You would think that politicians and central bankers would learn from their mistakes, wouldn’t you? They would learn that if something doesn’t work then try something else (or try doing nothing, instead!). But no, despite warnings from Moody’s (I wrote about their downgrade of Great Britain on Monday here), which is simply a rear-view mirror of what’s already happened and their very late recognition of their faltering economy, they continue to do exactly the opposite of what should be done. They raise taxes on precisely the people needed to invest in the economy and create jobs as a result, and they continue to “invest” (I love that word for make work projects) in infrastructure development using borrowed money in everlastingly foolish hopes that such will “stimulate” the economy.
It’s doing no such thing, of course. Reuters, the English equivalent to the New York Times - that is to say, thoroughly establishmentarian and Keynesian – expressed surprise that things aren’t doing better across the pond:
The risk that Britain is entering its third recession in four years grew on Friday with figures showing that manufacturing shrank unexpectedly last month and mortgage approvals for home buyers dropped in January.
Unexpectedly? Aren’t they paying attention? Can’t they look at what’s happening here to see just how well the same policies have been working here to learn from our mistakes and don’t continue the same policies?
But no. Instead Reuters explains that since the economy is tanking, the central bank must do more!
Gross domestic product fell at the end of last year, bringing Britain within sight of another recession and the latest data suggested the central bank may need to do yet more to revive the economy.
These are grown-ups I presume, making these decisions?
There is some sign of intelligent life there, however: those holding wads of their currency can see what’s coming:
The pound sank to its lowest level against the dollar in more than 2-1/2 years…
Let’s see if we poor schlumps (present writer included) can figure this out. If they print more paper then each piece will become worth less, right? So the pound drops in value in anticipation of more central bank printing. Gee, that seems reasonable, doesn’t it?
But bond investors, who should be demanding higher interest rates to offset the additional risk, aren’t. Instead, the prices of English bonds went up. That means that interest rates on those bonds went down. What on earth is going on here?
Oh, wait. I see. The central bank is going to be buying government bonds to stimulate the economy. That means higher demand for those bonds rather than lower. Wahoo! Let’s get on board now!
These people are certifiable. They’re doing what we’ve been doing so at least they have lots of company.