One of the leading economists in the world has persuaded Gordon Brown (Gordon Brown) to abandon the fiscal fetishism "to challenge the market and to maintain or even extend the fiscal incentives for the British economy.
Joseph Stiglitz, who was awarded the Nobel Prize in Economics in 2001, he was chief economic adviser to Bill Clinton and chief economist of the World Bank, warned that the markets can behave as a "crazy", unwilling to accept cuts in public spending.
"You're dealing with a crazy man. You ask, what can I do to appease a madman? Even getting what he wants - he will still kill you "- he said.
In an exclusive interview with The Independent, Stiglitz has rejected the idea put forward by David Cameron (David Cameron) that some symbolic cuts in the budget deficit this year could regain the confidence of financial markets. He also blamed the "bad faith" rating agencies, which would lower the credit rating of Britain, despite the fact that they themselves have published a very grudging about the crisis. "Fiscal fetishism is very dangerous," - he said.
If financial markets refused to buy British government bonds or first-class stocks, which, as suggested by Cameron could soon happen, instead, they could buy out the Bank of England, as it did during the recent pause the program for accepting quantitative easing, in which bonds were redeemed at £ 200 billion, Stiglitz said.
His intervention, coupled with growing criticism of economic policies with the assistance of Cameron Brown may be proof that the Labor policy is based on the leading economists in the world.
Stiglitz said that Brown should make plans to manage the further growth of the economy based on the fact that the projected growth will be lower. "There is a chance of the visible deceleration of the current growth rate, which is very weak," - he said. "In any case, this means that a negative or stagnant period will depend on government action. If we do away with incentives likely to be faced with the second wave of recession. "
He added: "You want to show not only sensitivity to the deficit, but also the sensitivity to timing (non-incentive) as well as to prove the unreliability of recovery."
Stiglitz said that European governments should provide Greece and other States "under attack" more support to help restore confidence in their attempts to restore stability and prevent the expansion of the financial crisis.
Cameron argued that a relatively small but immediate reduction in public spending and budget deficits, perhaps even a little as £ 1 billion of the total deficit of £ 175 billion, could persuade the markets that work is beginning a conservative government took control over public finances . Stiglitz, however, emphasized the continuing threat to recovery. Britain recovers slower and weaker than any other developed country, that nation must be perceived as the threat of sliding into recession.
Stiglitz, who dined with the Prime Minister and the Chancellor last night said that Obama's current plan for the separation of banks and limit their ability to conduct operations on their own trading accounts "does not go far." He criticized the U.S. president for the "mess" with the reaction to the financial crisis, but impressed by the changes in regulation. But Obama wants to expand the scope of U.S. financial regulation in the United States and abroad, to cover all types of traded securities. Some of the most complex securities issued by banks, meaning that the end was not even aware they were partly to blame for expanding the scope and distribution losses encountered during the credit crisis.
The impetus for the development of the U.S. economy, which has been given a package of nearly $ 800 billion in tax breaks and state spending plan has been criticized by Stiglitz for unfounded reducing the cost of each state, as he considers a negative impact on many federal initiatives.
The British government, which denied the Obama plan, however, warmly praised Stiglitz for his report: "The fact that Brown did for the banks are now much more correct than what has been done in the United States, he demanded greater guarantees for the funds released, greater accountability, better attempts to resume lending than in the United States. "
Independent
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