Anatole Kaletsky in the Times, praising the recent interest rate cuts, and arguing they may have to go lower!

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article5141565.ece

With inflation at 5% and interest rates at 3%, you will certainly be able to to get people to borrow to spend, but who's going to want to save. How are banks going to build up their capital reserves in no-one is going to put money into their accounts?

He does make the valid point that there are two contradictory problems facing the world economy a 'slow moving cancer' caused by excessive borrowing and a property speculation bubble, and a 'heart attack' brought on by the near meltdown of the global financial system.

But wasn't it Dr Brown as Chancellor who presided over a decade of a regimen of a diet of massive amounts of public sector lard, and recommended a 200 a day habit of high tar cigarettes to stimulate the system in the form of low interest rates, encouraging unprecedented levels of private debt, and Enron type accounting to keep much public sector debt off the books. All the time presenting data on blood pressure, temperature and other bodily functions and claiming that this was the fittest, healthiest, strongest patient ever, and under his guidance, all previous medical emergencies were a thing of the past, and good health was guaranteed as long as his advice was followed.

With the lard and cigarette diet giving the patient cancer and a near fatal heart attack, Dr Brown did at least do a good job of CPR to stop the patient expiring of the heart attack, but is now recommending increasing the patients intake of lard and consumption of cigarettes to aid recovery.

Spending your way out of recession has been a phrase much bandied about recently, by those conveniently forgetting the stagflation of the 1970's. Like drinking your way out of a hangover, or those people who like to think they can accelerate out of trouble on a motorway and end up causing a 12 vehicle pile up, it sounds as if it might work, but is just going to make the end result worse, though it may delay it.

What does 'and' mean?
If you order fish and chips, it's fairly obvious what you want - fish, and (as well as and at the same time) chips. Not just the fish, not just the chips, not the fish then the chips, not the chips then the fish ... fish and chips.
Plus you might want the options of salt, vinegar, buttered bread, pot of tea, tartare sauce, slice of lemon, what have you, but you definitely expect fish and chips.
If it was a politician running the chippie you might well be fobbed off with a raw goldfish and wood chippings and a speech about how the chip shop's menu manifesto commitments had been met.
But when politicians promise things like reductions in poverty and inequality, what are the chances of them delivering. They usually have in mind the dead, static model of a society and economy where you take some money of some richer people, give it to some poorer people, et voila, mission accomplished.
Trouble is, the higher taxes on the richer people reduces their incentive to produce more economically useful goods and services, the benefits given to the poorer people, reduces their incentive to have to produce economically useful goods and services, and the necessary state bureaucracy means many people are employed in shifting resources inefficiently between these groups, instead of being employed in economically productive tasks. The whole result is lower total wealth.
When countries experience rapid economic growth you will almost always hear politicians and commentators complaining about how some groups haven't benefited, or become worse off, or haven't benefited to the same extent as other groups, etc. Usually some formulation along the lines that 'the rich are getting richer, and the poor are getting poorer', or 'the proceeds of growth aren't being divided equally' will be invoked.
But in a living, growing, thriving economy that is always going to be the case. In fact it is the availability of extra rewards for some that encourages and enables entrepreneurs to take the risks and make the efforts that result in wealth creation. It the the different rewards available that result in resources being diverted to the most profitable, in demand activities, leading to economically efficient allocation of productive resources.
Wealth isn't created by magic, ready to be divided, and then divided unequally by malicious unfairness. It is the potential for unequal benefits from economic activity that causes the activity and wealth creation in the first place.

The US election still hasn't happened, the campaigning's been going on all year, who can put up with this much politics? It would probably be quicker and cheaper to sort it out by means of a civil war, and would make for more interesting television on the 24 hour news channels.

Anyhow, onto some of the policies. Obama's tax plan. Well it's the same one he's had for quite a while, but with the credit crunch, impending recession, billions added to the federal deficit and all, it seems a remarkable achievement that an economic policy that would be good in say June 2008 would also be exactly right for the conditions he may inherit in January 2009. Of course, there's the rub, like most politicians economic policies it's more about politics than economics, rewarding your supporters, and punishing your opponents.

