19/08/2011 Newsnight

The chances of a double-dip recession are rising, as the world

economy speaks with its numbers and shouts "big trouble ". The price of

gold hits a record high for the second straight day. It is one of

the few safe havens left. Six months ago analysts were saying

it would be all right, the world economy was clawing its way out of

the abyss. Now fatal uncertainty stalks the market.

We asked the man credited with predicting the last crash, if we

are about to see another. Suicide bombings in Kabul, target

the British Council. What will the timetable for the draw yawn do to

the security of our - drawdown do to the security of our troops.

Political perils of going into the other house. Sally Bercow survives

the night in Big Brother, what are the consequences for little husband.

Does your husband actually know you are here this evening? He does now,

he's not exactly chuffed about it. To discuss it, we are rejoined by

political husband and wife team, Christine and Neil Hamilton, and

the Conservative MP, Jacob Rees- Mogg.

Good evening, when banks aren't safe and Governments are bankrupt,

it is time to head to your log cabin, tweeted the economist who

predicted the crash of 2007, not everyone has a log cabin to hand,

everyone agrees with the sentiment. Bad economic data piles on top of

bad economic data. High street figures are down, markets in

continual motion sickness, and the European debt levels in crisis. We

will hear from the author of Black Swan, Nicolas Nassim Talib, what he

believes the long-term remedy is. First a week of turmoil.

When banks and deposits aren't safe and Governments are bankrupt, time

to buy canned food, Spam, guns, ammunition, gold bars and rush to

the mountain cabin. Thus speaks Dr Doom, via Twitter. Investors are

doing that, gold has hit an all- time high and the Swiss franc is

soaring against the dollar. On the global stock markets, the direction

of their graphs is down. The market is crashing, that is what is

happening. The market has crashed in Germany, and France, it is on

the edge of a 25% fall in the UK. Which is a crash, a good old

fashioned crash. It is crashing because Governments of Europe are

in very bad way financially. months ago analysts were saying

everything would be already, the world economy was slowly clawing

its way back to recovery, now the chances of a double-dip are high,

so why? After Lehman Brothers, credit markets collapsed, trade

collapsed, tkwroth and the stock markets collapsed. So Governments

unleashed two kinds of stimulus, they cut taxes and boosted splik

spending, the so-called fiscal stimlau, they cut interest rates to

zero, and after a bit of hesitation - stimulus, they skut interest

rates to zero and after a bit of hesitation, printed money.

Some currencies and political systems were not strong enough to

take the strain. The Greek crisis ignited chaos in

the eurozone, right now only lending by the European Central

Bank is keeping Italy and Spain afloat. The future of the euro is

at stake, now growth here is faltering. The outcome is grim as

we go forward. The reasons are, first of all, a lot of the recovery

we had been seeing in Europe has come about because of exports, but

there is no doubt that exports are starting to slow down quite

appreciably. Particularly exports to Asia, which had really been the

key catalyst driving European industrial growth in recent

quarters. In America, large parts of the

population see state spending as against their core religious and

constitutional beliefs, and now that's filtered through to politics,

stymieing President Obama on the budget. This week's market mayhem

is driven by fear, that America's recovery has run out, that Europe's

banking system could explode, and politicians, the world over, have

little idea about what to do next. The danger we have right now is

that although we're not at the moment in a recession, that the

sharp falls we are seeing in equity markets could actually drive down

confidence, and drive down wealth, and in turn, precipitate a

recession, which would then make the markets want to fall further

from here. There is a real danger of a downward spiral, unless we get

some force that comes in to intervene and arrest that. Another

fear driving the markets is that the cure could be worse than the

disease. The way out economically is a tried

and tested method, which is inflation. A level of inflation, 5-

6%, exactly what we have in the UK. A devaluation of the currency,

which is what we have in the UK. Austerity to cut back the costs in

the state, we have that in the UK. In Europe you haven't got that, in

America you haven't got that. The same will have to happen in America,

5-6% inflation per year, for five or six years a devalued currency

and austerity, that reality is frightening the markets.

