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You've confused me Nick. I thought there was only one shadow cabinet...and therefore one shadow chancellor. Regardless of what the LibDems call their spokesmen, they are not the official opposition nor a government in waiting. BTW, what is Vince Cable's official title - in parliament speak?

"When I asked Gordon Brown about this he appeared torn between wanting to diss an idea coming from his opponents"

Diss?

Are you trying to appeal to the kids? Why not take this to its logical conclusion and rap your next bulletin on the Ten O'Clock News. I'm available to join you for human beatbox.

Otherwise, interesting as usual.

Nick,
Next time you question the Chancellor or the PM,perhaps you could ask them how come, if they believe our economy is so robust, the Pound has slumped against the Euro?

Nick

You know that Gordon Brown has said that the IMF should operate as an early warning system.

In light of this are you going to challenge him on why he is ignoring their early warnings such as this one?

"Dip" in the housing market? For someone trying to cling onto a fast-fading reputation for economic know-how (or should that be being in the right job at the right moment in the economic cycle, as GB's successor now realises), he seems to be trying very hard to ignore the many factors which will make this dip a nosedive. Cheap 125% mortgages, one of several financial devices designed to sustain inflated house prices, are no longer being dished out like sweeties. Shaving 0.5% off a historically low interest rate is making no difference (if anything, mortgage lenders are putting their rates up!). On that note, the lenders are actually taking steps to deter new borrowers, something which would have been seen as financial suicide perhaps 6 months ago. Could it be that they just don't have the cash to give away?? But, apart from these trivial issues, our economic fundamentals are rock solid...

It has to be admitted that Vince Cables track record on the economy is very good and his ideas should be listened to. Its also clear that its the credit conditions that have brought these problems about, not just lending so that also fits into what is being proposed.
What worries me is the idea that 'there is some debate behind the scenes' and that 'whether the Bank can make the change itself or if it needs the Treasury' Someone needs to grab hold of this problem, take responsibility and make things happen.
The time for drifting and dithering is over.

I am convinced that one of the prime causes of the present crisis is the decision to use the CPI, rather than the RPI, as the 'key' measure of inflation. The result of this policy was that interest rates were held for too long at an artificially low rate, giving rise to the credit boom and runaway house price inflation. While I have no doubt that housing costs must be taken into account in determining the inflation rate, it is important that such a measure is only reintroduced once the present downturn has run its course, or the inflation figures will become skewed in the opposite direction, dragged down by the deflating housing market.

"diss" Nick? Has Gordon suddenly become "down with the kids" or is it just you?

What's this? A bank lending the money it collects from depositors? What a revolutionary idea! Perhaps once all banks operate this way, housing price bubbles will become a thing of the past.

Well done, HSBC!

I believe that (closet-Tory) Stephen Wynne-Jones clearly doesn't understand that the reason the Lib Dems are entitled to their "Shadow" status is because the Tories are currently doing such an appalling job themselves. At least Cable has suitable credentials to comment on the UK economy unlike the man who was the advisor to the Chancellor of the Exchequer during Black Wednesday. Someone who had a hand in such an event should not have any responsibility for the UK economy in the 21st Century.

So the Chancellor doesn't think that a slow down in the world economy will affect his own forecasts ? What an idiot !!!

Genuine economic growth comes from selling more goods and services tomorrow than you did today. So if the rest of the World has to cut back on buying goods and services how does our economy grow ??

No doubt Mr Darling has it in mind to use the traditional remedy of socialists who only understand rose-tinted economics from the LSE. He's in charge of the printing presses, so he can print lots more money and spend it whilly-nilly on creating more clients of the State.

In a time of World crisis, this should create stagflation of enormous proportions. Of course, massaging of the figures would allow him to proudly proclaim that we still only had an inflation level of 2%.

It is a sad fact that Government statistics are now so prone to interference that they have become meaningless and completely untrusted. The thin end of the wedge was started in the Thatcher government in order massage the unemployment figures but since Za-NuLab came to power and governed under the principles of spin they have proliferated statistics and every single one is contaminated.

If GB and AD are in such command, how come the two Opposition Parties are making the running on reforming the Financial System?

Also, I wonder when the Electorate is going to twig about New Labour's "Wizard of Oz" act?

Perhaps we can start a sweepstake about what we'll be told if there is a meltdown in the Local Govt. elections?

Lets get one thing Straight. The Economic conditions are different to the early 90's. However individuals now have so much more personal debt that this could end up worse that the early 90's as having no income owning nothing is bad having no income owning credit cards etc will could destroy people future for many years. Brown can say what he likes but this is the reality and likely outcome!!

Isn't it strange - when house prices go up, they vastly outstrip levels of economic output, going up by a factor of 3-4 relative to income growth and even more relative to inflation. But when they *stop* rising, they will apparently be "contained", because ... unemployment and inflation are low, so there is no reason for them to fall.

Basically it seems Gordon still hasn't understood that he is looking at a bubble, and he continues to use the same arguments about fundamentals, when the prices clearly haven't been driven by fundamentals for years. They have been driven purely by momentum and fuelled by credit that - suddenly - isn't that available any more. No more credit - no more momentum - it's a long way down.

