I find it astonishing that the banksters will now not pay for private sector banking debt which was transferred to the public sector through the bail-outs. It is their debt which we are now paying for through cuts in publice services etc. What a rotten system Capitalism surely is. These debt should have been written off or the banks who acted recklessly like wild gamblers in a Las Vegas casino should have been allowed to go under like Lehmann Bros.

Mr Blanchflower
I read somewhere that Keynes once said:
"When the facts change, I change my mind. What do you do, sir?". I am wondering what it would take to change yours?
The US has just been downgraded on debt concerns, that is too say, the largest and most powerful economy on our planet EVER, 25% of GLOBAL GDP, is essentially being questioned regarding it's debt servicing, and your article dosen't even touch on it, so I infer that in your then scathing attack on Osbourne you have not considered this new and important data point? Isn't that what economists do when analysing economies? Look at adta as it streams in and adjust accordingly? Perhaps you have avoided mentioning the ONLY downgrade ever in US history because it's about too much debt, something you ADVOCATE AT ANY PRICE.
Regarding UK as a safe haven, I don't get what banks trading down as got to do with (marginal)safe haven status- are you seriously suggesting that these banks serve as a proxy as to whether th UK is well run? (personally I don't believe there is any equity left in these institutions, a front that you might actually score points on were you less blinded by you're now evidently clear pre-judgement of Osbourne- A judgement that you know has been made too early and therefore must be otherswise motivated-political perhaps?? Power at any price eh...
Next you'll be saying the downgrade dosen't matter because as everyone tries to ponder on the long term consequences of how the indebted West is to sober up, your interpretation of a not immediate crash will be that you see this a vindication of your policy of debt at ANY price...You simply won't give up on expanding debt until the crash comes as a result of the loss of confidence in the debt mkts (the basis of trust in ANY business transaction that must be present for the transaction to occur- you don't understand this because you don't understand or like people- you just want power) Krugman, Summers, Brown, Balls, never even IMAGINED that the UK might downgrade- and now the biggest has.Good foresight from the 'High priests of economics'.
Now to the adult conversation which is; Mr Osborne must face the facts (and this data point must be considered).
WOW!!!!
US downgrade... gulp. Well, they are unique in being the reserve currency of the world so they can get away with more than most in terms of flexing the credit card. Impact? Asia has been growing in economic importance for years, so no change there, however the notion that 'west' is best in terms of finacial management of an economy will now start to be seriously examined AND questioned- in other words, this downgrade's immediate impact is political. So the Grand order of high buffons will have won the day- through their incessant and fevered craze for power, they have aided and abetted foreign powers in their control over workers and their families via ever and ever more debt-witness Europe and it's meddling pointless little Bureacracies (it's power has grown as the ECB's balence sheet has grown- why do u think they ask for more and more evrery year-mark my words , that balence sheet is about to multiply by 10, and big balence sheets means big power- especially when the balence sheet is full of rubbish, a problem our children will inherit). Personally I have no problem with Europe or China INFLENCING our decision making, that must naturally be right in an integrated, collective world which...er... we inhabit? Well, we're aiming for hopefully?? But DEBT enslaves people- it is an old enemy, reinvented, renamed, reworked by the 'Excellent order of revered Ecocknomists' so that it dosen't seem so bad, and their calls will become stronger as fears of recession become reality. These Financial fools would be advocating higher spending when people would be carting money about in wheelbarrows, they are that blind.
