Train wreck economy - Letter in Western Morning News

Trying to revive an economic corpse
Friday, March 27, 2009, 11:00

AS I write, the Government presses are rolling to print money for our ailing economy. It is spoken of as the last chance to rescue our country from its financial plight. Well, I can tell you, before the first crisp new fiver even crosses our palms, that the plan will not work.

How can I be so confident? Simple. Take a look at the economy all this new money is set to inflate. It is exactly the same economy that caused the meltdown we are experiencing, only there is less of it than there was.

Bluntly, it is an economy that has failed on a truly biblical scale. It failed because the pillars on which it grew, instead of being firm economic structures created from sound banking and financial practices and support, were in fact mere houses of cards that would totter and fall the moment reality shook their foundations – and they did, in spectacular fashion. Their utter demise was only prevented by mind-boggling amounts of taxpayers' money.

So this train wreck of an economy is now the very thing our Government intends to reinvigorate with billions in freshly minted notes. With all its flaws and structural faults, its too great a reliance on property equity and service industries, this is the economic corpse our leaders want to bring back to life.

In financial terms, this is the Frankenstein story of our economy – something dead and gone brought back to life to haunt us. In short, the Government is re-creating something that has failed.
With personal debt now at £1.5 trillion and rising and government liability for bank debt up to £1.3 trillion, any monetary inflating of such a situation is almost certainly bound to increase still further the former and add to the latter.

The Government does not seem to comprehend that in a recession debt levels like ours have to fall – and fall a long way – before incomes are unencumbered enough to allow genuine spending to begin again.

To use a motoring analogy, our economy has driven up a cul-de-sac. Before it can make headway it has to go in reverse and take a new direction, not keep revving up the engine in the blinkered hope that there is some way ahead down the old road.

Peter Waverly

Penzance