#6
Someone taking responsibility - this government like its predecessor has been doing its utmost to avoid any form of responsibility . Just about everything now is dealt with by 'Agencies' which makes them responsible - keeping the blame for the appalling situation we are now in as far as possible from those in power. It takes a lot of thinking back to remember any member of any government taking responsibility for any failure let alone resigning . As long as we have government 'at arms length' then the voter is powerless. By the way , recently HMRC admitted that in 2005 they 'lost' £42 billion in revenue due to evasion and avoidance plus £12 billion in VAT fraud . With that extra income we would be in a far better position than we are now.

I read No12 from Dan with a yawning interest. I remember Mr G Brown being very keen on the ERM, and indeed the Labour opposition and the Libs/Dems, or whatever they were called then, were completely sold on ERM. Having been pushed out by the market forces, a consequence of which the UK economy boomed, all the supporters of ERM did a 180 degree turn on the concept, tut tutting the Tories for going in almost. Such hypocrisy.

'When I asked Gordon Brown about this he appeared torn between wanting to diss an idea coming from his opponents and not wanting to rule out something he may yet want to embrace.'

Does this mean good old GB is about to nick yet another great Tory idea!

PS 'diss' - I think you are a cool dude Nick!

I like this blog, it's insightful and concise, but there really is no need for you to use the word "diss".

I suppose if you can claim expences for everything from your TV licence to your groceries then the economy and inflation do look rather benign! For those in the real world outside Westminster, of course, it all looks rather different. If the Bank of England is using inflation figures as its guide for interest rates, then shouldn't it be using the prices of things that real people have to pay for, like council tax, utility bills, petrol, TV licences etc, rather than Ipods, MP3 players (whatever they are) and the like?

Using deliberately falsified (or selectively chosen) items to put into the "shopping basket" to measure inflation, and pretending that this will guide the economy is rather like puting the wrong co-ordinates into your GPS and expecting to navigate to your intended destination. No wonder we as a nation are heading in the wrong direction.

Gordon Brown 'torn between... ' two different ideas? Well I never. The great Ditherer still dithering in the middle of the biggest credit crisis for fifty years. Can it be true?

The truth is they haven't got a clue what to do about a problem they created. NuLabour grew the money supply and the supply of credit at unpardonable levels for ten years to fund the biggest public sector splurge in a hundred years. Money poured in so fast that, like flood waters, much of it ran away.

We are now paying the price for this incompetence with higher mortgage payments and restricted credit markets and we are asked to believe that the Blessed Ditherer is the man to put it right. Student politics - which is all the leader is good for - can solve nothing in the real world. more importantly, student economics - for that is all he understands - never provided the answer to anything.

There is little wonder this government and its leader in particular, have suffered the fastest defrocking in history; for after all this Emperor wasn't wearing any clothes in the first place.

Keeping confidence high?

Confidence is as high as politician’s expenses and like those it’s full of fiction and hot air!

Same as the last lot when they were in the "House"

It really won't matter what colour gets in next. It's only a matter of time before the UK becomes a 3rd world country. I like to thank the politicians for that because we would never have got to this stage without all of their incompetent efforts!

Dan (at 12) calls Cameron "the advisor to the Chancellor of the Exchequer during Black Wednesday".

This isn't so. He was a minion and certainly not "THE advisor".

Let's not forget, in any case, that Norman Lamont was always against the ERM - it was John Major's policy that he was forced to follow - and that when the pound fell out of the ERM, it is well known that he was privately pleased. It was also Lamont that put in place the system of inflation targeting that has (until Brown messed it up by using CPI instead of RPI) been so successful.

The jobless total in the UK is down for the third month in a row, farmers are getting paid more for their produce (and are happy - listen to You and Yours yesterday), exporters are having a fantastic time with the lower value of sterling v Euro (see ³ÉÈËÂÛ̳ story re Caterham Cars) and last month manufacturing reported a increase in orders. Stories not heard in the US or many Eurozone countries.Yet it's all doom and gloom because the price of houses has dropped and the US is going into recession. We will talk ourselves into a recession if we're not careful, let's take time to look at the bigger picture.

In his article that you refer to Vincent Cable says 'What will have to happen is a much more active approach by the authorities, in particular the Bank of England, to managing cycles in the key asset markets:what the IMF calls "leaning into the wind"'.

In his article on FT.com dated 6 April 2008 entitled 'Alan Greenspan: A response to my critics', Mr Greenspan, a former President of the Governors of the Ferderal Reserve says 'I know of no instance in which such a policy has been successful... I doubt that it is possible. If it turns out it is feasible, I would become a strong supporter of "leaning against the wind".

My interpretation is that this is because leaning against the wind requires knowing what direction the wind is blowing and regulators are traditionally bad at that. Irresponsible sub-prime lending in the USA took off in 4th quarter 2005. By the time the regulators would have registered it as a fundamental problem it was probably too late to do anything about it. After all it initially showed good returns (hence the demand for the CDOs and helped finance the US trade deficit).

Why does Mr Cable, or anyone else for that matter, believe that such a policy would be feasible? Is it not just another idea that sounds good but wouldn't actually work?

Rather than trying to actively manage markets don't we just need straightforward rules to reduce the likelyhood of asset bubbles in assets that are important to most of us (housing, pensions, inflation)?

Maybe he meant diss as in "discuss"?

Yeah, alright, it’s not likely.