Views, not News

«Sober realism is important because we are heading for a period of enforced austerity and low growth. Individuals, companies, and countries will have to reduce levels of debt. On top of this we will have to save even more to finance pensions and long-term healthcare. Lack of growth will mean more must be saved than previously planned because we can no longer expect soaring stock markets to boost our wealth. Meanwhile investment will fall, because banks will have to increase their capital holdings (sensibly) and therefore lend less. The ‘baby-boom’ generation will draw down on savings and assets, decreasing their value, while growth in emerging markets will keep commodity prices high. And underlying all this are the unquantifiable, but in my opinion real, risks of climate change.»

«In finance, conservatives should undo neo-liberal deregulation, to reduce conflicts of interest and moral hazard. There has to be a middle way between a French-style attack on all financial innovation, and a naïve UK-style belief that nothing can ever go wrong. Regulators must let banks experiment and develop new products, without being swept along with the tide when bubbles begin to develop.»

«But the main requirement is for individuals, companies and governments to act responsibly; that cannot be imposed by any ideology. In particular, there is an obvious mantra for European governments: if you don’t want to be pushed around by the bond markets, don’t borrow on the bond markets. You can either spend less money, or tax your citizens more, or (if you are not in the Eurozone) print more money. That’s the choice; you can no more spend without limit than you can repeal the law of gravity.»

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