So it is confirmed. We have negative growth of 0.5%, a much bigger figure than economic pundits had been predicting. To those who live in the real economy it will have not come as much of a surprise.
The government's response to the economic problems seem, typically for Labour, to throw money at them. More spending, more borrowing, with barely a thought for the long term picking up of bills. If only getting the economy out of a recession was that simple. One of my earliest political memories was my Grandmother telling me in my early teens: "Never trust Labour. They always spend more than they can afford." The next day Denis Healey went cap in hand to the IMF.
If we're not careful, history is about to repeat itself.
"If only getting the economy out of a recession was that simple."
ReplyDeleteSo, what's your solution then? Most economists are saying that you have to spend your way out of a recession.
I remember having a pep talk in May 1997. Predictions were made which have all come true. That they took longer to materialise makes me think they will be harder to fix.
ReplyDeleteIain, the Labour GDP statistics include the effects of 6%+ growth in public sector spending, much of which is spending for spendings sake and does not add any true economic value. If we take out the increasing amounts paid to quangos whho spend the money like confetti, take out the economic activity on pointless schemes such as ID cards or the NHS booking system etc. etc, then the true economic picture is far worse.
ReplyDeleteIf I pay you £500 million to wash my car, and you pay me £500 million to cut my lawn, we are quits, but GDP goes up by £1 billion. That is the public sector economy under Labour.
Remember the GP contracts? Labour said they were investing billions in the NHS. All we got back was lots of administrators and the same number of doctors but better paid. There was no increase in output just an increase in GDP, and fortunately for the government doctor's pay / medical salaries conveniently fall outside the measurements of inflation.
Iain, is there any chance you can tell us when Gideon is giving his resignation speech?
ReplyDeleteI don't want to miss this one.
No resignation speech does mean that Dave will go.
Trust me, I know these things.
The problem with the Labour Party is that they are intrinsically a party of spending other people's money on their own pet vote-winning projects.
ReplyDeleteWhen has the Labour Party ever supported the real economy?
I have this image of a collection of Labour types sitting by a field of wheat discussing their "right" that the wheat should be grown and collected for them to use as they saw fit - all this without any effort on their part to plant it, nurture it, harvest it, thresh it and even bake it!
Yep, your Grandmother was right.
What do you mean "if we're not careful"?
ReplyDeleteOur care doesn't come into it.
The damage is already done.
Grandparents are usually right about these things aren't they.....my own first political memory is my grandfather telling me the difference between left and right wing. It was choc full of expletives that I also learned a few swear words too.......how I miss that man!
ReplyDeleteThe 'economic pundits' don't have a clue, an inkling, an iota of an idea of how bad this downturn will be - NOT A CLUE.
ReplyDeleteThe UK standard of living is about to reach that of Montenegro or Albania and will continue to fall down to sub-Saharan African standards.
Brown and the 'elite' have crucified the economy of a pile of debt. On a massive trade deficit and on a massive current account deficit. ANY country in that position is about to be crucified - no one will now finance the gaps.
And the more this joker borrows, the worse the situation will become. You CANNOT solve a problem of indebtedness by borrowing more money.
Iain
ReplyDeleteWhen the backlash comes against public sector job security and final salary pensions it's going to get very ugly.
As ever, it'll be the Tories that have to do the dirty work and the political cycle will start to take another turn.
SP
SP
If I pay you £500 million to wash my car, and you pay me £500 million to cut my lawn, we are quits, but GDP goes up by £1 billion. That is the public sector economy under Labour.
ReplyDeleteDon't think you are going to be getting that A level in economic anytime soon Alex.
Is there no end in sight to the fall of Sterling? Its been moving down in fits and starts ever since Gordo took over from Blair last year. But in the last few days it's gone into absolute freefall against all major currencies (except $AUD & $NZ). Down 11% against the Yen and 5% against the $US in ONE DAY. And today touched an all time low against the Euro. At what stage will the BoE have to put UP interest rates to defend the Pound - or is it headed the same way as the Zimbabwe currency?
ReplyDeleteRather simplistic Iain, (like your views on David Evans) These squalls are part and parcel of the capitalistic system. After a shake-out and an adjustment, things will improve, the system will recover, growth will return.
ReplyDeleteRemember '92?
I know, from your tweets, that you weren't impressed with that Newsnight investigation a week or so ago. But a key point was made by a lady who is a editor at the FT (deputy ? ) - and that her shock at how so few of our politicians( including serving government ministers) and journalists understand how finance really works.
