"The third is the soundbite “The UK is well placed to ride out this international storm”. The BBC dutifully puts into bulletins that the Credit Crunch was made in the USA, and this is an international problem. They should instead ask some of the following questions:
1. Wasn’t Northern Rock a British collapse, based on the UK mortgage market?
2. Didn’t nationalisation of the Rock remove the most aggressive large mortgage lender from the market, intensifying the mortgage squeeze?
3. Isn’t the boom-bust in UK property prices and housebuilding a UK phenomenon brought about by British monetary policy?
4. Isn’t the UK government in a bad position, having borrowed and spent too much in the good years and now unable to reflate the economy with tax cuts?
5. Didn’t the UK government use off balance sheet vehicles and creative credit devices itself on a large scale, fuelling the credit boom of recent years?
6. Hasn’t UK competitiveness declined significantly in recent years, making UK adjustment more painful?
7. Why did the UK fail to add more to non fossil fuel electricity capacity during the good times, to ease shortages now?
8. Why does the UK impose some of the highest taxes on oil products, and increase them during a period of sharp upward movements in oil prices, exacerbating the squeeze?
9. Why did the government increase North Sea oil taxes, putting companies off from more exploration and enhanced recovery?
If they asked some of these, they might see that repeating uncritically the notion that this is entirely a US or international problem is just not the case. The UK dimension to this crisis reveals serious flaws in the conduct of policy in recent years."
Wednesday, July 09, 2008
The Credit Crunch didn't just float over from the States
John Redwood makes the point very well: