Germans are snubbing Brown but maybe there is a way to pay for the deficit

Gordon may have saved the world but the Germans don't appear to be taking too kindly to his plans for world domination.

Chancellor Angela Merkel is none too happy about being snubbed on Monday by Brown,Sarkozy and Barossa and the German finance minister has let it be known that he thinks that our fiscal stimulation package.

In an interview with Newsweek magazine, Peer Steinbrueck singled out Prime Minister Gordon Brown for abandoning fiscal prudence and switching to policies that would saddle a generation with debt.

The finance minister seems particularly unhappy that having been lectured for 10 years by Brown about the need for fiscal prudence,our Prime Minister has engineered a complete about-face.

Over in the Times this morning,Anatole Kaletsky has a possible solution to the problem of paying for the increasing deficit

There is one type of tax crying out to be raised in the present environment because it would actually strengthen the economy. This is a tax on energy, carbon or fossil fuels.

According to Anatole

The simplest version of such a tax is the “escalator” whereby the Treasury committed itself in the mid-1990s to raising petrol duties by 5 per cent above inflation each year. In the past three years, this escalator has been suspended to offset the effects of soaring global oil prices.

But will it work?

I think that Mike Smithson has got it spot on after lokking the morning newspapers but how much of a protection does the announcement yesterday actually give.

One of the contentious issues is surely how do you prove that someone's drop in income is related to the recession.How do you account for people who overcommitted in the first place and how are the banks going to fund this?

After all although the government is going to guarantee the mortgage interest for two years,they will still have to show it as liability and thus will impair their abilities to lend

Merkel is not a fan of reflation and cheap money then

Angela Merkel is none too pleased with the fiscal response in some countries to the global financial crisis.

Ft.com reports her comments on the various reflations that are going on to the German Parliament

"Excessively cheap money in the US was a driver of today's crisis,I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis."

Now I wonder to who she is referring

Why it may be ok to print money

It is worth reading Samuel Brittan's pice in this morning's FT.

He defends the reflationary tactics of the governemnt even to the point of view of printing more money and his rational

The most frequent objection is to ask: “Where will the money come from?” The short answer is: the Bank of England printing works in Debden. This is not just a debating reply. In a paper currency system there is no fixed pot of money, but a total influenced by human action. The most interesting information in the Bank of England’s Inflation Report is a chart on page 11 showing that the annual growth of broad money and bank credit (excluding certain financial intermediaries) slowed from about 15 per cent early in 2007 to 5 per cent in the third quarter of 2008. In that quarter alone, real money growth (that is, adjusted for inflation) was negative for the first time since the early 1980s. There is clearly scope and need for a pick-up in monetary growth.