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Friday, 28 November, 2008 
David Cameron has given a speech this morning where he has said that our current economic problems are monetary based and therefore that a fiscal response is unlikely to help and may indeed hinder recovery. Put simply, monetary policy is defined as control of the money supply and fiscal policy is control of tax and spending. In a monetary crisis there is either too much money chasing after goods, which leads to price rises (inflation) or too little, which leads to prices cuts (deflation). The total amount of money in the system is also determined by how quickly it moves around, this is called the velocity of circulation. Many years ago an Economist, called Fisher, came up with the Quantity Theory of Money which stated that MV=PT, where M= the money supply, V= Velocity of circulation, P= the general price level and T= the number of Transactions or output of the economy. He postulated that in normal circumstances V and T are relatively fixed and so any increase in M would lead to an increase in P because the equation must always equal.
What I think David is saying now is that two things are happening, first the growth in the money supply has dried up (and this is borne out by Bank of England statements) but also that the loans are not being made and so the speed at which money is circulating around the economy is slowing also. Therefore if MV is falling then PT will also fall with falling prices and falling output. Today, the latest house price figures have been released and this coupled with what we are seeing on the high streets seems to show that prices are falling. We are obviously seeing falling output as businesses are failing and we are seeing unemployment rising.
The monetary solution is therefore to, counteract this fall in the money supply and also speed up its movement around the economy.
So how do you do this?
The quantity is largely controlled by the price of money which is the interest rate. That is why Conservatives are calling for a further fall in interest rates. In addition but, fiscal policy (tax and spend) must not prevent future interest rate cuts and this has happened because the Bank of England admitted they had considered further reduction in interest rates but have been put off by the Governments Pre-Budget Statement last Monday. So rather than helping the situation the Governments policies may delay recovery by preventing the corrective monetary policy decisions being made.
To speed up the circulation of money, Conservatives are suggesting a temporary system whereby bank lending to businesses will be guaranteed by the taxpayer. This guarantee would attract a slightly higher premium to cover the costs and risks of implementing the system. Lending is also a function of confidence so taken together the measures above would be designed to restore confidence and help lending start again.
Tuesday, 25 November, 2008
Every now and then I am still surprised by the breathtaking hypocrisy displayed by left wing commenters who claim to represent the working class. The self styled Socialist heroine Polly Toynbee was at it again in her column in the Guardian. This is what she had to say about the likelihood of unemployment reaching 3 million.
“Even if unemployment reaches 3 million, that still leaves 90% in secure jobs. Most people will suffer not at all in this recession: on the contrary they will do well…”
Polly forgets to mention her three houses, including a villa in Tuscany, a 6 figure salary and her very privileged upbringing. In fact she has about as much a clue of what it’s like in the real world as every other jumped up, opinionated and bigoted middle class Champagne swilling would be Socialist.
As always with these people, it’s one rule for them and another for the rest of us.
Saturday, 22 November, 2008
I attended a Road Safety Event in Brampton with local Councillor Joss Curwin. The event was well attended with representatives from Cumbria Fire & Rescue, the Police, The Drugs and Alcohol Awareness Campaign from Barrow wand the British Motorcycle Federation. The Fire service gave a sobering presentation on road traffic accidents in Cumbria that brought home the realities of the effect excessive speeding can have on families. The highlight of the day was the Fire Service demonstrating using their cutting equipment. I was ‘volunteered’ for one of these and was sat in the car whilst they cut the roof off and then lifted me out. I was impressed by the speed at which this was achieved but I would prefer to never experience it for real.
Wednesday, 12 November, 2008
I wrote this before PMQ’s today but have hesitated about posting it. I have been reading about this appalling case in the press today where a 17 month year old boy was killed by his mother, boyfriend and another man. I have been deeply upset by the whole story, perhaps because I have a five-year-old child myself or perhaps I’m just reacting to it in the same way that everybody else does.
Once again we have statements that lessons will be learnt and all the usual nonsense that you get when events like this happen. Yesterday, on the radio, I heard a person from Haringey try to excuse what had happened and blamed it on the families ability to deceive the authorities and that no one should be fired.
Today Sharon Shoesmith, Chairman of the Haringey Local Safeguarding Children Board said
“This is a family that needed, and was given, extensive help and support. The very sad fact is that we can't stop people who are determined to kill children. I am satisfied that the action that should have been taken was taken."
Do these people not realise that they failed and their failure cost the life of a baby. Do they not feel responsible? Do they not understand the level of disbelief and shock at what happened in the same Borough that saw the Victoria Climbie case just a few years ago? Does nobody feel that they should resign?
As for the three murderers, nothing will bring baby P back, but, I hope they rot in jail and life means life.
Monday, 10 November, 2008
On Sunday I attended the Remembrance parades in Barrow in the morning and Ulverston in the afternoon. Barrow was especially poignant due to the three families of local soldiers being present. We should be eternally grateful that there are still men and women who are prepared to put their lives on the line for our country. I strongly believe that the wars we are fighting overseas are in our national interest and that radical extremism poses a very serious threat to our way of life. If we do not fight these wars overseas, not only do we condemn people to suffer under evil regimes in foreign countries but, we will just have to fight these violent extremists in our own country.
We should honour our service people and accord them treatment befitting the heroes that they are. They do our dirty work so that we may be safer at home and we should say thank you more often.
Friday, 07 November, 2008
What a week, an election in America, an election in Scotland and a huge interest rate cut. The election of Barak Obama as the 44th President of the USA is a defining moment for America. It was heartening to see the two excellent candidates fight this election and also good to see a record turnout with people queuing to vote. Regardless of the outcome America showed the world just how good democracy can be and sets an example for people to aspire to.
The Glenrothes by-election produced a surprise result. The SNP were hoping to take this seat but Labour held the seat with a margin nobody expected. For all of us who believe in the Union the failure of the SNP to take this seat gives us a cheer. The UK is the most successful political union ever and we all benefit from being part of it. Sure, there are some issues to be clarified, why for example should Scottish MPs be allowed to vote on issues that only affect England and Wales?, but these are issues that can be resolved. The break up of the union would leave all parties worse off, Britain is better for being united.
On Thursday we also had a 1.5% interest rate cut which has taken rates to the lowest point for 50 years. This is a reflection on how bad the situation in the real economy is, which the Bank of England knows even if Gordon Brown wants to pretend otherwise.
In the run up to Christmas I will be running a survey in Barrow & Furness to ask people how the recession is affecting you. Many people tell me that they are worried about finances and jobs and I share your concerns. The sad thing is that, although the recession is worldwide, and so it’s unlikely the Government could have done anything to avoid it, we could have been better prepared. If the Government hadn’t over-spent and had saved during the good times then we could be cutting taxes now to help ease the pain. If the Government had regulated the banks properly then we wouldn’t be faced with the prospect of higher borrowing and taxes to bail them out. Labour has left us unprepared for this recession, and their only answer is grandiose plans to spend yet more of our money. We need practical policies to help people now and you will find details of some of these in the ‘News’ and ‘Press Releases’ sections.
You will find the survey on-line shortly or you may receive one through the post.
One thing is for certain, things won’t get any better until we have chance to vote for change.
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