Thursday, April 26, 2012

British Policy Has Been Keynesian, Not Anti-Keynesian

The spin by Paul Krugman and other Keynesians on the British double dip recession is, not surprisingly, that we should blame it on the most recent modest spending restraints from the British government. But that ignores the facts laid out by the Guardian's economics editor:

" Since the recession began, the Treasury has borrowed £500bn, the pound has depreciated by 20%, interest rates have been pegged at 0.5% for more than three years, and the Bank of England has plonked £325bn of newly created money into the banking system. The result has been the weakest recovery of the past 100 years"

Given that British GDP is only about £1,500 billion per year, these numbers make Britain  one of the most radical countries in terms of both government borrowing (aka "stimulus") and central bank "quantitative easing"