Entering the Bank of England is like walking back in time to the old British Empire. Its brass door is attended by the Pinks, men in black hats and pink tailcoats. Vast meeting rooms are decorated with richly colored carpets, high ceilings with gold filigree and ornate furniture. Between rooms, the marble floors bear monetary-themed mosaics. One depicts the development of the British pound. Elsewhere, the mosaics take the form of constellations — a reminder that the empire and its economy once dominated everywhere you could see the stars at night.
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One morning this summer, I went to the bank to visit Adam Posen, a member of its Monetary Policy Committee, the custodian of the pound. With bright red curly hair and a trim beard, Posen, who is 46, stands out in all the M.P.C.’s official photographs. He is “ fatter” and “fuzzier” than the other officials, he joked. Posen also happens to be only the second American economist ever to serve on the committee.
It’s impossible to imagine the uproar if President Obama ever nominated a British academic to work at the highest level of the Federal Reserve. But when Posen arrived, in September 2009, his job was to provide an outsider’s perspective. The bank was trying to steer Britain through the global financial crisis, and Posen seemed like a uniquely perfect fit. In the late 1990s, when he was a 30-year-old economist, his contrarian critique of Japan’s central bank and finance ministry helped that country put an end to its so-called Lost Decade. In the years since, Posen has become a well-respected adviser to (and critic of) many of the world’s key financial institutions. With this appointment, Posen crossed the line from scholar to decision maker. It was the first time that he had real power.
Posen arrived in London after the acute panic of the financial crisis had given way to the long slog we’re still in. At that point, policy makers around the world were given the task of assessing the damage and devising a plan that would best position the economy to function at normal levels. The United States had already responded with a roughly $800 billion stimulus package. In the spring of 2010, British voters went in another direction. They elected Prime Minister David Cameron, who had promised to reset the economy by severely cutting government spending, which would lead to significant public-sector layoffs. The economy’s only chance to return to long-term growth, Cameron argued, would be a painful, but brief, period of austerity. By shrinking the size of an inefficient government, Cameron explained, the budget would be balanced by 2015 and the private sector could lead the economy to full recovery.
Today these two approaches offer a crucial case study and perhaps a breakthrough in an age-old economic argument of austerity versus stimulus. In the past few years, the United States has experienced a steep downturn followed by a steady (though horrendously slow) upturn. The U.S. unemployment rate, which shot up to 10 percent at the end of 2009 from 4.4 percent in mid-2007, has now dropped steadily to 7.7 percent. It might be a frustrating pace, but it’s enough to persuade most economists that a recovery is under way.
The British economy, however, is profoundly stuck. Between fall 2007 and summer 2009, its unemployment rate jumped to 7.9 percent, from 5.2 percent. Yet in the three and a half years since — even despite the stimulus provided by this summer’s Olympic Games — the number has hovered around 7.9. The overall level of economic activity, real G.D.P., is still below where it was five years ago, too. Historically, it’s almost unimaginable for a major economy to be poorer than it was half a decade ago. (By comparison, the United States has a real G.D.P. that is around a half-trillion dollars more than it was in 2007.) Yet austerity’s advocates continue to argue, as Cameron has, that Britain’s economic stagnation shows that the government is still crowding out private-sector investment. This, they say, is proof that austerity is even more essential than was first realized. Once the debts have been paid off and the euro zone solves its political problems, the thinking goes, the British economy will bounce back quickly.
When I visited Posen this summer, he refused to publicly criticize a sitting administration’s policies, but every time the topic of austerity came up, he was unable to hide his frustration. Posen’s term ended in August, and his subsequent nondisclosure agreement expired last month. Now he wants to persuade everyone he can that Britain should abandon its austerity program. He says that he has a solution that would quickly return healthy economic growth. His critics say that his prescription would bring about another financial panic. But whether you think he’s right or wrong depends on what you make of the data.
