This used to be the phrase that was always uttered when Presidential elections came around in the United States. It didn't matter what was happening anywhere else, if you wanted to win the presidency you needed to promise to put more money in the pockets of the electorate. In 2008 this has never been truer for both candidates. Somebody is going to inherit the mess that George W. Bush has presided over. Not surprisingly, neither of them wants to be seen to have rubber-stamped a blank cheque to bail out Wall Street at the taxpayers' expense. In the World's most prosperous "free market", it appears that most Americans don't support their politicians efforts and most of the politicians who are up for re-election can't afford to carry the can. It has even got to the point where the "bail out" has been renamed as a "rescue" to try and make it more palatable to the populus.
In the United Kingdom between 1997 and 2007, Gordon Brown was the British Chancellor of the Exchequer. He pulled the finance strings while the economy was booming and he had promised no return to "boom and bust" economics as witnessed in the 1990s. Now that he is Prime Minister his opponents are naturally quite happy to point out that he did not put anything away for a rainy day while the sun was shining. The banks were free to do whatever they liked as they raked in the profits from their dubious dealings, which included buying up large chunks of the American debt problem in the form of unsustainable sub-prime mortgages.
The situation for the long term future is probably much worse than that. Not only was nothing put away for a rainy day, but most of what was spent during those ten years was done using public debt. Many new hospitals and schools were built by the private sector through government finance initiatives that guarantee the private sector huge profits over an extended period of time. In the meantime, public sector expansion was funded by borrowing that now cripples the economic strategies of all the political parties.
By October 2008, the borrowing bubble had been well and truly burst. Too many people had run up personal credit bills that they could not service and had been loaned mortgages at ridiculous multiples of their salaries based on the notion that property values were always going to rise because demand outstripped supply and was going to continue to do so. This also fuelled a boom in the "buy to let" market where uneducated investors saw rental properties as a license to print money. Many of these investors will probably default on their mortgages or they will lose their deposits because they can no longer secure a mortgage as developers put projects on hold.
In recent times, the opposition politicians have seen that the best policy to have is to offer to help the government to ease the financial crisis by working with them. It is also the best way to avoid getting the blame for any policy that proves futile. So will the British government come up with a deal to buy up the bad debts of the banking industry? Would this even provide liquidity in the market to kick start the economy? Surely the old wisdom that when America sneezes, Britain catches the cold applies? Although we trade more heavily with Europe, our economy is more akin to the American free market than the European socialist model.
Before October, the monies of depositors in United Kingdom banks was guaranteed by the government upto £35,000 per account per institution. This covered about 96 per cent of all customers. It was rumoured that this guarantee was going to be raised to £50,000; however, events in Europe have overtaken this, with the Irish government providing an unlimited guarantee for Irish banks, which the Irish government cannot actually finance; and similar measures being proposed in other European Union member states such as France. Further to this, the French have proposed that European Union members should work together to provide a guarantee system. It is hardly surprising that such a request should come from socialist France, as they are already one of the main benefactors from EU subsidisation. The United Kingdom is one of the chief contributors to the European Union subsidy system, including the unsustainable Common Agricultural Policy, and would be best advised not to get tied into any guarantee scheme that would see the British taxpayer covering our socialist neighbours.