So for Mr Osbourne, the implications are that when's he's in negociations with foreign govts and powers, the psyche at the table will have shifted somewhat, AND they will be aware that he has to contend at home with people who don't get it, somewhat tying his hands. However, my instinct is to run with Osbourne, for a few reasons but mainly this: He got in, took a look at the books, made decisions that are politically potentially suicide (who loves a cutter)and his grasp of the REAL problem is now the subject of intense debate in US and Europe i.e. too much debt- for a youngster he saw that quickly, which tells me his instincts are good. He saw that debt WAS going to be THE problem and that finally mkts would begin to question the sustainability of bloated balence sheets (for the benefit of the Ancient order of lapel mounted squirty Flower wearers, when u begin to class deferred tax credits on your balence sheet as an asset at 100%, you're effed cos u don't get it- they don't understand this, in the same way that their understanding of Demand (the economic term, not the need to banish these size 14 shoe wearers to another planet for disservices to humanity) is one dimensional- this is a serious point). So, Mr Osbourne, the facts are that you pinpointed what the troubles ahead would be, and indeed implemented policies ahead of everyone else- good start! Sadly, QE will have to remain on the table if the global economy takes a dive. Now at this point it gets tricky for the Balls, brown/Blanchflower(?) Camp, because QE is spending , which I'm arguing against above. The reason it must remain an option is 2 fold: 1) it is pointless for some of the debt laden countries to devalue their currency whilst others don't (that would indeed be self flagellation, what I think Blanchflower is reffering to, never sure though as his mind is unordered)i.e. the west will competively devalue EN MASSE (this plus rebalencing economies is a way out)and 2): that the QE has caveats- no more for broken banks- if 25% go bust, so be it (I'd make preparations for that, quiet calls to HSBC bosses and such, and preparing for shock announcements if the proverbial does indeed hit, and SOME of the QE might be used to help healthy bank eat broken bank, and guess what? if equity holders get wiped, AND bondholders, so be it(the govt injection in a debt for equity swap to be managed by guys who have proven themselves through crisis (WEIRDLY, the banks that are stable don't have a lot of debt, but the very banks mr Blanchflower CITES as the very REASON that UK is no longer a safe haven are the ones who were too highly leevraged-groan...it's so desperate with these guys-no one ever seems sad when people in banks get sacked, most of whom are normal and not highly paid, always found that sad that people can hate a group of people simply out of misunderstanding), but most of the QE should be used in creating the high end jobs that the world is screaming out for- AND here is a last caveat,- create the jobs in sustainable indutries in parts of the country that the previous morons made state dependant. Just look at the postcode and build the 'economic zones;' e.g. Nissan had their most efficient plant in the world in the north east of England- Mr Osbourne, go with your instincts- If you break the odd European rule or seventeen by creating these zones, tell the europoliticos to poke it- after all, they NEED your approval to buy some of their debts back,correct?. Mr Osbourne, forget about the old school busted economists who became so obsessed in representing ultra rare minority groups that they forgot why they came into politics/economists in the first place. Ignore the mantras of these nutters and remeber also there will be calls from crazy right wingers as well, and it's not the fault of kids in the soon to be ravaged parts of the country that their parents and their party let them down. Don't fall into the class thing, it will be tempting.
You have a very fine line to walk. make resources available to those who want to dig themselves out of the misery the debt junkies will soon be responsible for. The facts are that it is time to do the right thing, and a natural leader with strong instincts is where we should be looking to find that

