 each, which is set to disappear down the black hole of smoke and mirrors accounting. 

The BBC reports a further £200 billion will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies. And, on top of that, there's a lending guarantee worth around £250 billion. All in all, a staggering £500 billion.

Time will tell whether this £50 billion bail-out on the hoof and the other £450 billion is too little too late or too much too soon. And, after the bail-out of Northern Rock and Bradford & Bingley, the question is where is all this cash actually coming from and where will it all end? 

In the US, Bush and his side-kick Paulson's cap in hand plea to Congress for $700 billion taxpayers bail-out cash had little effect. Now the Fed is being forced to pump billions more taxpayers cash into the US banking system. 

There's no reason to think the same won't happen over here, despite today's 0.5% cut in interest rates by central banks, including the Bank of England. 

Pumping taxpayers money into the banks means the taxpayer, not the bank shareholders, take all the financial risk. 

Shareholders still own the banks which can continue to make huge and risk-free profits, as well as paying themselves handsome dividends and director bonuses.

Brown and Darling are clearly out of their depth and the banks are calling the shots. 

Saving the banks in this way comes at a cost. The bail-out will bust Brown's golden rule on borrowing. The treasury will have to try to raise sufficient funds on the tight international money markets to pay our national debts. 

The BBC's man in the City and the treasury, Robert Peston, sent Downing Street into a spin yesterday when he leaked details of a secret meeting between the High Street bankers and government. This exposed a weak political leadership at the beck and call of the bankers. 

What is needed is bold, decisive leadership and a well-thought out economic recovery plan, not a bumbling and fumbling Brown and Darling. Bail-outs on the hoof are not the way to run an economy.

What is clear is that we have a chancellor and prime minister who are prepared to take risks with the economy and people's livelihoods, by using taxpayers money to prop up their pals in the banking system. And that could lead to political suicide.

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Heads Should Roll In Rock Scandal

Calls for legal action against Northern Rock directors doesn't go far enough. Members of financial watchdog, the FSA and government ministers who just sat back and allowed the whole sorry mess to happen, should be forced to quit in shame. 

The scandal is beginning to unravel, with a staggering half a billion pounds loss announced by the now nationalised Northern Rock and £3 billion of taxpayers cash to be pumped in to shore up the company.

The bank and building society's big wheeze to make a fat profit from mortgages and loans started years ago.

The government, Bank of England and the FSA turned a blind eye, while the money lenders changed the way they dished out the money. 

Instead of traditional financial checks on income and what you could afford, they switched to a risk assessment. 

Anyone could have a mortgage. The risks were bundled up and sold off. Big profits all around. Until the money to buy the bundled debt dried up. 

Northern Rock had given loans worth as much as 125% of home values, to some customers. 

But Northern Rock was just the tip of this iceberg. The financial mess was about to go pear-shaped. 

LibDem, Vincent Cable, has called for legal action against the private directors and warned the £3 billion of taxpayers' money is at risk.

The Rock also revealed customers in arrears and being repossessed, had risen sharply. Last week it announced 1,300 jobs were to go.

It was all an accident waiting to happen leaving taxpayers, now to cough up, pay for the greed and clear up the mess.

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