adrenochrome

In this ever changing global landscape, I felt it was time to give updates on some of my previous blog entries;

1/ Israel - has now been condemned for violating international law, humanitarian law and failing to recognise the neutrality staus of the International Committee of the Red Cross. My best friend is of German Jewish extraction, and whilst being a generally calm and relaxed person, he is ashamed and angered by Israels actions. Many European Jews are likewise disgusted. Unfortunately, Israel tends to ignore international law, the UN, and even the Jewish people of the majority of the world. This cannot be allowed to continue; Jewish people have been attacked in Denmark, supposedly a list of influential European Jews has been drawn up for retribution (including Sir Alan Sugar), and this was before the atrocities of the last few days. These kinds of reprisals against the Jewish communities of the world can not be condoned, but only Israel can defuse this situation. Even the USA seems split, with Condoleeza Rice stating that the UN statement is a step in the direction towards the aims of America, but she still abstained rather than voted for the statement! Israeli soldiers must not attack Red Cross and UNWRA staff, can not block ambulances, should be ashamed that children are left for days without food and water whilst lying amongst the dead bodies of their mothers, and the whole idea of corralling citizens into a ’safe’ house then shelling them is just too close to concentration camp extermination for any human being to not be shocked. Israel is perfectly entitled to take action to protect its citizens, yet producing hatred of Jews across the world, and the next generation of Hamas and Hezbollah suicide bombers will not do this. The action of Israeli troops has got severely out of hand and is being counter productive. As usual, more carrot and less stick will win the war of hearts and minds in the long term.

2/ Andrew Strauss has been named the new England cricket captain, at least for the Test matches, and whilst I suggested Paul Colliongwood, Strauss is a level headed character, who has respect among the players and an even handed approach. This is a good selection, and I wish him well.

3/ The UK economy - well let’s face it, when Alistair Darling claimed in the pre-budget report that the recession would be over by July, and when Gordon Brown claimed the UK was better placed than other western countries to weather the storm, I mocked. Today it became clear that I was right.

We are all aware of the job losses in December and the downturn in manufacturing pre-Christmas (especially in the car industry) but today we have learnt that November saw a downturn in productivity 5 times larger than economists had expected. With even worse figures to come over the next few months, with unemployment likely to hit nearer to 4million than the 3million predicted, and with worse than anticipated US employment figures, it seems that Alistair Darling is going to have to rework his figures and downgrade his expectations. That these were ridiculously over optimistic was apparent to everyone, but by how far he has been proven to be innaccurate has even shocked me. The affect of all this on the individual is not being discussed by the media. Remember that after the PBR (Pre-budget report) the Tories said that this would lead to massive debt for the country, which the next generation would have to pay? Well the reappraisal will mean that the country will have to borrow even more, and for even longer, and the debt will be substantially higher, leading to higher VAT, PAYE and interest rates for even longer, possibly not just our children but our grandchildren. Additionally, both Darling and Brown stated that they were ‘urging’ the banks to lend more capital to individuals and small businesses to ride out the recession, keep people in jobs and aid the economy. They also agreed that if the banks didn’t act, they would take measures to force compliance from the banks. 2 months later, still no compliance, no lending, and no action from the government, who are obviously in the pockets of the same banks.

Yesterday we had the pointless action of a 1/2% cut in the Bank of England base rate. This will have no effect on the economy for numerous reasons. It only affects ‘tracker’ mortgages, most of which have a bottom level limit of 2%. The banks are not lending, and the lower the interest rate, the less profit for them from lending. This is a disincentive. It is made even worse by the fact that the government money lent to recapitalise the banks is charged at 12% to the banks, therefore, every pound that the banks lend at 1.5% will cost them 10.5p in losses. This is also a disincentive to lend.

The affects of the unemployment have not yet been felt, and as things stand it is unlikely that the country will start to come out of recession till November this year, at the earliest. Meanwhile, the most atrocious spectre of printing money to buy our way out of debt is now looming. This would be a travesty, leading to wage inflation, devaluation of an already devastated pound sterling, and inflationary pressures that could make the Weimar Republic blush.

Even so, the Guardian today had the headline that Barrack Obama agreed with Gordon Brown on policy. The truth is that the only way out of recession is to spend your way out, but not by giving money to the banks. This has already been tried and failed. Vince Cable, deputy leader of the LibDems, has again been right from the beginning. A small tax cut at the bottom level would put money back into the pockets of the public, who could then spend. This is the only practical way to spend our way out of recession.

No more money for the banks, no more cash being printed, just a two pence reduction in the bottom rate of income tax will redeem our ability to spend our way out of trouble. Strangely, this would have been the first thing a Labour government would have done, prior to their becoming Thatcherites under Tony ‘Middle East Peace Envoy’ Blair.

Sorry that todays blog is so bleak, at least the cold weather is coming to an end. Let’s hope the rain that falls on frozen ground does not lead to localized flooding.