The purpose of Anatole Kaletsky

I think I've finally figured out why Anatole Kaletsky exists. He's there to fire out ideas of such surpassing stupidity that anything the government actually does will seem like the height of common sense by comparison.

Recall that the current crisis arose largely because of excessive credit creation, something which Kaletsky regularly applauded. (He was especially scathing about central banks such as the ECB, which never took his advice to pump up their economies by encouraging household equity withdrawal). When Northern Rock collapsed he declared it to be a storm in a teacup, and he continued denying the seriousness of the credit crisis until the spring of 2008. When Lehman was allowed to fail, he roundly blamed that decision for all the ills that befell the US economy, as if everyting had been fine until that point. This rather ignores the fact that the official verdict is now that the US recession began right at the start of last year. (What's the Latin for that kind of causation? Ante hoc ergo propter hoc?).

In the past few weeks he has been at the forefront of the band of idiots who are arguing that the measures governments have taken so far to address the crisis have failed, and that much more needs to be done. A couple of weeks ago he suggested that doubling bank reserve requirements would provide a cheap source of borrowing for the government, apparently not noticing that such a step would effectively neutralise any possible benefit from recapitalising the banks in the first place. Today he has slipped right over the edge of reason, arguing that bank deposits should be taxed to punish savers and encourage them to spend or to invest in more productive assets -- such as property!

It's certainly true that we don't need people with jobs to rein in their spending excessively right now, though it's hard to blame them when the media, including Kaletsky's own august organ, are replete with scare stories, many of which are exaggerated or just plain wrong. (Example: last Sunday's Times had a business section headline "One fifth of small firms to fail". The text of the story made it plain that the actual forecast was 5% of firms. One fifth, 5%, what's the diff?) However, after many years of debt-fuelled consumption it's a bit hard to argue that the UK's biggest problems is excessive saving. In fact, the lack of personal saving in the UK is one reason that many of the banks became reliant on wholesale funding, and look where that got them. In the absence of exchange controls, the main effect of a tax on bank deposits would be to drive savings abroad, exacerbating funding problems for the domestic banks. Kaletsky admits that "even Barack Obama" might consider his idea too radical. It's not radical, Anatole. It's just asinine.