Britain, riots apart, is not se centre of this global stress. But -

at the centre of this global stress, but any trouble is bad for us, we

are one of the most globalised economies in the world.

A few moments ago I spoke to Nicolas Nassim Talib, author of the

influential Black Swan theory of unpredictable events A few months

back on Newsnight he used this theory to warn of civil unrest on

the streets of London, which came to pass. I came to ask would world

recession be his next prediction? don't think the bad news will be a

recession. The bad news is that not figuring out what got us here, and

continuing to commit the same mistake. Too much debt and too much

of what we call the "agency" problem. On the part of the

financial system. Let me tell you what that problem is, the tumour at

the centre of the system not removed. It is when someone makes

money and gets a bow New York and when they lose money we pay the

price, the taxpayers, the future generations in this case. The core

of the problem is that asymmetry in pay-off, socialising losses and

privatising the gain, and the generator of that iniquity is still

there. You are basically saying the banks got away with it, are you?

What has happened, since the crisis these people got us here and they

are reaping the benefits. As an industry they have not suffered.

You have people in the streets, unemployed people, we have the

Federal Reserve doing everything to finance these bonuses. This is, I

mean, I'm outraged. What do you think actually needs to happen then

to the banks that you think have gone unchartered? The first time we

bailed out the banks was in 1982, 1983, during the Reagan years, they

said OK, this should never happen again. But the fact that they

bailed out the banks again in 1987 and repeated it, gave the banks the

feeling they could hijack society, to extract the bonus system, it is

extremely sneaky, in a sense they know if they make a mistake someone

else pays for it, and when they benefit they get it. In 2008 when

they bailed out the banks once again, They should have set the

ground to remove the problem, they did not. The banks today have

hijacked the Government, it is the inverse of what the French did,

they socialised the bank in 1981, in the US the banks took over the

Government. What would you make of the Bank of England here, the

stability chief arguing that actually banks need to be taking

more risk, not less to get us out of recession, that is what he

advocates? I mean, it is not whether the banks should be taking

more or less risk, the banks should be something other than machines to

generate themselves bonuses. The banks should be something more like

a utility, we are bailing them out because they are a utility,

otherwise we will let them die like other business, like the car

industry, like other businesses. We should remove that problem. It has

not been addressed. Today the banks are vastly more centralised than

they were before the crisis. They are much more powerful than they

were before. They have incredibly sneaky lobbies in Washington, it

looks like every monetary policy we have had in the United States for

the last ten years was there to accommodate them, and today more

than ever. We have not solved the problem that got us here. Surely

you are not just saying that the world economic woes we are looking

at at the moment are all down to bank bonus, are you? No, it is

because the monetary policy that we are engaging in, in the United

States, putting interest rates at zero, seems to just do nothing but

supply banks with cheap money, that's it, nothing else. What

should change in terms of the policy now? The first thing we

should have done is try to remove the cancer by working on lowering

indebtedness in society, particularly the United States, we

lost three-and-a-half years, we should have started the process

very early, tried to turn that to equity. It is like a country cannot

survive on air, money is air, you print money it is air. You need to

do something other than just print money and create public liability.

We have not done it. The aim is to get growth back into the economy?

The word "growth" to me, by itself is meaningless. It is like saying

"speed", you need safety before growth. A uponcy scheme generates

growth, that is not the growth we want. People who talk about growth

without robustness are not acting responsibly. Growth that is going

to make the system collapse in two or three years not the growth we

want. We want to clean up the system, we wasted three years doing

nothing but transferring money into the pockets of bankers. The take on

the British Council offices in Kabul which left 12 people dead is

a reminder that the fight against the Taliban is far from won. The

British Council is a non-political organisation that works on soft

diplomacy, a kind of cultural openness, which occasionally makes

it vulnerable. If this is hoi a non-military target is viewed, what

about the troops, as their numbers in the country diminish. The

drawdown timetable is intended to leave no British troops left by the

spring of 2015. How will that be managed, and how easily targeted

with the last ones. This was a carefully planned three-

phase asalt. It began in the early - assault. It began in the early

hours of the morning in a dusty middle-class area of Kabul. Taliban

fighters moved into the side streets that lead from the

mountains, armed with rocket- propelled grenades and machine guns.

