Gordon Brown’s plan to save the world from another Great Depression
Posted on 17 September 2011 with 10 comments from readers
Asking the former British Prime Minister Gordon Brown how to fix the world economy is a bit like taking advice from Nick Leeson, the man who bankrupted Barings Bank with fraudulent trading. He should know. He was the person who loaded up the UK economy with the highest debt in the world and left it so exposed (click here).
Yesterday he told the World Economic Forum’s offshoot in China that austerity was not working and would drive the world into a repeat of the Great Depression: ‘Unless there is global co-ordination, I foresee 10 years of low growth in Europe and America, with very high levels on unemployment, that will lead in the end to greater protectionism. This is exactly like the 1930s.
‘You can impose all the fiscal contraction in the world, and yet more austerity, and that will drive the economy further into recession. Greece’s economy will contract five per cent this year, and we’re not seeing recovery in Spain, Portugal, Italy and Ireland’.
Brown’s Plan
His solution is for a ‘global growth pact’ combining stimulus from Europe and America and ’substantially more resources for the European Financial Stability Facility’ to bail-out Greece and recapitalize the banking sector, adding that ‘China must be prepared to increase consumption’.
Bloomberg editors reached a similar sort of conclusion arguing this weekend for an enhanced role for the European Central Bank with centralized powers like the US Treasury, seeing the US bail-out almost three years ago as a successful model for a way out of the current eurozone crisis.
However, just as the current British Prime Minister ruled Gordon Brown out of the running for a top IMF job because he misunderstood the dangers of debt – a euphemistic reference to the latter’s 13 years running UK finances into the ground – you do have to wonder if repeating the folly of the US in the eurozone is any more of a solution to the crisis.
The assumption Mr. Brown makes is that in the 1930s heaping more debt onto the already excessive borrowing of the 20s and First World War would have saved the world from the Great Depression. Nobody actually knows that this would have worked in the way he and many others assume.
It might have simply led to an even bigger blow up in the global banking system, if that is imaginable. So we cannot be sure it will work now. The socialist, big government prescription is not necessarily the one that will work. Indeed, as it got us into this mess in the first place commonsense would suggest it is most likely not the solution.
What needs to happen is a limited purging of the excesses now built up in the global financial crisis, not the creation of yet another level of debt. The German technocrats are not madmen, they are the ones who ought to be running the assylum not politically-motivated lunatics like Brown who got us into this mess in the first place.
He pushed British debt levels up and up to keep house prices rising so that he would become Prime Minister. That took a long time and left UK debt levels beyond any other country in the entire world.
Endgame
No what actually has to happen is a major shake-out. Debtors will face the consequences of their excessive borrowing and lose their homes and falsely-obtained prosperity. Assets will then be bought up by those with money at lower prices and the whole economy can be reset for a new era.
Capital will be in the hands of those who know best how to use it and the absolute absurdity of trying to save everybody from their debts will be over. Life is a competitive system, not a mechanism for universal welfare, and that is at heart where the world has gone wrong. Let competition work and society will get richer, stop that and you get economic depression.
And actually if you look beyond the heavily manipulated US statistics that is what is happening to US housing with massive price slumps and repossessions being the true story of the past few years. The US Treasury only prevented a collapse in the banking system, it has done nothing for many individuals or the lengthening dole queues.
This is painful and you can see why elected politicians are trying so hard to avoid it for they will be held responsible and spurned by the electorate, just like Mr. Brown who arouses so much anger among the intelligent British middle classes that he seldom appears in public in the UK. President Obama is going the same way, although he always sensed Brown was a loser.
The eurozone is muddling along into a crisis that will bring the debtors to their knees, and there will not be a solution to this economic quagmire until that happens. Mr. Brown only offers more of the same and running up bigger and bigger bills that can never be repaid. His day is over and the unavoidable denouement of the debt crisis is almost upon us.
10 Comments posted by readers:
congratulations for this very accurate comment.
Excellent & accurate assessment.
The questions beg … who invited that maniac to the conference? i.e. why is he there? who thinks he has a point of view worth considering?
Most serious of all, are any of the grownups listening to him?
- worth noting … his acolyte, Mr E. Balls, expounds similar. The only thing UK has going for it is that that other charlatan is not Chancellor!
Unfortunately, the virus extends now to Denmark where the new PM (daughter-in-law to a Neil Kinnock, another Labour windbag of an idiot) wants to chant the same mantra i.e. spend her way out of the doldrums. All the naive Danes who voted for the Reds should take a hard look at the state of UK when Brown was ejected … but now, it is too late
Brown spent money for the sheer sake of it in the naive belief he was expanding the real economy. Result? UK is now picking up the bill for various social initiatives incl. courses in clog dancing, drum beating etc. for ethnically unaware civil servants et al.
Conclusion: indeed, the inmates are running the asylum …
Prop. G. Brown!
He is STILL costing the UK money
He was recently spotted with his wife and kids at the beach in Fife – with 3 security minders – paid for by who?
The monocular moron should be jailed for treason. Sold our gold for $250/oz – was this stupidity or a deliberate act of communism?
Gordon Brown IS himself the Great Depression !!
The Arab Spring uprisings need their counterpart in the UK to become a Christian Winter of Disenchantment against the western political leadership.
