Lincoln Drill Hall

Thursday, 8 October 2009

The deficit

In a much earlier blog I observed that what had happened was that public borrowing, which had previously been used to power the economy through recessions, had been replaced by private borrowing on an unprecedented scale. The dramatic reduction in the availability of credit has through the consequent recession caused a very large number of borrowers to default. The anticipation of this stripped banks' balance sheets of value sending them cap in hand to government who have poured in money like water. Government now wrings its hands at the deficit it is running and its own need for borrowing.
I can't help feeling that an economy which places sensible controls of private borrowing but which is realistic about the need for cyclical public borrowing is likely to end up healthier than the free for all which has got us into this very much larger mess.