They fired on a checkpoint, killing the police on duty. A vehicle

packed with explosives was detonated outside the main gate of

the British Council nearby, bringing down a wall and killing

guards. The blast shook half the city. What followed was an eight-

hour gun battle with Taliban suicide bombers fighting Afghan

security forces and New Zealand SAS soldiers, helped by British, French

and US troops. At least 12 people died, including a New Zealand

soldier. Why does the Afghan Government

think that the British Council was targeted? We are still

investigating why this was under attack. But, as you know, the

terrorists they are attacking international organisations in

Kabul city, also the Government entities. So we do not have any

conclusion at the moment, since the investigation is on, and we will

have to wait for the results. This is a vicious and cowardly attack,

but one that didn't succeed. I spoke to the ambassador in Kabul

this morning, and he assured me that all of the British Council

staff are safe and back at the British Embassy, and the embassy is

safe, obviously there has been a tragic loss of life of Afghan

police and others. The British Council is partly

funded by the Government. And in Afghanistan it concentrates on

English language schools. Clearly the work we are doing,

working with the schools and universities to modernise the

education system. To provide access to education for young women, to

give opportunities for young Afghans to have contact with the

outside world, is something which those who want to close the

community off, do not want to see happen. And in some senses, it is

precisely to stop the sorts of things we are doing that perhaps

cause the attack on the compound. So why should this happen now. Well,

today is the 92nd anniversary of Afghanistan's independence from

Britain, but perhaps more importantly the Alban are well

aware that there is growing pressure in - the Taliban are well

aware there is growing pressure in the west for the troops to lead.

The date for total withdrawal is little more than three years away,

and peaceful transfer of control is supposed to be under way.

Afghan forces have had responsibility for security in

Kabul since 2008, though NATO troops also operate in the city, of

course, as today's events showed. The aim is that NATO combat troops,

including around 10,000 British soldiers, should leave Afghanistan

by the end of 2014, or soon there after, depending on conditions on

the ground, and the rate to which Afghan forces are trained.

And there's pressure on the US and Britain to hurry that process along.

Sow does today's take show the tragedy - so does today's attack

show the strategy needs re-thinking. One former member of the Defence

Select Committee, argues there must be talks with elements of the

Taliban. The Taliban are many, many different groups of people. Of

course they find common cause with Mullah Omar and others, but if

Mullah Omar is not playing ball, and it sound as if that is the case,

then what we have to do is work on spliting the Taliban movement, so

that you bring the insurgency to a level that can be managed in the

long-term. I mean, you know, there are pragmatic Taliban who actually

care about their country, and don't want war forever.

The British Council plan to continue their work in Afghanistan,

and remain there when the troops have left. Today's attack puts the

timetable for that and the current strategy for dealing with the

Taliban under question. Joining me now is Lord Hutton, the

former Labour Defence Secretary, and from Washington, Kurt Volker,

the former US Ambassador to NATO. Very kind of you both to join us.

