The UK government is now building up public sector debt at the fastest rate in peace time. This fiscal year, it intends to borrow almost ₤130 billion. It is extremely likely to borrow a similar amount next year. Moreover, this borrowing doesn't include the ₤1.2 trillion of taxpayer's money that is now on the line, guaranteeing bank assets and recapitalizing the banks.
It is time we woke up to the fact that we are in the midst of the greatest financial revolution since the UK left the Gold Standard. This public debt strategy - taken together with zero interest rates and quantitative easing - is a reckless economic policy experiment. To put it mildly, these initiatives are untried, untested and could lead to total macroeconomic chaos.
Why? Why is Brown and Darling doing this to the UK economy? The simple answer is an unwillingness to confront the consequences of past mistakes. For almost 40 years, the UK has gone through a series of asset price bubbles, with each one being wilder than the one before. These speculative cycles has landed the UK with the greatest financial crisis in our history.
However, Brown is like a gambler cannot leave the table. Rather than go home and acknowledge his losses, he has decided to put everything on one last turn of the wheel. He would prefer to see an explosion in public debt; set zero interest rates, and print uncountable amounts of new money - rather than honestly explain to the electorate that living standards must fall as part of the inevitable post-crisis adjustment.
The UK desperately needs a government that can honestly present the reality of our situation. We need to hear that the massive credit explosion and the housing bubble carried an enormous cost that we must now pay in terms of jobs and income levels. We need to hear that we will have to pay considerably more tax in order to clean up our banks. Above all, we need to hear that we have no "get out of jail" card and that we can not inflate our way out of our current difficulties.