RIP Anna J. Schwartz
Let Me Offend James Fallows by Saying That for 36 Months Bernanke and Geithner Have Been Acting Like Boiling Frogs

Sam Brittan on the 45 Degree Turn of the Cameron-Osborne-Clegg British Government

The right thing to do, of course, is for Nick Clegg to end this farce immediately…

Sam Brittan is unfair to bookkeepers:

Enough of the bookkeeping, Mr Osborne: Does the plan to boost credit for British business, outlined by chancellor George Osborne and Bank of England governor Mervyn King in their Mansion House addresses, amount to a U-turn? Let us say it marks some change, and call it a 45-degree one. We should at least be pleased that the British authorities have at last recognised the need for a stimulus over and above minor so-called supply-side reforms. The more important questions, though, are whether these changes are in the right direction and whether they are adequate. The answer to the first question is “yes”, and to the second, “probably not”….

Instead of risking the Budget deficit-reduction programme by boosting public spending and cutting taxes, the government is trying to encourage the private sector to borrow on special terms. The package is said to be worth £100bn.... Why is it better to encourage others to undertake investment projects rather than finance them directly? It is basically so that Mr Osborne can say that he has not added to some crude measure of the Budget deficit, leaving the chicken to come home to roost in a later parliament. I had intended to call this article “The accountancy approach to policy”, but decided that this might be unfair to accountants and preferred to call it the bookkeeping approach.

A permanent secretary under an earlier Labour administration once asked me what I thought were the limits to permissible Budget deficits. My answer was: “Up to the point where the gains to output and employment are offset by the inflationary effects of a fall in the exchange rate.”… [A]part from the peripheral members of the eurozone, most industrial countries are nowhere near having to face these dilemmas. Interest rates, both long and short (which are of course relevant to exchange rate prospects), are close to record lows both in the US and the UK; indeed, they are sometimes negative in real terms.