John Htuton, the presumption is that - John Hutton, the presumption

is Afghanistan is getting safer, and Kabul safer, which allows us to

plan specifically a drawdown timetable. Something like this must

start changing your mind? This is a very security breach in Kabul,

there is no point preend iting otherwise. Is it in itself -

pretending otherwise. Is it in itself going to change the

timetable that the British Government and President Obama have

set down over the next few weeks, probably not. We have to look at

Afghanistan as a whole, and look at what is happening in the country as

a whole. There have been improvements in the security in

Kandahar, east Afghanistan we should continue to be worried about,

the security development there is. Kabul there will be incidents here

from time to time. But the prime timetable for withdrawal is being

driven by the importance of US politics, and President Obama's

decision that he wants to go into the next presidential election

being able to say there is a significant reduction in the

American combat presence in Afghanistan. Her Majesty's

Government here and other NATO countries have very little option

but really to fall in with that imperative. Presumptionably you

would agree with the political - presumably you would agree with the

political imperative, but would you worry about the troops? Lord Hutton

is right about one thing, the attack itself is not serious in the

whole situation, it is unincident in Kabul, it is worrying but not

significant. The bigger issue is the question of time table and

strategy, it is impossible to bend our will on the strategy set. It is

a long-term challenge. We need to be clear about what our objectives

are, and we can achieve those objective, regardless of the time

lime, as soon as you put a time line on, that you signal to the

public that we don't have the will to be there, put in question your

resolve to achieve your objective, you give a shot in the arm to the

Taliban who think it is a matter of time, and they can use that time,

with incidents like this, to create a climate of fear and doubt about

the future, and put pressure on other Afghan s not to side with

them but to sit it out. To put that point to Lord Hutton,

could you do this with objectives. Basically the time line is a very

visible signal to the Taliban? always decline to put a time line

on when British troops would come home. For exactly the reasons

outlined. You disagree with the position of the current Government,

then? I wouldn't have been in favour of a time line as hard and

definitive as was set. What we have to do now, I don't think that is

going to change, we have to make sure it works in the best possible

way we have. All the NATO allies and partners have is to try to

focus on this now. I accept what was said, I think it is difficult,

knowing all we know about Afghanistan, all the precedents to

take into account, how hard it is to keep your foot on the pedal of

reform to try to get increases in capability amongst the police and

military in Afghanistan, it will be gamble. I don't think we should

kill ourselves on anything other than that. I don't see the time

line changing. I think the politics now are pretty well clear. I think

the British and American forces must do the best they can now. I

think we can do that now. Lord Hutton referred to it as gamble.

Would you have to make the admission that by the time the

troops need, the job, bluntly put, will not be finished? Absolutely. I

want to come back to the point of a time line, though, there is an

opportunity to pivot here. The time line that has been announced right

now, is really the withdrawal of the surge forces. Unlike in Iraq,

where we withdrew the surge forces after they had established some

measure of greater stability, in Afghanistan we are withdrawing them

at a time when violence is up. Nonetheless, I think that time line

is right, that is fixed and before the upcoming presidential election.

From that point forward there is an opportunity to pivot. We have

ourselves out on a limb, where we have a huge military financial

commitment that we can no longer sustain, the solution is to draw it

down. If we look over a longer period of time, with a steader

commitment more targeted, both hitting the tourist organisations,

including the Taliban, and strengthening the security forces,

for a much longer time, that may be a way to pivot.

Could this thing move forward more quickly than we think? Not without

threatening the success of the mission. I'm not sure entirely what

this deaf vision of combat mission is. We hear it - definition of

combat mission is. We hear it will be the end of combat mission by the

end of 2014. No-one has explained that. If we go on training military

and police, we embed our troops alongside them, that is how we do

that, if we are under fire we defend ourselves. There is plenty

of opportunity for to us see this mi mission through. We have

tremendously capable spoke forces which I would imagine will be still

in and around the vicinity, making a contribution. The important thing

to do is win the conflict, which winning it means we leave in a

position where the Afghan Government can handle its on

security effectively and competently, without having to rely

on a large number of NATO force, that will be success in the

campaign. When Big Brother had the brain wave

of inviting The Speaker's wife into the house, they must have realised

they reached the parts of reality shows haven't reached yet. The

political classes were chattering, and even here at Newsnight we asked

a few questions. Does it demean the Office of the Speaker, or is it a

sexist reaction to an independent women doing what she wants to do.

