Nov.2, 2008 12:41 a.m.
Over the past several days it has become clear that in Great Britian Keynes once again has a place of honour in public policy. Undoubtedly somewhere on the south downs at Tilton where his ashes were scattered his spirit is comforted by the course of events.
The Prime Minister of Britain Gordon Brown and his Chancellor of the Exchequer Alistair Darling have made it clear that the public sector deficit is increasing as a deliberate response to the financial crisis both in order to inject capital into British banks in order to unlock the credt system and in order to stimulate the economy to combat the downturn that is underway.
Growth in the GDP fell by 0.5 % in the third quarter after it had stagnated in the second quarter. As the Chancellor made clear "to increase borrowing in a downturn is sensible ."since prior to these initiatives the debt to GDP ratio was 36.6 % and the deficit £ 36 billion or less than 3 % of the GDP there was plenty of room to manoeuvre. The Government will no longer be constrained by the fiscal rules it had enacted under the influence of monetarist forces at least for as long as the crisis lasts.This is a good development and Brown and Darling deserve congratulations for moving finally to jettison the monetarist straightjacket
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