Where has all the credit gone?

In 1962 that marvelous American folk group Peter, Paul and Mary, issued their first album, the last track of which was a Pete Seeger song:

Where have all the flowers gone?

Long time passing

Where have all the flowers gone?

Long time ago

Where have all the flowers gone?

Girls have picked them every one

When will they ever learn?

When will they ever learn?

In celebration of an awful week for the British economy the following lyrics have been written for the Treasury:

Where has all the credit gone?

Long time passing

Where has all the credit gone?

Since Lehman’s woe

Where has all the credit gone?

Vince has ditched them every one

When will the Treasury ever learn?

When will they ever learn?

In 2009 the Treasury predicted growth of 3.75% in 2012. The Office for Budget Responsibility forecast 2.8%. The latest figures from the Bank of England seem to be around zero expansion of the economy.

The irony is that everybody knows what the problem is but nobody can find the solution. From 2000 – 2008 there was a credit explosion the like of which has never been seen before. The inevitable happened and money lost its value as a medium of exchange. The recession was simply the cyclical reaction to the period of excess.

The Coalition did not understand this and has introduced draconian measures which have had the effect of withdrawing credit from the system.

Attempts now to accelerate the growth of credit have completely floundered. Project Merlin has failed, New Buy and other mortgage schemes have withered on the vine, it is thought that the first £125bn of QE boosted money supply by no more than £30bn and the Treasury are now holding their breath that Funding for Lending succeeds.

If real salaries are falling even before inflation the engine of growth represented by consumer spending is also affected.

Peter, Paul and Mary sang another song (editor: written by Bob Dylan) which contained the words:

The answer, my friends, is blowing’ in the wind

This is exactly where the Treasury is at the present time.

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