We will hear from Christine Hamilton, who feels it is wrong for

her to appear there. And from the Conservative MP, Jacob Rees-Mogg,

who doesn't. Those who missed her debut appearance here it is. It is

Sally, I have to ask, does your husband actually know you are here

this evening? He does now. He's not exactly chuffed about it. I really

genuinely didn't expect the media furore it caused. Because of who

I'm married to, it is not acceptable. The dirl, Sally. She's

an MP. An MP means, she's. We will ask Big

Brother. Jedward. She owns the House of Commons, that's what I

have heard, she owns it with her husband, that's who she is, really

important. Let's turn to the Hamiltons, who

join me from Edinburgh. You can't really be too pompus about this, it

is a bit of harmless fun? It is for the TV channel, but it will demean

the husband by the kind of programme we have just seen a clip

of. She says she's doing this to give two fingers up to the

establishment. In every other respect she's very happy to enjoy

all the privileges which her husband's seniority in the

establishment gives her. That means she's a parasite to fraud. She

suffers from what we might call attention surplus disorder, she

can't get enough of it. That is her problem, rather than our's. As far

as the House of Commons is concerned, what she's doing is

making the speaker's office, through her connection with the

Speaker, into a figure of fun. Let's put it to a current

Conservative MP, do you share that? No, it is nonsense. She's not The

Speaker, she's not maybe of the Royal Family, or defined by her

husband's job. She's doing this programme, which may not be

considered high-class television by many people, but it's not The

Speaker who is doing it. He's doing his job completely independently of

that. A lot of people will say actually she is famous for being

The Speaker's wife. She's not famous for being a Labour

councillor, she is famous for the fact she's married to John Bercow?

If you look at what people are famous for, it is all sorts of

things. There is a celebrity culture in Britain that promotes

people who haven't necessarily done anything in their own right, but

have been touched by other people who are famous. That is a different

matter all together. That is not particularly her fault, that is

just the way the press is interested in people. Let me put

this to Christine, would you have done this whilst your husband, Neil,

was still an MP? Absolutely no way. You mentioned earlier that I have

been on the very first I'm a Celbrity Get Me Out of Here. I'm a

perfectly ordinary private individual, a private citizen, I

don't owe anything from the state or receive anything from the state,

I'm not married to the highest commoner in the land, which Sally

is. My position is 100% different. What you might call the Sally

Bercow Sir cushion when it started I fully supported her, I am in

fully agreement that a woman should do what she wants and not be

defined by her husband. I think Sally has taken it far too far. Big

Brother, I think it is highly demeaning, I have turned it down

twice. She's in awe autounique position. No wonder - she is in a

unique position, no wonder her husband is staying in India.

Let's talk about someone who didn't turn it down, George Galloway, he

did it while he was in office, there he is, pretending to be a

cat? George Galloway might a prize fool of himself on Big Brother, he

decided to do that. I don't think there is anything fundamentally

wrong with people appearing on bad television shows, that is their

choice, and people have their views of television, mine is Newsnight,

others want to watch Big Brother, good luck to them. I'm glad to say

my wife has more sense. You have a lot of colleagues who would agree

with what the Hamiltons are saying tonight, would it not help to

campaign against him, is he not more vulnerable because of this?

don't think so, people who oppose the Speaker because of what his

wife is doing make them look ridiculous, that is up to her. It

must be on what he does as Speaker, it happens what he is doing is

supporting the legislature against the executive, I'm in favour of

that. That is tremendously important, and shouldn't be lost in

this fog of Big Brother. When people hear from you, they will

have a moment of pot and kettle, they don't think of you two as

turning down offers for finding publicity? I have turned down Big

Brother twice, and a lot of things, people only know what you do and

not what you turn down. We are both perfectly independent private

citizens, we do not have any connection with any high offices of

state like she does, we are a totally different category. I don't

think you think there was a little bit of fundamentally good old

fashioned sexism, if it was an MP, or a bloke, or even when George

Galloway did t people are rather more accepting of it, she will get

more flack because she's female? she were the Speaker and the spouse,

John would be on there, it would be the same where does it go next,

cage fighting, mud wrestling, where does the line draw itself? She will

make herself look an idiot, I think, the same way as George Galloway.

Throughout history there have been strong-minded women who caused

their husbands embarrassment, you can go through it, that is all

that's happening, it is not a big constitutional issue, I hope she