A$..you understate Brown’s evil and intent..never can he safely walk the streets..you become Peter again when you admit he & his internationals saved only the banks & traders..of course the only sanity relies upon orderly reorganization, the one prescription
these spawn of a Devil avoid, as did Dracula the Cross
Very true and if you look at the comments section for the article link below, you will see that 99.9% are angry and resentful for the mess this socialist buffoon left the UK finances, just so that he could buy votes and further his own despicable career.
http://www.telegraph.co.uk/finance/financialcrisis/8768575/Gordon-Brown-fears-euro-crisis-worse-than-Lehman-as-1930s-beckon.html
Kyle Bass, who predicted the sub-prime lending debacle, was on CNBC Thursday at the ‘Seeking Alpha’ conference. He said that he expects Greece to default within a year. He said the default will take out the European banks and cause the USA to go into a recession next year. When asked about Geithner statement to Jim Cramer that another Lehman wasn’t going to happen in Europe, he replied, “But he didn’t say that bank shares or debt will be worth anything.” Another quote about what is going to happen in Europe, “A lot of people are going to lose a lot of money.” The host said he would have a longer discussion with Bass in 2 weeks at the ‘barefoot (?) conference’ at which time, they would discuss the European debt crisis in greater detail. Bass and his Texas partners made several billion dollars on the sub-prime debt meltdown. He made a presentation to a major NY bank before the crash trying to warn them what would happen if housing prices ever fell. They told him that could never happen. Then he placed his bets. The amazing thing was that his whole involvement in the investment was a result of a casual conversation he happened to have with someone involved in sub-prime lending at a friend’s wedding he attended in Italy.
I still expect some version of QE 3 before next spring. With Europe heading for a melt down, the Federal Reserve will do anything to try and stop the USA from following them into the abyss.
Here are some interesting facts, with gold now selling for more than platinum, which isn’t a good sign for the economy, by the way. Platinum is about 30 X rarer than gold on Earth. South Africa produces 80% of all platinum and has 88% of the known reserves of platinum. Russia produces nearly all of the other 20%.
Finally, a huge number of very sophisticated Russian hand-held surface to air guided missiles have been stolen from arms depots in Libya. They sell for a small fortune on the black market. These aren’t your typical old Russian junk weapons. They have shot down European and US warplanes in recent wars. One expert said they have the potential to turn Africa into a no fly zone. They can take down planes two miles away. They are very similar to the US Stingers that defeated the Soviets in Afghanistan. Too bad that weapons are about the only thing that Russia is good at making. If I was surrounded by Germany, some radical religious folks, China, and Japan, I guess that I would be good at building weapons too. Their new tank armor that can defeat kinetic energy rounds by sheering them is something else ! Who came up with that? They should redirect some of that talent to building some new airliners to reduce the number of crashes over there. Flying inside Russia is getting to be like playing Russian roulette.
I couldn’t agree more….Brown is a menace, a mis-fit and a half-wit! He is a serious threat to any nation’s wealth, so his “advice” should be disregarded as claptrap!
This man is ineducable. He obviously knows nothing of economics or history and it’s the likes of him that have brought the Western World to the brink of Financial Armagedon. Wasn’t he the Buffoon that sold 1/2 of Britan’s Gold Reserve at the outset of the recent ten year ( and counting ) Bull Market for the equivalent of $275 an ounce? Now he believes that more debt is the answer. All of these liberal, socialist ideas have failed utterly and abysmally. Yet those of that philospohy believe they just need to do more of their silly plans on a more grandiose scale and that will fix what the overspending has caused. Face Reality Gordy Baby, the World isn’t the same as it was and Humpty Dumpty is now a Fried Egg.
Gordon Brownis a Keynesian fool, and a disgrace to the UK.
Keynesians (e.g. Paul Krugman) have argued that the state should print massive amounts of money for “stimulus, subsidies and interventions”. This is the only prescription in their playbook, because they never learned Austrian Economics. Basically, they’re saying that the state MUST perpetuate the debt economy until it collapses. Europe is now agonizing over stimulus packages; unfortunately, several trillion Euros still won’t be enough.
A Quick Review of US stimulus Packages:
Let’s review a few facts here, regarding the unbelievably high Keynesian “stimulus packages” that the US has been issuing over the past 3 years.
1. US Congress (2008 – 2009): US Emergency Economic Stabilization Fund (EESF), approx. $800 billion, and the Troubled Assets Relief Program (TARP), $285Billion
2. FED’s QE2 Cost (2009): $600 Billion (same source as above)
3. FED’s Overt Bailout of US Banks (Jan’09 – Jun’10): US banks swapped their bad debts, MBSs, etc. with the FED, which then provided the banks with over $2.1 trillion, and bank debt, MBS, etc.
Source: http://en.wikipedia.org/wiki/Quantitative_easing
4. FED’s Secret Bailout of Big Banks (Mar’09 – Dec’10): Over $16 trillion (yes, TRILLION)
The US GAO audit of the FED revealed that the FED printed over $16 trillion and gave half of it to US banks, the other half to foreign banks.
Source: http://www.thedailybell.com/2729/GAO-Fed-Issued-US16-Trillion-During-2008-Crisis
Summary, from James Quinn:
“I’d like to remind the Harvard educated Keynesian economists that Federal government spending is currently chiming in at $3.8 trillion per year. Federal spending was $2.7 trillion in 2007 and $3.0 trillion in 2008. Keynesians believe government spending fills the gap when private companies are contracting. Obama has taken Keynesianism to a new level. Federal spending will total $10.8 trillion in Obama’s 1st three years.”
Source: James Quinn
Link: http://www.zerohedge.com/news/guest-post-keynesian-solutions-after-total-failure-try-try-again
Einstein’s Definition of Insanity:
Doing the same thing over and over, yet expecting a different result.
Definition of Keynesian Insanity:
Doing the same thing over and over, yet expecting a different result.