Thursday, May 15, 2008

Dear Prudence, Brown in Buck Passing Mode

Well as the Chancellor he once littered his budget speeches with prudence, or some other word derived from that stem is passing the buck regarding all things economic. However, as is the way of the Tim'rous Beatie as things are going wrong the Prime Minister instead of taking the plaudits once thrown at him for a stable economy, he's papering over the cracks as subsidence sets in, not even a year after his watch concludes.

Now while I accept that he does not have control really over international oil prices. He has had some control over food prices and as for UK house prices just who is the PM kidding by blaming international factors carte blanche.

Let's start with food. Yes for some time now our supermarkets have been underpaying suppliers to provide them with good which consumers are demanding all year round. Looking at the 'fresh' fruit and veg in February you'd think it was summer time if you had your own allotment or vegetable patch. Many of our European neighbours don't go in for this have it fresh have it now attitude and are more reliant on local in season produce, or pickled, frozen, tinned etc varieties when out of season.

Now by underpaying for what we eat, the producers have been unable to reinvest in their businesses to improve things, many have gone out of business. So yes while there is a food shortage in some areas of the world forcing prices for some commodities up, it is actually as much our responsibility in the first place as it now is our concern in our pockets. The fact that the keeping of prices artificially low has aided the chancellors inflationary targets for so long is possibly one reason why the government weren't too keen on fair trade, as fair trade wouldn't have made them look quite so good to the punter on the street.

As for the housing market problems. Surely the only problem our banks have had is in investing in something that overstretches. I remember learning all about discounting etc way back in early Economics classes at school. About how the banks had continued to lend more and more against a smaller and smaller proportion of anything substantial. Therefore the whole sub-prime fiasco is a disaster of the banks own making. The fact that many of our banks investing in companies offering that is a sign of their own greed, to try and make a quick buck.

The fact that 125% mortgages were available in the UK makes you wonder if it all goes wrong how on earth do you get back the extra 25%. Especially if the bubble finally bursts and house prices can no longer rise because people no longer can afford to pay to be able to borrow to pay those sorts of prices.

So just who was able to keep some sort of check on the financial sector in the last 11 years then Gordon?

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