Economics often appears to be an exercise in number-crunching, but it actually resembles storytelling more than mathematics. Before the members of the Monetary Policy Committee gather for their monthly meeting, they sit through a presentation from the Bank of England’s economic staff. The staff members take the most recent economic data — G.D.P. growth, the unemployment rate and more subtle details gathered from interviews with businesspeople throughout the country — and try to fashion it into a narrative. Does a sudden spike in new factory orders represent a fundamental shift, or is it just a preholiday blip? Do anecdotal reports of rising food prices herald a period of inflation, or is it the result of a cold snap? Which story feels truer?
A few days later, each of the nine members of the M.P.C. puts forth his or her own interpretation. Over two days, the members debate these competing narratives and discuss what the Bank of England should do. Then the committee votes, and the winning policies are implemented.
Soon after Cameron was elected, Posen argued that the committee should endorse a more radical, expansionary approach of economic recovery. He believed that the data indicated the sputtering would end and the economy would grow only if the Bank of England began buying many billions of pounds’ more worth of bonds. This added stimulus would flood the banking system with new cash and indirectly push banks to lend to businesses and citizens. (Banks don’t make money by sitting on cash.) Some of Posen’s colleagues warned that this would lead to inflation. He countered that the economy was operating below its capacity, so there was no reason to fear inflation.
Adam Davidson writes the It’s the Economy column for the magazine. He is co-founder of NPR’s ‘‘Planet Money,’’ a podcast and blog.
Editor: Jon Kelly
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No tax-dodging strategy over recent years has filled U.S. corporate coffers more rapidly than the offshoring of corporate activity to tax havens in low- or no-tax jurisdictions. Eighteen of the 25 firms highlighted in this study operate subsidiaries in offshore tax haven jurisdictions. The firms, all combined, had 556 tax haven subsidiaries last year.
Democracy Under Attack By Zillionaires 
It’s about f’ing time. Perhaps under new leadership EQCA has found their cajones and is now going to get down in the trenches and fight fire with fire.
Posted by: TampaZeke | Aug 31, 2011 11:54:53 AM
I’m interested in what these “ties to the KKK” are. If it’s just sharing space on a list at the Southern Poverty Law Center, I’m not sure that’s exactly “ties.”
I’m not saying there aren’t any, but this is the first I’m hearing of any ties other than also being a hate group, which FRC unequivocally is. If there are more concrete ties, I’d like to know what they are.
Posted by: Jonathan | Aug 31, 2011 12:13:11 PM
I hope this time around our side will start going for the jugular. But this video is seriously flawed. It needs a proequality voice pointing out the lies. A printed text does not carry the weight of the spoken voice. So it’s Tony’s antigay talking points that are dominating the presentation instead of the refutation. Why does our side have such a hard time finding top-notch political media consultants to craft effective messages?
Posted by: candide001 | Aug 31, 2011 12:18:49 PM
I’d like to know what the “ties to the KKK” are, also. I totally missed that one.
The hottest ring in hell burns for Tony Perkins.
Posted by: lincolnlounger | Aug 31, 2011 12:25:00 PM
I’m one of the army of voices that have not let up on EQCA ever since they blocked anyone else from having any control over fighting Prop 8 and then intentionally threw the fight themselves for reasons that today remain known only to the people at EQCA who made the choice to fail and betray us.
Finally, they’re calling a lie a lie. Finally, they’re calling a hate group a hate group. Finally, they’re explaining why something is right and saying who’s good and who’s bad.
This is a very good step forward. This is the organization they refused to be in 2008. This, however, also better be only the beginning.
It is very frustrating that they’re only doing the job they should have done in 2008 when it mattered most, but this is a good start and they better only get more aggressive and never let up for one single second from here on out.
Posted by: ohplease | Aug 31, 2011 12:25:57 PM
“Four years ago, Perkins addressed the Louisiana chapter of the Council of Conservative Citizens (CCC), America’s premier white supremacist organization, the successor to the White Citizens Councils, which battled integration in the South. In 1996 Perkins paid former Ku Klux Klan Grand Wizard David Duke $82,500 for his mailing list. At the time, Perkins was the campaign manager for a right-wing Republican candidate for the US Senate in Louisiana. The Federal Election Commission fined the campaign Perkins ran $3,000 for attempting to hide the money paid to Duke.
