Spending solves nothing
I’m reading a magazine article written by Paul Bareau in the now long defunct Statist in 1967. He bemoans the state of the British economy, which at the time was suffering “pangs” of deflation. He notes that this deflation, “while modest”, was nonetheless “violently resented”, and then insists that “political pressure as well as economic good sense” suggests that “some time this year a series of measures of re-expansion will be called for”.
The first harbingers of this had already appeared: there had been a cut in the bank rate (from 7% to 6.5%); new investment grants had been introduced and a “more lenient attitude” had been taken towards the banks. Sounds familiar, doesn’t it? Today, thanks to the enthusiastic money printing of our central bank, we haven’t quite got to mild deflation – but we live in fear of it and violently resent any hint of recession as we do so; we are being lenient with our banks; we have most certainly cut what is now the base rate; and of course the political pressure for “re-expansion” is huge.
• Read the full editor’s letter here: Spending solves nothing.