Over the last month or so, the government has put together a seven point plan to save the UK economy.
Here, for the first time, is a comprehensive survey of the New Labour Economic Plan. It will explain the policies that Brown and Darling believe will prevent a recession and avoid a painful reckoning for all those extravagant years of bubbles and borrowing.
1. A larger government deficit, more government debt
We start with the centerpiece of the strategy; New Labour will borrow and spend their way out of recession. Rather than maintain sound public finances, the chancellor will mortgage our future in order to keep us happy today with a few extra pips of GDP growth.
In order to tart the policy up, Brown will throw in few tax cuts. Already, newspapers are touting around a figure of ₤15 billion. This should nicely complement this years government deficit, which likely to be around ₤65 billion for this year alone.
It is an old discredited policy that was tried during the 1970s. Back then, it led to rising inflation, ballooning government debt and financial chaos. New Labour have chosen to forget the bitter lessons of 30 years ago, and think they can succeed where previous socialist governments have failed.
2. Discourage savings with negative real interest rates
New Labour doesn't need savers, it needs deeply indebted consumers. So it has pressurized the government department known as the Bank of England to cut rates by 2 percentage points below the inflation rate.
The objective of the policy is to reduce the personal savings rate to zero. Don't try to put money away for retirement. Resistance is futile. So you are better off spending it now while you have it, rather than wait and watch your savings disappear in a cloud of inflation.
This policy has the added advantage of making everyone dependent on the state pension. It is social engineering at its worst; designed to make old age paupers of us all.
3. Nationalize the banks
After years of regulatory neglect and reckless lending UK banks are mostly insolvent. Happily New Labour is coming to the rescue with a big bag of taxpayer's money. Nationalisation is the order of the day. New Labour will turn the banks into now state owned enterprises, ready to hand out credit according to the political priorities of the government.
4. Bully the banks into lending
The government needs the banks to start borrowing again. Darling called the bankers in this week and told them to cut their rates. After all, the banks aren't commercial enterprises anymore; they are owned by the government.
Unfortunately, the banks tried to maintain higher interest margins in the hope of covering up past losses. Bank CEOs haven't yet fully appreciated the new reality and are still harbouring the illusion that they are employed to manage their banks. Not so. Darling is in charge, and bank CEOs are merely highly paid civil servants.
5. Flood the banks with liquidity
Despite this week's rather unpleasant meeting about mortgage rates, the banks are getting some help from the government. Darling was most sympathetic when the bankers had complained about a "lack of liquidity". The government ordered its highly subservient central bank to flood the banks with a wave of cheap credit.
This wall of liquidity has the added advantage of making the previously private banking sector even more dependent on the state.
6. Government guarantees for the interbank market
The banks also told the government about the "lack of trust" within the industry.
Again, the government was there with a helping hand. In future, it will guarantee all unsecured interbank loans. Don't worry if a bank should default, the government will be there to clean up the mess and pass the bill onto the taxpayer.
7. Put a floor under the housing market
The UK economy can not survive without an inflated housing market. So the central objective of government policy is to try to stop the market from crashing.
Part of the answer lies with a renewed round of bank credit, and hopefully a renewed wave of speculation. However, the government has also cut stamp duty and instructed local authorities to buy up unwanted overpriced city centre flats.
The seven point plan will fail
The government and their servants at the Bank of England have put together a sorry collection of failed initiatives.
The common themes running throughout their plan is evasiveness and short termism. Rather than resolve the deep rooted crisis afflicting the economy, New Labour tries to find a quick fix. If the banks are in trouble, give them money; If consumers stop spending, cut rates to make them borrow; if they won't buy houses, make the banks lend more money and offer tax breaks to new home buyers.
Short term fixes to long term problems do not have a happy record of success. This motley collection of ill-conceived policies will only exacerabate our economic difficulties and delay the recovery from ten years of excess.