ReplyDeleteI've heard about people who've met Gordon Brown in the city who are amazed at how little he understands.
About a week ago the government was almost boasting about its plans to go on a borrowing binge (spin itself as they are already on one).
But this week we see currencies falling and countries lining up outside the IMF.
There are only two feasible explanations to Labour behaviour:
1) They really are clueless and have no idea what they're doing.
2) They desire the destruction of our capitalist economy and plan to make things so desperate that people will welcome socialist autocratic rule when its announced as an emergency measure.
I used to think 2) was purely for the tinfoil headgear brigade, but I'm starting to wonder.
It is certainly consistent with what the main players used to believe in their youth - before they discovered you can't get elected for saying such things.
If you want to know the state of the economy can I recommend reading the Loughborough Echo? It has a jobs section which in times of boom can be 7 pages long, normally it is 5 like it was 3 months ago. But it has now gone down in stages to 3 and this week, for the first time, just 2 pages and that includes some padding ads by the newspaper itself. And of those jobs, most are for public sector jobs or for care assistants. Methinks, worse is to come.
ReplyDeletecanvas,
ReplyDeleteit depends who's doing the spending. if it's the government and they have to borrow that money, then that won't help the country as we will still have to find money to pay that and the interest.
only if it's money in people's pockets which they then use to spend will make any difference to the economy.
I agree with what you say but I note a lack of consistency amongst politicians about any alternative to this Keynsian spluge.
ReplyDeleteThe US accompanies spending with tax cuts. In Ireland they have announced massive spending cuts although that is now looking like a political death warrant.
A philosopher said "Money is an idea backed by confidence".
ReplyDeleteGordon Brown intervenes to RAISE confidence. It promptly plummets. And this is repeated again and again.
The ONLY thing that will restore confidence in the UK is Gordon Brown NOT intervening - or not even being in a position to intervene.
He claims he will do whatever is necessary. Gordon, what is required is YOUR resignation, nothing else has any chance of restoring the UK's confidence.
Sadly, somehow I think that step as likely as a promised referendum on the Lisbon treaty being held.
Alan Douglas
Remeber France trying to spend itself out of their problems in the 80's. Verrryy ugly when it came to an end ( the French love to riot though....)
ReplyDeleteThe Keynesian solution is like discovering that you've drunk bleach - and then drinking lots more bleach in a bid to rectify the earlier incident.
ReplyDeleteWe need the milk of tax cuts and budgetary restraint, not the bleach of more borrowing. What people don't seem to realise is that he's NOT "treating" the cause (credit crunch) but rather the symptoms (recession). It's rather like taking out another credit card in order to make the minimum payments on the last one you maxed-out. It'll all end in disaster.
Word verification: excersec (exocet?)
Iain
ReplyDeleteStill the Labour Rebuttal squad is about!
New story about Lord Sleaze and his friendship with Rothschild and the Russian dating backto 2004 which he kept hidden from Brussels. There is also his sticky hands in Rothschild and Russian 'business' in Montenegro. The way it is developing, Lord Sleaze may not last until the New Year! Poor Brown , the 'experienced' Chancellor and the PM!
Blair and Mittal and Mittal and Labour! Mittal and the other rich Russians we see in London buying up everything short of the B. Palace were turned down for residencies by the Americans.
Now the recession is going to hit hard, no capping on immigration, direct and indirect (backdoor through universities)? Campbell,Lord Sleaze and bottler Brown is working overtime to explain away the millions who are going to be in the streets.
(re. your twitter postings)
ReplyDeleteOther Telegraph front-page items include:
"Hamster who evaded fireman found"
"Man chokes to death on kebab"
"Mafia send donkey head threat"
"Woman dies after lavatory seat accident"
"South African MP falls off chair on live TV"
Oh dear.
Of course we should'nt borrow our way out of recession, we borrowed to not have a recession back in the nineties & look where we are now!
ReplyDeleteWe need to change the way we deal with capitalism because so far it's not working.
We need to stop using credit & get the mentallity that our granparents had! As in, feel the shame of owing money.
Labour dont feel shame, they are like a uncontrollable child who cant handle money, it is time they had their spoilt bum kicked into the real world.
Ever heard the phrase "Even a stopped clock is right twice a day"? Labour government in for 11 years; Tories have been saying "there's going to be a recession" every two months; and hey presto after 11 years when there is a world recession, we start having problems.