As is almost universally the case, the analysis presented in the media by pundits and talking heads is about how somebody on such an income will gain x dollars, and somebody at some other income level will lose y dollars, like a high school algebra problem. The trouble with this sort of analysis is it assumes a static system, whereas in the real world the economy is a dynamic system which changes as it is prodded by various government policies, and those changes cause other changes which cause other changes .... well you get the idea. Obama's claim that only 5 per cent of people will be worse off, and everyone else will be unaffected or better off is very interesting, especially I should imagine to those 5 per cent. Since there will be more than a year from Obama appearing to have a realistic possibility of becoming to president to if when he finally does achieve it, those members of that 5 per cent group who are not completely over the moon about being charged more to support the government (and I suspect there may be one or two at least) have had plenty of time to consult with tax lawyers and accountants in order to reduce their US tax liabilities. I would suspect this program will raise rather less off the top 5 per cent of earners than is assumed by policy wonks with their clever spreadsheets. That combined with an almost certain drop in tax revenues because of impending recession, and the huge and the recent huge increase in the budget deficit and I will frankly be amazed if some of those voting for Obama expecting to be better off because of his tax policies don't turn out to be very disappointed.

Not that McCain's policies are necessarily any better. He has at least presented a major new policy since the latest trainwreck in the financial system, but unfortunately it's a bit of a lemon. His idea of using government money to stop some foreclosures and allow the borrower to renegotiate the mortgage based on the new lower value of their homes. One problem with this is the moral hazard of people who have been struggling to keep up with payments. Now if this policy is implemented they would be put in the position where they can give up making that effort in the expectation of being bailed out and being given a smaller amount to repay.

It is the same over most of the democratic world, policies presented by political candidates are more smoke and mirrors than realistic and sensible plans well rooted in sound economics, and it is often the one with the smokiest smoke and the shiniest mirror that wins the day.

I saw a loyalist Labour MP on the BBC news channel a few weeks back defending Gordon Brown (no really). I don't recall his name but he looked a little like mad-eye Moody in one of the Harry Potter films. Anyway he siad something about the depression in Britain being caused by Churchill's decision to go back onto the gold standard. I couldn't swear to it but I think the term 'knee jerk reaction' was used.
The decision to return to the gold standard after the debts and inflation of WWI is a rare example of a government attempting to honour its debts. What should have happened was that wage rates should have fallen back towards their pre war inflation nominal levels while maintaining their real value. That didn't happen because the British labour market at the time was not a free market where wages were allowed to reflect the results of supply and demand.
The more powerful unions insisted in no cuts in the face value of their members pay packets. This put the real cost of labour up well above the would be market level, so increasing unemployment.The Unions used their monopoly power of labour supply to keep their working members standard of living at an artificially high level, at the expense of the total number of jobs available.
Meanwhile the employers were forced to spend their wage bill to employ a smaller number of workers than they would like, and so total output fell.
The apparent Keynesian solution to this problem after WWII with its trade off between some inflation in order to increase total output and employment was in part successful by inflation reducing the real value of the nominal wage rates the unions were so determined to maintain, back down to the actual market rate.

From 'The Economics of Everyday Life' by Gertrude Williams

'When unemployment meant starvation or the workhouse, the trade union secretary realized that it was impolitic to persue a course of action which would face his unemployed members with the alternatives of remaining out of work or accepting jobs at blackleg rates of pay. And a prolonged depression in atre inevitably showed itself in an agreement to lower wages. But the trade union has a very strong hold on the loyalty of its members and there are few who would dream of undercutting, so long as the unemployment insurance benefit provides, at least, sufficient to let one get along. The effect of this was seen during the chronic depression of the inter-war years when although there were at times as many as 23 per cent of the insured population out of work, wage rates fell hardly at all, and when, indeed, if we take into account the fall in the price of foods during this period - real wages rose quite considerably.Here we have an entirely new phenomenon, and one that has, as we shall see shortly, a very important influence on the occupational distribution of the population. As a consequence, on the one hand, of wage rates fixed by collective bargaining, and, on the other, of the provision of a 'cushion' of social security payments to break the fall in the standard of living of those who are not earning a livelihood by their own work, there has come to be a very great element of rigidity in wages. Once rates have risen, it is extraordinarily difficult to bring them down, whatever the level of prosperity in the industry and whatever the rate of unemployment.'

