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The Economy

This is the second time that the Chancellor has not understood the question today and has therefore not been able to answer it. Of course it is the case that in a normal operating economy that is how things are, but in a liquidity trap it is different, and that is where we are. That is why when American debt was downgraded in August, America's long-term interest rates fell; they did not rise. Let me quote to him what the chief economist at Capital Economics said this August:"““Signs that the UK's economic recovery has ground to a standstill have led markets to revise down their interest rate expectations””." The National Institute of Economic and Social Research has said:"““The reason people are marking down gilt yields is because””—" they think that the UK—"““economy is weak””." In a liquidity trap, long-term interest rates are a sign of the growth potential of the economy. It really worries me that the Chancellor does not understand the economics of this.