Spectator politics correspondent Fraser Nelson spots that Gordon “off balance sheet” Brown, as I will now continue to call this shit of a national leader, has devised an accounting wheeze to remove the tens of billions of public debt involved in the Northern Rock bailout from the public accounts. As a result, Brown can claim that the UK public finances are fine, nothing to look at here, please move along.
As Mr Nelson points out, Brown engages in practices that politicians are only too keen to condemn when applied by banks. But at least banks, if they try to remove certain default risks off their balance sheets, use forms of tradable insurance policies known as credit default swaps. I’d be interested to know how exactly Brown & Co. intend to hedge out the risk that Northern Rock does not return to any form of profit. This disconnect between the talk of prudence on the one hand and financial trickery on the other will, I hope, be the undoing of this overrated bullshitter from north of the border. Brown is damaging the age-old Scottish reputation for plain dealing. No wonder so many Scots want to cut loose from the UK. I don’t blame them.
Almost as much fun as Massachusetts’s “non-budget budget” (one of 4 budgets constituting the overall state budget, with only one discussed in the news).
I have no debts, excluding my mortgage, which according to recent polls doesn’t really count. There, that felt better.
I don’t think Gordon Brown is the reason that Scots want to cut loose from the UK. After all, the subsidies that this criminal scum shovels across the border are the chief reason Scots want to remain in the UK.
Gordon Brown is the chief reason English people want to get shot of the UK.
Come the next election I am going to bet that Brown will lose is seat, that is if he has the guts to stand.
The issue here would seem to be the quality of decisions that the country’s Prime Minister is apparently empowered (or advised) to make/announce. If a decision seems to be asinine, then that would be a good reason for debating the decision, but it would not be rational to attack the person (argumentum ad hominem) in unsavoury terms. Whilst it might feel good to vent in this manner, to do so would tend to say more about the attacker than the object of the attack.
As for the decision, I would suggest that the PM is probably no fool and that there would be good reasons – if not extenuating circumstances – for his arriving at the decision he did. However, we do not know those reasons, though we could suppose them.
The decision to relegate the public funds committed to the Northern Rock bailout to off-balance-sheet status does seem extraordinary, and going off-balance-sheet is an accounting rule that few organisations (the exceptions include some some financial institutions) are legally entitled to implement. It could be “false accounting”.
Some acceptable/legitimate criteria for doing this are that the funds are committed to a subsidiary company which is NOT regarded as an investment, where one is not a majority shareholder, and where the subsidiary provides services to oneself which could be more properly regarded as operational costs – so it is an expense item. Such services need to be paid for as an inter-company transaction, and would usually incur VAT. I am not sure whether Northern Rock would meet those criteria, for the government, but I suspect not.
Such a decision as this by the PM is more probably the sort of thing you might expect out of an organisation whose process capability is immature – in a state of dynamic change – and processes would thus be irregular or ad hoc (i.e., chaotic). I would not expect such processes to be able to bear the hard light of scrutiny by an objective observer looking for a consistent and ethical approach.
The fact that such a decision can actually live to see the light of day could well bespeak a formiddable level of panic in government circles, and is presumably an attempt to manage perceptions and exercise damage control. No-one in their right minds should be easily taken in by it. Goodness knows what the man in the Clapham omnibus would make of it, but I suspect it could shift his voting bias away from Labour.
Not being familiar enough with the specific case of Gordon Brown I’ll leave that aside. However, in general, when a person accumulates a consistent pattern of bad decisions, is it not prudent to eventually recognize not that he’s committed an error of judgement, but that he’s just too stupid to live?
Cor blimey, Johnathan! If you’ve vented more…er…stridently against a public figure before, I certainly can’t recall the occasion. Gordo must have really sunk to a new low!
Pedant, you chose your handle well.
James, Gordon has indeed been sinking to new lows. Of course, I try to tell myself that he is just a politician, etc, but that is too easy. He has been in power for more than 11 years, and been hammering away at his image for “prudence” and plain speaking for two decades or more. It is at odds with his actual behaviour. He hides behind complexity, has raised taxes when he says he hasn’t; fiddle public spending rules, weakened the inflation-busting remit of the Bank of England, concealed debts. Now he has the nerve to engage in a mad orgy of Keynesian spending – at total odds with the lessons of history or indeed his own stated views.
The man is beneath contempt. He is one of the few political leaders whom it would give me pleasure to see fall from grace in humiliating fashion. And like Brian Micklethwait said recently, I don’t even let myself get diverted by this “oh he’s probably not such a bad guy” line. I have met him several times, and he’s not a nice man.
No price was too high for the British people to pay for Tony Bliar’s popularity. However, Gordon is worse: no future price is too high for us to pay for his current popularity.
From cunning stunt to stunning Cnut, where will he go next?
Why does he assume Northern Rock will return to profit? Maybe it won’t. At risk of losing all my savings, I wouldn’t touch Northern Rock with a long pole.
As you know J.P., Mr Brown has being doing this sort of thing since 1997.
For example, pretending the “tax credit” welfare payments are not government spending (although even Mr Brown did not call these welfare hand outs “tax cuts” as Senator Obama is). And also putting such things as the P.F.I. projects and the “private” (100% government owned) Network Rail stuff “off budget”. I agree Mr Brown is a criminal and should be in prison.
However, this does not mean I give bankers and others such a pass.
The only reason why calling in debts leads to a “debt deflation contraction of the money supply” (so feared by Tim Congdon and others) is that banks have been lending out money that does not exist – i.e. they have (in various complex ways) been generating bank credit on top of the monetary base.
This is why such measures of money as M3 are not the same as the Monetary Base (MB) and, sorry, but it is just as bent as Mr Brown.
All loans should be 100% from savings, and different people can not have the same money at the same time. If a bank lends out deposits then neither the depositors or the banks have that money till when and IF the money is paid back. Certainly I.O.U.s are NOT money and should not be used as the basis for more loans.
Credit bubble castles-in-the-air may be (indeed are) pushed by central banks like the Bank of England and the Federal Reserve (with their endless generation of credit money to prop up unsound principles in finance), but they always end in tears.
I apologise for going slightly OT, but…
Paul, I would value your opinion on LPUK’s monetary policy (Link) and whether you think it would work. Certainly I’ve had in mind many of your comments when thinking about it!
I apologise for going slightly OT, but…
Paul, I would value your opinion on LPUK’s monetary policy (Link) and whether you think it would work. Certainly I’ve had in mind many of your comments when thinking about it!
@Sunfish
I would not deny anybody their place under the sun, so I could not agree that it was prudent. Sadly though, I do feel that you could well be right. Maybe the explanation of the bad decision is that the PM is an example of a “clever idiot” – a brain good enough to earn a good degree, but one where his thinking is badly “off” – perhaps led by his ego.
There’s an old joke that runs, “If the average IQ of a population is 100, then half of us are subnormal by definition.”
There’s an old saw to the effect that “People get the leader they deserve.”
If the PM is indeed “…just too stupid to live” as you put it, then taking these things together could perhaps lead to some depressing conclusions about the real average level of intelligence in Britain.