Margareta Pagano: No ifs or butts: Obama has to stick to his guns

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The Independent Online

If you want a real feel for Barack Obama's economic policies, go to YouTube and tap in "Obama", "Pants" and "MTV News". Here you can watch the President-elect urging his young black brothers to: "Pull UpYour Pants". His rebuke to the saggy-pants brigade tells me more about where Obama wants to take the US economy than any number of new policy statements to be made by his team over the coming months. With those words, he's told a generation to get off their butts, get some pride, self-reliance, self-respect, hard work and decency; all those old-fashioned virtues which are as much the American dream as a black man in the White House.

Obama also tells Sway Calloway, the TV station's rapper turned reporter, that: "Money doesn't grow on trees. It's got to come from somewhere and the attitude that I have is that, if we want to grow our economy, the way it grows is from the bottom up." His message is clear: pull up your trousers and you'll get your rewards. I also loved the line: "Some people might not want to see your underwear – I'm one of them."

All this fits perfectly beside everything else Obama has said during the campaign: tax cuts for the middle-classes, mortgage tax relief on homes, tuition credits for students, measures to stop mortgage companies claiming back homes and abolishing capital gains tax for small businesses. Let's be honest, Obama won this election on the economy. He instinctively understands what it takes to create a strong one too: new ideas, which create new jobs, which in turn create wealth – then it is taxed and spent by governments.

While Obama's challenge – kick-starting the US economy – is daunting, he should take comfort from evidence that risk-taking always rises during an economic downturn; proper risk-taking that is, not the leveraged lunacy of the credit binge. Ironically, it's also when people lose their jobs that so many strike out on their own. In the tough times, people are braver because they have less to lose.

Look back at the US over the past few decades to see how true this is. Microsoft and Apple both started in the middle of the 1970s recession, while Google and MySpace emerged from the ashes of the 2000 internet bubble. There will be new companies born out of the crash of 2008 too. Baby Apples are already sprouting in Silicon Valley, many of them coming from the cutting edge in fields such as "cloud computing" – the dispersal of computing resources across the internet – nanotech, biotech, materials science and even space travel.

It's not going to be easy. America is in recession, 10 million are already out of work and millions more will lose their jobs in the coming months. Income disparities are at their greatest for a century. The budget deficit is at its highest ever, taking the national debt to a staggering $11 trillion (£7 trillion) while the dollar is hovering. Demand for cars, perhaps the second most potent symbol of the American dream, is at its lowest level for 25 years and the motor industry is on its knees, begging to be bailed out like the banks. Even before this crisis, many were living below the poverty line and the credit crunch can only increase the number. In short, the US is teetering on the edge of bankruptcy.

If Obama can stick to his beliefs, persuade everyone in the US to pull up their trousers as well as his brothers, he may prove to be as successful as he is inspirational.

Photo shoot Archer's auction raises £100,000 from City

A dramatic picture of a young soldier at a highway checkpoint in Kurdistan was one of more than 87 limited edition photographs auctioned by Jeffrey Archer last week for PhotoVoice, a charity that uses photojournalism to highlight marginalised groups around the world. Taken by award-winning documentary photographer Anastasia Taylor-Lind, the photo fetched £800 for the charity while the Herb Ritts classic 'Tatjana Veiled Head' raised a whopping £6,500. PhotoVoice had been worried that the credit crunch would put people off buying but the 450 who turned up at Thomson Reuters in Canary Wharf had clearly not heard of it. Generous City and corporate collectors bid £102,305 in total, some £30,000 more for the charity than last year. Archer, who paid £2,750 for a photo, hasn't lost his touch. To see the lots visit www.photovoice.org

There's no panic at the Bank – just an urgent wish to be ahead of the curve

I would love to have been a fly on the wall during last Thursday's Monetary Policy Committee meeting at the Bank of England when members voted for the biggest cut in interest rates for 53 years.

What, I wonder, was the look on the face of the donnish Governor, Mervyn King, when he added up his colleagues' votes to slash the official bank rate by 1.5 per cent? Did he make his decision through gritted teeth, forced to yield to some in the press baying for his blood plus a little heavy-breathing from Nos 10 and 11? After all, the hawkish King has voted only three times for a rate cut, seven times for them to be maintained over the past year and claimed only a few months ago that rates would stay at 5 per cent for months to come. And what about Tim Besley, the most hawkish of all, who has voted twice for an increase and six times for rates to be held the same?

Then, more intriguing still, would have been the composure of David Blanchflower, the economist who has been arguing since Northern Rock that interest rates should be cut.

Was Blanchflower grinning from ear to ear, cock-a-hoop over bringing his colleagues on side at last?

Actually, I reckon they would have all looked pretty miserable because they have seen the data for last month. Clearly it was ghastly. But the Bank hasn't panicked, as some are claiming. It's much more likely that, having seen just how horrible the October figures are, the Bank now wants to get ahead of the curve. There would have been no point in cutting any less, as small cuts were already priced into the market; and it stops the CBI bleating for more cuts while the banks can start to relax home loans. Libor is already down so hopefully the medicine is working.

But those who say the decision means the Bank has lost it virginity as an independent institution are perhaps too cynical. At least for now.

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