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Five Tests [On Economics]

  09/22/10 09:58, by Len, Categories: Financial Markets, Financial Articles

Source - Article by Cees Bruggemans - 21st September 2010

Profile: Cees Bruggemans is Chief Economist of First National Bank.

Gordon Brown, remember him?
Tony’s biography “Tony Blair – A Journey” brought Gordon also briefly back to life, but unlikely for long. Still, Gordon sticks in the mind for his ‘Five Tests’, also mentioned in the probably unauthorized and terrible repetitive biography by Tom Bower “Gordon Brown – Prime minister”. Gordon in the end did not want Britain to join the Euro, at least not under Tony’s leadership, and in short order invented ‘Five Tests’ that the Euro had to satisfy in order for Great Britain to join the lowly continent.

These were:

• are business cycles and economic structures compatible so that the UK and others could live comfortably with Euro interest rates on a permanent basis?

• If problems emerge is there sufficient flexibility to deal with them?

• Would joining EMU create better conditions for firms making long-term decisions to invest in Britain?

• What impact would entry into EMU have on the competitive position of the UK’s financial services industry, particularly the City’s wholesale markets?

• In summary, will joining EMU promote higher growth, stability and a lasting increase in jobs?

By 2006 Gordon triumphantly claimed that four tests had been met, yet there was no joining yet (good thing, too, knowing what came next). One imagines General De Gaulle turning in his grave, another forgettable minor historic detail. Even so, by not joining EMU and be subjected to its rigour, Britain opted to be subjected to Gordon. Whereas Europe has discovered the joys of Euro stress, Britain has of late discovered the full cost of having had Gordon during a very sensitive period in its national life. Anyway, one recent sunny Sunday morning Tony’s blurb reminded me of Gordon and his Five Tests. In short order I could think of my own Five Tests, but on a slightly larger canvas than Gordon’s.

The Question begging to be satisfied: Is the world about to descent into a depression-cum-deflationary hell? Not on your Nellie, but how to prove that?

This is where the Five Tests come in. Not particularly scientific, but neither were Gordon’s and everyone religiously believed him, so why not mine, too?

Read the full Article here.

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