October 13, 2008

Mr Brown saves the world (no less)

Filed under: Economy, Politics/News — Tags: , — 4fooey @ 9:19 pm

Last week the UK government announced measures that will inject billions of pounds into British banks and guarentee lending between banks — it seems odd to most people that we, taxpayers, have to fork out so much cash to save banks, which afterall are commercial organisations which are ordinarily run for shareholder benefit. Aside from the rights and wrongs of rescuing the banks, and how we got into this mess in the first place, it seems that a rescue package is desperately needed — towards the end of last week stock markets were tumbling, severe economic depression was being predicted, and nobody really appeared to have a grip on this situation. The UK plan has gone through today — so not such a ‘Black Monday’ (except for the bank’s directors, poor souls!).

However it seems that with the UK’s rescue package, put together by UK PM Gordon Brown and Chancellor Darling, that we have all been saved, and now many other governments in Europe, and in the US, are doing the same. So let’s hope the British public can feel proud of their Prime Minister, and proud that it was a British plan that saved the day. It often takes an outsider to recognise success and give praise when it is due, so it was that economist Paul Krugman of Princetown Univ and columnist for the New York Times was overflowing with praise for Mr Brown. His comments are reported in the New York Times today: Gordon Does Good (reg may be required).

To quote Paul Krugman: “the British government went straight to the heart of the problem — and moved to address it with stunning speed. On Wednesday, Mr. Brown’s officials announced a plan for major equity injections into British banks, backed up by guarantees on bank debt that should get lending among banks, a crucial part of the financial mechanism, running again. And the first major commitment of funds will come on Monday — five days after the plan’s announcement.”

I still believe the banks were largely to blame for this crisis, but the regulators should take the next portion of blame. And it is government that should have been checking the regulator, in the UK this is the FSA. As well as the bankers, individuals should also take some of the responsibility for the crisis, since they fuelled the demand for more and more debt: according to Robert Peston today, the British people owe the equivalent of 3x the UK annual GDP which surely is unsustainable. So there’s plenty of people at fault here, but I guess while the whole ship kept afloat no-one wanted to complain. Today however, the British public should at least stop griping about their PM and give him some credit for once.


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