When Markets Don’t Attack
04/03/2013 3 Comments
As I wrote recently, last week was going to be the real test of whether George Osborne’s policy of pursuing a AAA credit rating above all else was justified. Although he lost that rating anyway we would at least see whether, as he’d repeatedly warned us, the rate at which the government can borrow money would go through the roof as the markets lost all that “hard-won confidence”.
He has continually used this threat to justify austerity so it’s important to see whether or not there was any merit in his argument. So let’s see what happened to our borrowing rates last week. Make sure you have a cushion ready to hide your face, this is going to be scary:
It’s ok, you can put the cushion down now – nothing happened. I told it wouldn’t but how could I be so sure? Am I a soothsayer? Am I the modern day Nostradamus? No, not at all. I took the revolutionary step of applying the discipline of economics to the situation.
The government seems to believe that economics and evidence are dangerous things because they might encourage people to look for an alternative to their failed policy. The thing is though, that over the last three years economics has done a much better job of predicting these sort of things than a government who chose to ignore it. While far from perfect, economics is still the best tool we have to help guide our way back towards a healthy economy.
At the moment though we have a government who dismisses economics as if it were witchcraft and why is that? Because it’s simply more convenient than admitting that they got everything so massively wrong.