Flashman and Boy Georgie are a couple of public school spivs selling snake oil who are taking this county's economy down the toilet. Wake up Britain, we are walking in to a disaster made in Toryland.

"The US has been downgraded because it is cutting too fast and too deep as the economy starts to slow."

Meanwhile, Standard & Poor - ie the people who actually downgraded US debt, said something rather different - "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics"

You may not agree with it, but please don't make out they agree with you. They clearly don't.

It's time to go George. You are useless and clearly out of your depth.

As a Tory "strategist" you need to do what clearly would be the right thing to do as YOUR strategy is wreaking havoc on this country's economy. Go now for goodness sake!

Awake; You're right. The key strength of Britain is that it is probably the financial centre of the world certainly with respect to insurance. If it starts printing money like no tomorrow to get growth going, and it goes wrong, and it has to be bailed out then its reputation and the business of finance takes a hit. That's something that Danny is not taking into consideration.

There is too much happening to be worried about .8% difference in the growth rates between the UK and the USA in nine months ... there is the long term.

Difficult to know where to start with this ranting and raving load of rubbish. Far from reasoned debate, we've entered the realms of tribal deluded nonsense. The sort of junk I'd expect politicans to come out with, not respected professors.

I could have sworn the US was downgraded as its debts were out of control and that they are in a state of political deadlock so can't take decisive action to do anything about them.

Clearly I and many of the other commenters on here have read it all wrong.

It clearly is a dearly held belief on the Right that "having a plan" is the same thing as "cutting the deficit".

It isn't of course. Just saying you're "cutting the deficit" which is essentially what the Right is doing, doesn't mean the deficit is coming down - a simple measure after all. Indeed we now know that the deficit ISN'T coming down, as Osborne was warned it wouldn't in the face of zero growth.

Rightwingers may not like economic reality (partly why it bites them on the backside so often) but trying to reduce a defciit with no growth is utterly idiotic. Where that growth comes from is not much of an issue.

As clueless as the Right is, and I know they won't get this because the idea though correct is quite complex, it is worth pointing out thast Labour's growth had reduced the deficit in the last financial year by £30bn or so from initial projections. That was all borrowed.

Showing once again that Growth is the key and flouncing around making people's lives miserable because you are egged on by a sycophantic Tory press and its dimwitted readers will mark you out as another of History's rightwing clowns.'

@ phil daniels
Krugman is a clown, and the link you post is him defending his bullshit economic mantra of the last 20 years. Want to know why? cos his spend spend spend has come home to roost, and it's not looking pretty- so he blames S&P (There is a GLARING circularity in his argument by the way, see if you can be bothered to spot it- after all, we've had to listen to this drivel for so long almost became immune to it). It's intersting you let him argue for you rather than think it for yourself, the circularity is there- is it because he ha s letters after his name? what if he were a hedge fund manager with letters? ah.. thought not...
BREAKING NEWS from KRUGMAN- S&P is a joke institution trying to improve itslef after the subprime debacle(LOLOL no shit paul, u make me laugh hahaha, remind me who owns them again?) Seriously though, Pav... in your 30 years as an economist, when did u denounce them again? So now that the Crookman has used a circularity, blamed S&P (vote winner, yanks are v patriotic) actually Krugman sounds like a tradesman blaming other tradesman on site, what does he do next? why, he tells us the problem!! yes! he can see it;
"No, what makes America look unreliable isn’t budget math, it’s politics"
oh, er, hang on paul, surely you meant it's the politics that's skewing the budget maths, right?RIGHT? He continues, and this is why he's the best, his armoury is unparallelled;
"specifically, they’re caused by the rise of an extremist right that is prepared to create repeated crises rather than give an inch on its demands." yes yes paul but what actually is the problem? what cause and effect chain must we address so as to prevent further synmptoms? His holiest holy of the Ancient sacred order then states;
"The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits"
PUNCHLINE-WOOHOO, I love this guy, he makes me laugh harder each time, truly he us worthy of his title- Clowns make you laugh, and who else makes you laugh harder...
He's writing this cos he knows questions are being asked, and despite his protestation that the problem is not debt (he calls it budget math, I have to stop writing each time i read his material, just keep chuckling- budget maths, ahh good one), er Paul, despite u saying that and having lots of letters, the thing is pal.. mhow to put it- the entire financial community of the planet,most businesses and lastly but never leastly, heads of households, seem to be talking about this non problemmic 'budget arithmetic' (snigger). Genius man, genius

