Reasons to doubt Brown's proposal - 1

In general he is applying a vaccination. We have a recession caused by an excess of debt, Government and private, so he is advocating a further dose of debt to cure the problem!

The "never-had-it-so-good, permanent-boom-without-bust" decade under Brown ultimately destroyed a healthy economy because it was built on a bubble which could not last. In the end it was the sub-prime over-lending to people who could not afford to repay, by President Clinton, and others in this country who overreached and forced up house prices when interest rates were kept low, which gave the illusion of well-being. These are the cause of our problems.

Everything has now collapsed, or is rapidly doing so. His remedy is likely to cause stagnation for many years to come, partly through distortions which he has introduced and partly because extra government debt will hang round the neck of the economy like a great millstone.

For the moment, let us just reflect that Japan tried the Brown nostrum in in the early 1990s and had very poor growth for years afterwards in what had been one of the world's star performing economies. The present US government has increased its spending by over 11 per cent in the past twelve months, and pushed its budget deficit to $455 billion in the process. This is a Brown fiscal stimulus, but it has had as yet little noticeable effect on the US economy. Indeed the motor manufacturers are asking for yet more, - to be pumped in their direction.

Until recently our Subprime Minister was quoting Keynes, - he has not done so recently, perhaps because of the criticism he encountered. Keynes wrote out of the experience of the 1930s, but his nostrum was applied after the start of the world depression in the early 1930s.

Did the Keynesian solution work, that is throwing yet more money? The answer has to be that if it worked at all it was really only after a number of years, and perhaps it was WWII which really did the trick.

Of course Brown & Co could always say, "But things could have been even worse without what was done!" That is always true, but I am not sure that the Japanese would see it that way, and Brown can't prove that things will have been better because of his enormous gamble.