…Six years later, in 2002, Perkins embarked on a campaign to avenge his mentor’s defeat by running for the US Senate himself. But Perkins was dogged with questions about his involvement with David Duke. Perkins issued a flat denial that he had ever had anything to do with Duke, and he denounced him for good measure. Unfortunately, Perkins’s signature was on the document authorizing the purchase of Duke’s list. Perkins’s dalliance with the racist Council of Conservative Citizens in the run-up to his campaign also illuminates the seamy underside of his political associations.”
http://pamshouseblend.firedoglake.com/2010/10/12/the-wapos-justification-for-tony-perkins-oped-it-held-a-liveblog-with-dan-savage/
Posted by: XbonzHD | Aug 31, 2011 12:30:38 PM
What are the “ties to the KKK”? Gee, if only we all had access to a machine that could give us any information we wanted simply by typing in our questions. What a wonderful thing that would be, huh?
Or, in other words: Let Me Google That For You:
http://lmgtfy.com/?q=frc+kkk+perkins+duke
Posted by: ohplease | Aug 31, 2011 12:34:05 PM
OHPLEASE – thank you for saying what so many of us often say. Quit asking others to do your work. You want to know? Look it up. That’s the beauty of the ‘Net and why it is the force that it is.
Posted by: OS2Guy | Aug 31, 2011 12:57:53 PM
There is a picture of him addressing the Council of Conservative Citizens (CCC aka KKK), complete with rebel flag emblazoned Klan flag proudly displayed behind him.
Posted by: TampaZeke | Aug 31, 2011 1:18:14 PM
For those unable, unwilling or unconcerned about searching for the picture of Perkins with the flag:
http://www.rightwingwatch.org/content/picture-worth-thousand-memories
Posted by: TampaZeke | Aug 31, 2011 1:20:09 PM
I don’t think they would mind the FAIR education act if we weren’t included in there. It just goes to show that they’re willing to screw over other disadvantaged groups, even the disabled, to get to us.
Posted by: ophu | Aug 31, 2011 1:44:41 PM
But wait: there’s more:
http://pamshouseblend.firedoglake.com/2010/10/12/the-wapos-justification-for-tony-perkins-oped-it-held-a-liveblog-with-dan-savage/
Posted by: Danny | Aug 31, 2011 1:46:26 PM
That is not an effective ad. Just flashing the words, “Lies” or “Scare Tactic” in the background is incredibly weak.You need to immediately shoot it down on its lack of merit, perhaps coming from attractive, minority school parents in front of a picture of Bayard Rustin, Harvey Milk or other hero of note.
The public have short attention spans.You’ve given smooth-talking Tony his chance to make his points (for free!),fail to directly engage them and then try to clear it all up at the end.Flashing words comes across as yelling because you don’t have anything else to back you up.
I’m sorry but in my opinion, I think this one could do more harm than good.
Posted by: KEW | Aug 31, 2011 2:11:20 PM
Or you can keep on playing up Perkin’s ties to Duke, the KKK, and racist rhetoric.
Don’t let up on that angle.
In fact, I dare Perkins to respond and answer questions about this (and I don’t think that he’s ever been asked by tweety Matthews, Anderson Cooper, or the usual suspects that continue to give him airtime.)
Posted by: Chitown Kev | Aug 31, 2011 2:29:32 PM
Jumpin’ Jesus! What a difference a tiny leadership change seems to make. Finally, EQCA isn’t rolling over and playing dead! I stopped contributing to this organization after Geoff Kors lost us the Prop 8 vote. It sounds like it might be time to look again. Nice work EQCA!
Posted by: Keppler | Aug 31, 2011 3:05:38 PM