The Great Debate UK
-David Kuo is director at the Motley Fool. The opinions expressed are his own.-
The day of reckoning is looming ever closer.
Political leaders are jockeying for position with ad-hoc appearances here and a flesh-pressing engagements there to curry favour with voters ahead of the general election. How long will it be before we get our first baby-kissing photo opportunity?
But as yet, none of the main parties has told the electorate exactly how bad things are with the UK economy. Instead, they pussyfoot around difficult economic issues in the hope that if they don’t say anything, then maybe we won’t ask.
The truth is the economy is running on empty. It is flat on its back having been badly winded by rising unemployment, the sinking pound, and banks that seem happier to lock away any spare cash they have rather than lend it to businesses and consumers.
The number of people claiming unemployment benefit has risen to 1.6 million – the highest figure for 13 years. The pound has fallen against the both the dollar and the euro. Two years ago, one pound was worth $1.85 and 1.29 euros.
When the Bank of England decided to expand its quantitative easing policy by 25 billion pounds to 200 billion on Thursday, it was essentially hedging its bets.
After Britain’s economy shrank unexpectedly in the third quarter, and with two thirds of the City expecting an expansion to the QE programme, simply shutting off the tap of government bond purchases would risk being more of a shock than the economy could bear.
In “Verdict on the Crash” we argue that government failure and not market failure is responsible for the collapse in financial markets.