ReplyDeleteThis proves nothing but the stupidity of the Conservatives. What would the Conservatives have done differently? No-one knows. Would it have made our present economic situation better? Certainly not.
"'ve heard about people who've met Gordon Brown in the city who are amazed at how little he understands"
ReplyDeleteNot suprised. His PhD thesis on 'History of Labour Party in Scotland' a friend says was a waffle.
His colleagues at the Glasgow College of Technology ( now Glasgow
Caledonian university, a former polytechnic) where Brown was a Sociology lecturer think he makes ideas from others as his own like the famous 'Brown Plan'
About the famous 'Brown Plan' praised by the Nobel prize winner
Krugman. He spent time in Scotland working with another bright economist, Wendy Alexander!
The co-author of articles Krugman wrote, Prof Bhagwati a brilliant Indian economist many say really deserved the prize. They doubt whether Krugman contributed anything new in economics.
This year Nobel Prize for Chemistry is also a sham. The real discoverer is Douglas Prasher, who could not continue his research because of financial reasons and gave all his research work away to the current Chemistry winners. He now drives a
pick up down South in America truck for a minimum wage!
Our economic wizard Brown of Fife, put forward a plan 'Brown's plan' praised by Krugman the Nobel Laureate. That is the spin.
About 'Brown plan'. In News at One interview when asked Baroness Vadera said 'Brown plan',core of it was in the Hank Paulson's $700 million plan document. He was worried that it is too far a step to go.
If it succeeds it is 'Brown Plan' otherwise, it is 'Cameron plan'!
Brown's ex-colleagues at Glasgow College of Technology know what they were talking!!
no matter which party is in power, nothing beats the warm glow one gets from 'doing good' with someone elses money
ReplyDeleteI remember Ken Clarke saying 'every Labour government runs out of money eventually, until then we may as well all go home'.
ReplyDeleteThe fact that it has taken the barstewards 11 years to run out of money speaks volumes for the state of the economy they inherited.
Once again the Tories will have to clear up the mess.
nicholas from l'boro
ReplyDeleteExactly the same in The Coventry Evening Telegraph and The Leicester Mercury
Canvas, how can it be sensible at a time when people are in debt up to the eyeballs, to promote spending our way out of a recession - by borrowing billions more?
ReplyDeleteIf we had reserves to use to stimulate the economy through tax cuts or investment it might be sensible.
But we have a Labour government and Gordon Brown thinks reserves are the Raith Rovers players who are not good enough for the first team.
Public spending is needed to kick-start demand to the point where profit expectations rise, and normal investment returns. We need a fiscal jump start.
ReplyDeleteIt's time to build a British infrastructure fit for the 21st century. Build more schools, roads, bridges, invest in a modern train network, invest in public transport...
And if Labour has already spent £7 billion pounds on the illegal war in Iraq then they can spend it on their own country...
big dave said...
ReplyDelete...'only if it's money in people's pockets which they then use to spend will make any difference to the economy'
Haven't they tried that in the States to no effect?
Some one is using my name on here, this happened to verity also. it isn't that I disagree with the comments, but thats my name,and it will cause confusion.
ReplyDeleteWhy can't you get your own name?
Man in a Shed said...
ReplyDelete'I've heard about people who've met Gordon Brown in the city who are amazed at how little he understands'
Don't be shy, we'll try not to assume that you're just a name dropper.
Who are these people?
Name names.
My father used to say the same.When I was about 16, I remember I had obtained a little red book called 'The Thoughts of Chairman Mao'
ReplyDeleteWhen he saw me reading it and saying how I thought the left were for the ordinary people and all that. He picked himself off the floor wipped the foam from round his mouth and said.
"Son I have never tried to stop your free thinking in any way. I have tried to leave you to develope your own thoughts, but if you remember only one thing. Labour will always leave office with the country in debt and in a worse state than when they came to power. No matter what they promise if you vote Labour you will live to regret it in the end"
This just was not him, so you never forget something like that.
I went on to vote Labour many years ago and did totaly regret it as he had said. Since then I have voted with my head.
Labour just do not understand about wealth. They can only spend, never earn and it has been proved yet again.
Its fine having all these worthy ideas but if you do not create the wealth to pay for it you end up with nothing.
Its called the real world.
My name is Ann. It's been mine since I was born, but I'll change it just for you.
ReplyDelete