Labour’s hubris reached new heights yesterday evening on Question Time when Roy Hattersley told the audience that Gordon Brown was now “leading the world out of recession” – an impressive claim given that (officially at least) we are only going to enter one today.
Either Hattersley doesn’t understand the difference between a liquidity trap and a recession or he has a touching faith in the ability of Labour spin doctors to convince the lumpenproletariat that the unemployment queue in which they are standing and the bailiff at their door are simply figments of their imagination, unpleasant side effects of an international crisis which is not of Labour’s making.
The currency markets, of course, are a tried and trusted mechanism for telling us which countries are going to withstand a recession better than the rest – which is why the pound is about as popular on Foreign Exchanges as Phil Woolas at a Cabinet meeting. The fall in the pound, which could now test the historical 1992 dollar lows, is only going to be made worse by the spending plans of a Government desperate to cling on by their fingernails. Living standards will be hit faster and harder because after eleven years of New Labour we just don’t have the balance sheet to be issuing new debt on this scale.
Edmund Conway in the Telegraph this morning compares Darlings new found faith in Keynes to the actions of a Gambler.. but as everyone knows there is a world of difference between the player who doubles up when he is winning and the desperate man who stretches the last of his credit trying to claw his way back into the game.