@ elrob
agreed, cuts when economy on edge is dangerous- using Greece not proper though, yes they had austerity in exchange for bailout but too early to say if it works- personally, i don't think it can (unless the germans cough up a couple of trillion)as the southern european cultures are just way too different- true it worked out in the US following their civil war, so in their psyche the unity is ingrained now- but europe would need to be where it was at end of second world war, psychologically I mean- Humans only appreciate what they have when they have lost so much/ had their life endangered, it's the way we are- it's what allows us to accept without real question the cries of 'cuts and poor standards of living' despite a welfare budget of 110bn is it, dunno anymore, when people are trying to come and make home here from all over the world- and before some neanderthal pipes up saying the Brits go abroad as well, please consider that the plight of an african dad on £700 a year leaving his family on a trip where he might drown, be captured, shot at , mistrearted by police, so that he can get a job cleaning the toilets in our nice council buildings and MAYBE he can send for them later,please don't compare, it's fallacious at best. Talk about the Left betraying it's roots...
Sometimes, though, the cuts have to come cos actually there's no choice- There will be pain, and that's what we're starting to see now.But is Osborne can convince mkt he's serious, maybe he opens the purse strings before nest election? hope so, many who've done nothing wrong deserve the effort

Some of the above comments from the economic "creationists" are so vitriolic as to be disturbing. They maintain a faith position in the face of all reason and insult those who point out the obvious.

What do they not get :-

1) we are borrowing more, not less,
2) a plan to cut the deficit is not cutting the deficit,
3) you can't cut the deficit without job creating growth
4) if every country in the western world embraces austerity then exports become more difficult and domestic demand falls,
5)the OBR states that Osborne intends to increase borrowing, he is simply pushing borrowing into the private household sector.

Finally why is that Osborne's supporters can't spell his name?

@ Ben M: you write;
"Showing once again that Growth is the key and ...'and;
"trying to reduce a deficit with no growth is utterly idiotic".
I understand I think your point i.e. that the growth and it's extra tax revenues will fund the interest payments on the debt? that makes sense , right? What if you increase the debt, hoping to fund growth, but it dosen't come? What then? Is there a point we balence the books i.e. we accept that despite being a competitive advanced economy, we also can look after those genuinely in need of help, AND we manage that of our own backs? OR do we have to keep being effectively told that The Englishman is not capable of looking after his own, he has to borrow permanantly cap in hand to be able to provide for his own- Is that what you're saying Mr blanchflower and crew?
@ Keithpp
to your points:
1) yes, but where is Osborne going to take the debt do you think- down or up? That's the point surely
2)see above
3)yes you can. Bond salesman in banks have convinced us otherwise because it's easier to pencil in growth rather than give a full detailed explanation of the investment and payoff.'Growth' is a magic term that the new army of weekend economists have adopted, unfortunatley because our educational system no longer teaches people to think for themselves, no one has considered this more and more often used word. It just gets trotted out when someone needs as an argument...
4) What do you mean here? The distinction right now is between debt laden and not debt laden... it's what all the recent news is about dear... groan... and the rich countries want the stuff that we make, and that germany makes , luv- it's not hard this... we make high end that the germans can't get off the shelves quick enough... services and manufactured goods btw, so with a weaker pound do the math.
5)who?
LOL

Excellent article, Danny. Osborne should resign and publicly admit his pathetic incompetence and arrogance.
The only change I would offer for discussion would be whether or not he should do so quietly and then slip out of the back door into oblivion - to avoid widespread attacks of nausea.
To the spluttering gentlemen above, I would recommend your rushing off to buy gold as fast as your little legs will carry you.

@Vic Singh: You've thrown in the troll towel! You can't respond so you call me a name. This is a favourite name by left wing people who are trapped by logic. I've cornered you and you can't answer so you start hissing names like an animal trapped.

Awake asked you the same question .. how do you know it is the result of government policy and not some other variable? Are you going to start hissing names at him as well or are you going to answer the question?

On here with me Vic Singh you find out how limited your assumptions are. When people start calling me names I know that that is the limit of their intelligence.

Vic Singh, when you able to admit you are initially wrong you will be able to move on to higher intellectual achievements. Until then your brain will remain in the lower divisions.

Good luck with your business .. what is it exactly? I've had a couple of successful businesses that I've sold. Now I do what I want. I enjoy laughing at people like you squealing when I've cornered them. Always thought you knew what you were talking about but not now eh! Oh maybe you are still proud and strutting.

