Tuesday, September 20, 2011

Outside the conference hall...

The media narrative of the Liberal Democrats at conference setting themselves up against the "evil" Tories is not one that I find particularly inspiring, even if it makes for tub thumping speeches and generates a bit more coverage for the party. 

In fact it is a distraction.

Vince Cable is wasted as the anti Tory shibboleth, when it is his economics prowess that is now most needed in order to analyse the growth implosion outside the conference hall. Yesterday's downgrade of Italy looks to me like the beginning of the end of the financial system as we have known it for some twenty or thirty years. The political paralysis across the European Union is now not only threatening the existence of the Euro, but of the European Union itself.
The breakdown of the EU would be an economic and political catastrophe for the UK.

While infantile Conservatives rub their hands with glee, they fail to see the unfolding disaster in Britain. Our markets, our trade, our very livelihood depends on Europe, and a catastrophic meltdown of currency and the wider system, far from being the "liberation" that the more right wing Tories believe, has the potential to become a bigger economic shock than the great depression- with incalculable and permanent impact on the UK- even leading to the break up of our country.

Vince Cable is one of the commentators who got the crisis right, and his solutions are among the most nuanced and thoughtful. Although he is right to trumpet his victory over Tories in the Murdoch affair, it is his economic analysis that we could most do with right now.

I do not buy the idea that splitting "good", that is high street, banks from "bad", that is "casino" banks is on its own sufficient safeguard- the fact is that the crisis has its root in bad lending- basic mortgage lending- that was only made worse by the bundling of such dross into more complicated securities. The original failure was a basic bank failure and not an investment bank failure, albeit that investment banks made a poor situation into a critical one.

While I welcome the current ideas on bank reform, the fact is that the UK faces the immediate crisis with a far bigger structural deficit than we knew, and it faces the potential for a critical breakdown in trade and finance flows.

We need to be addressing this crisis with far more urgency: the fact is that much that is going on inside the conference hall in Birmingham will be irrelevant, pretty soon, unless we can understand and get to grips with the economic crisis.

Vince Cable has been a good lookout, but the country is still headed towards the iceberg- as Italy pays the price for its failures of political and economic leadership, we must make sure that the UK does not go the same way.

How we address that is what I want to hear from the party leadership: it could hardly be more topical or relevant.

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