Quite a funny little article in the Sunday Times about Sarah Palin being the subject of much male admiration

http://www.timesonline.co.uk/tol/comment/columnists/india_knight/article4692219.ece

Not sure about that it tells the full story though.

'Nothing to do with her shooting moose, then? Nope: the attraction is basic and physical.'

It might actually have something to do with the moose hunting. Although Sarah Palin may not believe in evolution, maybe evolutionary psychology has something to add. According to the theory many impulses and behaviours are explained by being useful to our hunter gatherer ancestors through thousands of generations in the stone age.

In those days men home to bring home the bacon (or moose or whatever), the most successful being the ones being rewarded with the chance to pass on there genes with the pick of the attractive, fertile females. Now Governor Palin is widely considered attractive, and is certainly fertile. But better yet, she goes out in the freezing wastes and brings home the moose so you don't have to. From the cavemen point of view she's as good as Raquel Welch in 'One Million Years BC'.

http://www.art.co.uk/asp/sp-asp/_/PD--12147391/SP--A/IGID--812883/Raquel_Welch.htm?sOrig=CAT&sOrigID=10581&ui=432FD1368AEA4063893971864A5ACA84

But whereas Raquel talked the talk (or rather grunted the grunt), Palin walks the walk. Also when she gets home with the moose, there's noting for it but to snuggle up in the bearskin, (bear previously killed and skinned by the divine Sarah) and settle in for the six month Arctic winter night. And how are you going to pass the time, well scrabble hadn't yet been invented in the neolithic age, and would anyway be pretty boring with just the letters 'u' and 'g', so you have to use you imagination.

Queen Elizabeth I's dying words are reputed to be 'All my possessions for one moment of time'. Famous last words in most cases should be taken with a pinch of salt, and like many others these are probably apocryphal.
However, assuming she said them, one can make a point about the trade off between health spending and life expectancy.
Most health spending is at the end of a patient's life, prolonging the inevitable for a period. It is of course entirely natural, like Elizaeth, that the patient should want this. Looking from a purely economic view at Elizabeth's statement, given that she was about to lose all her possessions anyway, and had no heir, with their value to her rapidly depeciating to zero, the supposed offer is a very rational one.
However, if when she ascended the throne at the age of 25 she had been asked if she wanted to give up her realm, powers and possessions in return for a moment longer on her death bed she would undoubtedly have refused.
Whatever trade off she would have made at that time, or anybody would make at various times in their life in terms of health insurance, with a nationalised system that is taken out of their hands. The state decides how much money to take off you, and how much it will spend on health care, and you only have the choice of liking it or lumping it.

What does this phrase indicate?

Some possibilities include

a) It doesn't indicate anything, milkmaids were no prettier than other girls

b) It is ironic, milkmaids were in fact notoriously plain

c) It was coined by someone who had a thing for milkmaids, or a crush onn a milkmaid, and was entirely subjective

d) Milkmaids wre indeed noticeably better looking than other girls

Assumming for the sake of argument we accept d)as the explanation, why should this be?

Again there are many possibilities to investigate, but some include

a) diary farms were established in areas known for their good looking women

b) dairy farmers only hired pretty girls as milkmaids, it was a clear case of discrimination against plain applicants

c) only pretty girls applied to become milkmaids

d) girls becoming milkmaids had much the same distribution of prettiness and plainness as the general population, but being a milkmaid made them better looking

e) girls becoming milkmaids had much the same distribution of prettiness and plainness as the general population, but kept their looks while those of the girls who were not milkmaids declined

f) some complicated mixture of the all of the above, plus perhaps further factors as well

In fact, e), though a bit of a strange one, is close to the truth. Milkmaids caught cowpox, a fairly mild disease, which protected them from the ravages of smallpox, a related, but much more virulent disease. From this Edward Jenner, though not the first to experiment with the concept, developed and popularised vaccination.

