One life. Live it.

Via Cranmer: Conservatives launch Debt Clock:

What you could buy with the interest on Labour’s debt:

If Britain was not going to spend £63.7 billion a year on debt interest, we could:

Abolish fuel duty, inheritance tax, and stamp duty or

Abolish council tax or

Pay for 1.5 million extra police officers or

Pay for 1.6 million extra teachers or

Pay for 1.9 million extra nurses or

Cut the basic rate of income tax by over 13p.

Britain will spend more next year on paying the interest on Labour’s debt than on educating our schoolchildren. The Dedicated Schools Grant in 2010-11 will be £31.9 billion. Debt interest payments will be £42.9 billion in 2010-11, and are estimated to rise to £63.7 billion by 2013-4.

And so on…

Via The Cobden Centre » Honest money, a summary of economist Irving Fisher’s “100% Money”:

The 100% proposal is the opposite of radical. What it asks, in principle, is a return from the present extraordinary and ruinous system of lending the same money 8 or 10 times over, to the conservative safety-deposit system of the old goldsmiths, before they began lending out improperly what was entrusted to them for safekeeping. It was this abuse of trust which, after being accepted as standard practice, evolved into modern deposit banking.

Today while telling in Norwich North, I was joined by a charming lady from the Green Party.

In conversation, she indicated the Green view that the present crisis was caused by the liberalisation of banking and the operation of the free market. I explained the ways in which I disagreed.

These are the posts I recommended:

• A quick guide to The Credit Crisis, which links to:
• Banks, economic interventionism and the cause of the credit crisis,
• And this primer which includes:
• This short essay on the Austrian theory of the trade cycle.

As I said earlier, perhaps the greatest of my dissatisfactions with the Green Party is their lack of a coherent explanation for misallocation (that is, waste) of resources, resource over-consumption and the boom-bust cycle. If we truly care about the environment and people’s well-being in it, good intentions and passion are not enough: we must understand the way society works and the factors affecting consumption.

In the meantime, all the best today, on polling day, to Chloe Smith.

Via British banks highly vulnerable to future shocks, Bank of England warns – Telegraph:

Britain’s banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.

…

In a sign of the strain facing nations’ public finances – including the UK’s – the report also revealed that the threat of a sovereign debt default has become one of the biggest concerns for investors. A survey put together for the report identified sovereign risk as a financial stability concern for the first time.

The report also laid out a number of key criteria banks will have to fulfil in the future – reforms which could transform the structure of the financial system. Among its recommendations were that in future banks should “face a credible threat of closure or wind down”, should have a “risk-based, pre-funded deposit insurance system”, should increase their levels of capital and liquidity, depending on their size, and should provide a “will” which explains how to dismantle them in the event of insolvency.

The Bank of England’s Financial Stability Report is available here. The summary is quite accessible.

However, to answer the underlying “why?” one must look elsewhere. It may also be worth considering this speech by the Earl of Caithness:

The Banking Bill which we are currently discussing in the House is very complex and detailed, but it does nothing to resolve the current banking crisis, which lies at the heart of our economic problems. … the fault that really needs correcting is our whole banking system.

The debate which must be reopened and made contemporary is that between the Banking and Currency Schools of the nineteenth century. At the time of the 1844 Bank Charter Act, the Currency School committed three errors which haunt us today. More to follow at The Cobden Centre.

The European Commission and other EU officials are celebrating after the Prime Minister accepted on Thursday night the creation of European supervisors over national regulators.

Senior EU officials described how in return for a promise that Brussels regulators can not have power to tell the British government when, and by how much, to bail out banks, Mr Brown has given ground on a broad range of other supervisory powers.

via Gordon Brown surrenders key powers over financial regulation to Brussels – Telegraph.

See also King seeks empire and EU ‘risks lagging US on regulation’.

The Policy Exchange has advised the next government that it must be prepared to make radical and immediate cuts to spending plans or face a serious risk of a full-scale sovereign debt crisis. In a new paper, it has also shown that only a third of the impending surge in government spending can be traced back to measures intended to combat the recession, with the rest going on increased budgets for ballooning government departments.

via UK ‘needs emergency Budget’ – Telegraph. The Policy Exchange report is here:

Government spending is growing far more quickly than in other countries, and faster than in previous recessions, think tank Policy Exchange today warns. A new report finds that the surge in spending is not being driven by the recession.

At most, 6% of the increased spending is going on public works, and just over a third is due to the rising cost of social security or debt. Instead of “investment”, most of the increase is due to a decision to spend more on consumption.

“A decision to spend more on consumption” — that is, borrowing to fund present expenditure: plainly unsustainable.

Bank of America, Citigroup and Wells Fargo will have to collectively find $55bn in fresh ordinary capital as a result of the US Treasury’s financial stress tests, details of which are due to be announced today.

The three banks – three of America’s four largest by assets – are expected to be among the institutions requiring the most capital following the publication of the long-awaited tests, designed to ascertain whether banks’ reserves are strong enough to survive further economic shock waves.

via US banks thought to need $55bn in capital – Telegraph.

The projected value of the state pension collapses in the face of the rising cost of public sector pensions:

Billions of pounds have been added to the cost of unfunded public sector pensions as the various schemes from the NHS to civil servants, the armed forces and teachers have updated their assumptions about how long people will live, Watson Wyatt, the pensions consultants, said.

The NHS has become the latest to do so, with the government now expecting the typical employee to draw their pension for more than 30 years – to beyond their 90th birthday.

via FT.com / UK / Politics & policy – Longer life raises bill for taxpayers.

From the FT, Quantitative Easing Explained provides an approachable description of the process.

However, Dr Anthony Evans writes:

Despite the confusing terminology, quantitative easing is nothing new. It is simply an exotic label for a discredited policy.

And:

The amount of currency in circulation was growing at 12% in January 2009, has consistently been expanding at a faster rate than GDP, and the Bank of England is responsible for this monetary expansion. What’s more, the consensus view of economic commentators is that a root cause of the financial crisis was artificially low interest rates and the resulting mis-allocations of capital. In short, the Bank’s solution is a larger dose of what caused the original disease.

Read his article for more.

I am delighted to report our most successful year ever. We made more progress to achieving our twin goals of increasing our losses and building up our levels of debt than ever before. Indeed, I am especially proud to be able to announce that in just two years we will be able to borrow more than all the previous managements of UK PLC and its predecessor companies over 1000 years. I think you will agree with me that this is a magnificent result.

Read more at John Redwood MP » The Finance Director of UK PLC sends out the annual figures.