Hey Vic do you notice I don't need to call someone names like a little boy? Why don't you just answer my question and show me up? You're probably not up to it.

As the comments seem to have led away from the hapless and risible Montgomerie, for any interested parties, here is a link to Paul Krugman's piece today dealing mainly with the (lack of) credibility of S&P:
http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt....

And here is the link to the US Treasury's response (2nd paragraph) to S&P's contradictory stance on their US$2 trillion error: http://www.treasury.gov/connect/blog/Pages/Just-the-Facts-SPs-2-Trillion...

As George would say:If you change horses in mid stream now, you're likely to drown anyway. The savage cuts are a response to Britains profligate living, and the riots are a symptom of Britains 'must have' throwaway society.
Somehow we must bring discipline and rigour back into our lives.

Glad to see our resident dimwits ignoring the latest economic data.

Manufacturing output declined by 0.4% in Jun 2011.

What did happen to the " March of the Makers "

@VIC Singh and Divine
Yes- how do u know Vic?
By the way Vic, Bernanke been saying he dosen't know why the stimulus hasn't worked so well...

Mr Divine,
I wouldn't assume anything about David Blanchflower's personal circumstances based on the fact he's an academic. There are plenty wealthy economics academics out there.
Also, as far as I'm aware there's a pretty significant element of private eneterprise in American higher education

Osbourne is the rabbit in the headlights. David, you are the first I have read calling for Osbourne to quit. I don't think you'll be the last.

That should have read:

FACT: The shares didn't take a tumble because of Osbourne's economic policies. They fell as an outcome of the US 'debt crisis' and credit downgrading news.

great article, Mr Blanchflower continues to provide a convincing counter argument to the slavish pro torygraph, keep it up !

What irritates me most is that the Coalition aplogists are always allowed to get away with this rubbish.

1) Osborne is not cutting the deficit, he is increasing the deficit, and will increase the deficit further if he does not get growth,
2) cutting public spending is not the same as cutting the deficit,
3) all that Osborne has done is issue a plan; that plan is not working,
4) total borrowing in the UK is set to rise even if the plan succeeds since private household debt is forecast to increase from £1.6 trillion to £2.1 trillion.

Why does the media not understand this, are the presenters as stupid as they appear?

Oooh, what a ranty piece of conjecture, no charts, no evidence to back this endless assertion of spending out way out of trouble on borrowed money.

The US got downgraded because they are the most indebted country on the planet and lack the courage to put in place the means necessary to start paying it back.

As simple as that.

The UK banks are in the crossfire because US institution are foreseeing another liquidity crisis and taking cash for equities.

As simple as that.

I really struggle to see with your academic background that you cannot see that.

The stimulus did not sort out the problem and top-down does not work.

The problem lies in the household budgets being seriously stretched, taxes far too high, discretionary consumption sacrificed for autonomous consumption.

National government keep socialising the bad debts through QE and devaluing the currency making its citizens poorer.

That's why aggregate demand is down, governments heavily dependent on imports are making goods too expensive to buy through their own actions.

What a load of jibberish. If the reporter is so clever and knows all the answers and exactly what is wrong and is able to tell us quite categorically all these facts why is he a mere reporter I have nevre heard of before.
I recall Messrs Milliband and Balls helping the then chancellor to sell half of our gold reserves and buying Euros.Such wise people yet they cocked it up big time leaving the mess for others to sort out and our children and grandchildren debts to pay in their lifetime.
These alleged experts in the media are nothing but pen pushers painting a scenario to suit their own bias and the views they think people want to hear or read.
Last week the BBC and Unions bashed the Government for the cuts in charitable funding yet failed as usual to get the true facts as 70 per cent of the Councils cutting were Socialist and their cuts were also 3 time the cuts elsewhere. Of course the truth is not news so lets distort to suit our own biased opinions. How they are paid so much to write rubbish is beyond most of us.