Banks ordered to lend

We are on the road to disaster.

Consider the problems before us:

Inflation is at a 16 year high and the BoE has just cut rates to a 50 year low.

The the economy is sliding into recession, unemployment is rising, and sterling is crashing.

We have a huge current account deficit, largely due to historically unprecedented levels of personal debt.

The banking system is largely insolvent, and is now in the process of being nationalized.

As bad as things are, today's meeting between the Treasury and the commercial banks was an all time low. Darling called them in and ordered them to lend. Prudence, effective risk management, or commercial self interest - none of this matters anymore. For their own narrow political self interest, New Labour needs the banks to turn the credit tap back on. Darling may as well have asked them to merge and called the new entity Gosbank. This is the worst kind of crude state intervention. It truly is the worst kind of socialism.

Today's meeting raises a deeper question. What kind of vision does Brown and Darling have for the UK economy? With the current policy framework of massive deficits, negative real interest rates, and credit policies determined by political priorities rather than commercial interests, where do they think the economy will be in 12 months time.

Do they really think that more financial chaos is the solution to the existing chaotic credit crisis currently facing the economy? Do they think that they just have to order the banks to lend more money and a recession will be avoided?

Make no mistake, the problem isn't the economy, the problem is the UK economic policy framework.