Thursday, 6 October 2011
What's in a speech
Tesco record their worse sales for 20 years. House prices fall by 0.5% in September and the market is "lacking direction", according to Halifax. The euro zone is in turmoil and now the `Bank of England has decided to print more money. Could things get worse?
Well things nearly did. And the culprit would have been none other than our own Prime Minister. And the cause would have been his address to the faithful in Manchester.
In the press previews of his conference speech he was due to say "the only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills".
At the very last minute the speech was redrafted to say “The only way out of a debt crisis is to deal with your debts. That's why households are paying down their credit card and store card bills.”
It has been said to the point of boredom by government they’re not going to move from their programme of cuts. In other words, forget a plan “B”, it ain’t going to happen.
But if the government isn’t for turning on public spending it needs ordinary punters to cut their debt and start saving like it needs a hole in the head.
It’s all about what our old friend Milton Keynes described as the paradox of thrift.
It’s when government, firms and consumers keep their hands in their collective pockets and refuse to spend. They become preoccupied with reducing their debts.
And why not be prudent, I hear you say. Well it would result in domestic demand being even further depressed with output going down and jobs going out of the window. And this would be only the start of a downward spiral to mass unemployment. Just like the thirties, but politicians then had an excuse, Keynes hadn’t published his tome.
Now Mr. Cameron who in Oxford read PPE ought to dust down his old college notes and remind himself of the General Theory of Employment, Interest and Money. He’ll be reminded that last thing the UK economy needs at the moment is for Joe Public to clear personal debt and stop using the credit card.
There are real risks to the country’s economy at the moment if collectively it saves and not spend.
So whilst Mr Cameron’s original speech would have meant economic disaster if the public had taken heed of his advice.
However, if his amended version is true and consumers are indeed paying off the credit card and store card bills then the onus is on government to step in and start spending to support demand.
If they’re not for turning, then the economic and fiscal forecasts depend on households ignoring thrift.
Spend, spend, spend would have been a better conference message.