Edward I reigned from 1272 to 1307, and Robert the Bruce was King of Scotland from 1306 to 1329. Adfam Smith wrote 'The Wealth of Nations' in the 1770's, so we are talking about devaluation over a period of about 470 years.
To maintain purchasing parity for a currency devalued to 1/3 of its original value over 470 years, like the pound sterling, would require compound interest at a rate of about 0.24%.
In the case of the Scottish pound, reduced to 1/36thof its value over that period, a compound interest rate of 0.77% is necessary just to break even.

This puts Gordon Brown's inflation target of two to three percent, widely described as low, in a historical context. This target rate has been exceeded on several occasions, but of course, inflation hasn't come in below the target range.

2 to 3 per cent is a historically low inflation rate only if you think that history began in the 1970's.

2 per cent over 470 years would leave the poor GBP (Gordon Broon Poond) at 1/11,000 th of it's original value. 3 percent to less than 1 millionth of it's original worth. At the moment the inflation rate is expected top reach 4 per cent, which would lead to the pound being less than 1 / 100 millionth of its value over 470 years.

So the klepto chancellor's legendary proodence had led to a situation when the pound is devaluing at a rate which would be 33 million times worse than the combined efforts of some notably greedy tyrants and spendthrift wastrals over the centuries.

The English pound sterling, in the time of Edward I. contained a pound,
Tower weight, of silver of a known fineness. The Tower pound seems to
have been something more than the Roman pound, and something less than the
Troyes pound. This last was not introduced into the mint of England till
the 18th of Henry the VIII. The French livre contained, in the time of Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair of Troyes in
Champaign was at that time frequented by all the nations of Europe,
and the weights and measures of so famous a market were generally
known and esteemed. The Scots money pound contained, from the time of
Alexander the First to that of Robert Bruce, a pound of silver of the
same weight and fineness with the English pound sterling. English,
French, and Scots pennies, too, contained all of them originally a
real penny-weight of silver, the twentieth part of an ounce, and the
two hundred-and-fortieth part of a pound. The shilling, too, seems
originally to have been the denomination of a weight. "When wheat is
at twelve shillings the quarter," says an ancient statute of Henry
III. "then wastel bread of a farthing shall weigh eleven shillings and
fourpence". The proportion, however, between the shilling, and either
the penny on the one hand, or the pound on the other, seems not to
have been so constant and uniform as that between the penny and the
pound. During the first race of the kings of France, the French sou or
shilling appears upon different occasions to have contained five,
twelve, twenty, and forty pennies. Among the ancient Saxons, a
shilling appears at one time to have contained only five pennies, and
it is not improbable that it may have been as variable among them as
among their neighbours, the ancient Franks. From the time of
Charlemagne among the French, and from that of William the Conqueror
among the English, the proportion between the pound, the shilling, and
the penny, seems to have been uniformly the same as at present, though
the value of each has been very different; for in every country of the
world, I believe, the avarice and injustice of princes and sovereign
states, abusing the confidence of their subjects, have by degrees
diminished the real quantity of metal, which had been originally
contained in their coins. The Roman as, in the latter ages of the
republic, was reduced to the twenty-fourth part of its original value,
and, instead of weighing a pound, came to weigh only half an ounce.
The English pound and penny contain at present about a third only; the
Scots pound and penny about a thirty-sixth; and the French pound and
penny about a sixty-sixth part of their original value. By means of
those operations, the princes and sovereign states which performed
them were enabled, in appearance, to pay their debts and fulfil their
engagements with a smaller quantity of silver than would otherwise
have been requisite. It was indeed in appearance only; for their
creditors were really defrauded of a part of what was due to them. All
other debtors in the state were allowed the same privilege, and might
pay with the same nominal sum of the new and debased coin whatever
they had borrowed in the old. Such operations, therefore, have always
proved favourable to the debtor, and ruinous to the creditor, and have
sometimes produced a greater and more universal revolution in the
fortunes of private persons, than could have been occasioned by a very
great public calamity.

Adam Smith, The Wealth of Nations