Guido has helpfully created this chart which shows just how hubristic Gordon Brown's claim about Britain being the best prepared country to withstand the recession really was. As Guido says...
As well as being the lamest economy in the G7 we share recessionary woes with economic powerhouses like Romania. Gordon Brown’s epitaph will be that he didn’t abolish boom and bust, that he didn’t save the world and he “lead the way” only in his imagination. The British economy has paid the price for his delusions.
No one should take any pleasure from us being alone among G7 countries to still be in recession. But it is entirely right to point out that it is Labour's economic policies which are keeping us there. No one has confidence in them and as a consequence we are not attracting the investment which will give us the growth we need. The money the government has pumped into the economy and the banks has resulted in little extra liquidity and lending. Why isn't it using its controlling interest in several of the banks to influence lending policy?
And now we are potentially heading for a double dip recession. The Bank of England is clearly worried that inflation is due to let rip, which will lead to higher interest rates. So much for
But there's no fresh approach, no fresh thinking. Just a Denis Norden-esque attitude of 'It'll be alright on the night'. Except it won't be. Until May 7th.
Inflation about to take off did you say....Quelle suprise..nailing interest rates to the floor and printing money has never not caused inflation....ask any Banana Republic...get used to 10% mortgage rates...it will happen...
ReplyDeleteJust of course goes to prove that Broon wasnt fit to be let loose with anyone`s cheque book let alone ours...
Yes - but the unemployment rate is lower in the UK than the US or most of continental Europe
ReplyDeleteMay 7th!?
ReplyDelete"Why isn't it using its controlling interest in several of the banks to influence lending policy?"
ReplyDeleteThey are. They told the banks to clean up their balance sheets, which of course involves stopping lending. Winner.
Well, this was to be expected. The big story today was Lord West admitting that the Olympics 2012 constitute the biggest security challenge since World War 2. I said why on Tuesday 12 May.
ReplyDeleteBut are we best placed in the new G7 division 2 against Greece, Estonia etc?
ReplyDelete@johnwillman: "Yes - but the unemployment rate is lower in the UK than the US or most of continental Europe"
ReplyDeleteMaybe... But they're all employed in numerous public bodies and quangos - busily sending memos to each other>
Once growth starts in ernest inflationary pressure will build. Little reported after the BoE's November Inflation report were the interest rate assumptions supporting the growth forecasts.
ReplyDeleteAssuming the BoE's GDP growth figures are reliable - I don't, they are too optimistic - there will be a significant hike in interest rates.
The BoE assumes rates will double to 1% by the end of Q3/4 2010, and steadily rise to 2% in Q1, 2.5% in Q2 and 3% in Q3 2011.
The interest component in a typical 250K 25 year tracker mortgage could rise by as much as GBP 400 per month depending on the lender.
Add in tax and NI rises, the likely rise in the cost of energy/fuel and people will feel very poor indeed.
The conservatives were right to set an austere tone during conference.
The WSJ has a good comment on McMental's proposed Topin tax here http://online.wsj.com/article/SB10001424052748704576204574531211500981726.html?mod=rss_opinion_main.
ReplyDeleteWillman - In the UK we have a lot of short time working and pay cuts and no pay rises.
ReplyDeletePlus Lloyds just announced 500 job losses for next year. It will continue if we do not get our huge mountain of debt under control.
The Spectators graph is more scary that Guidos. We will soon be paying £65 billion in interest debt a year. 2ce the defence budget.
http://www.spectator.co.uk/coffeehouse/5536583/the-perfect-storm.thtml
This cannot go on. The blatherings of Mr Blanchflower are going to crucify us. Other countries are suffering unemployment but they have not got the debt to pay off that we do. They will cut taxes to make room for spending cuts and growth. We need to do the same.
But there is one silver lining. huge savings can be made by capping public sector recruitment and freezing pay will save large sums.
Err....I don't know about you, but I see a bit of a paradox here.
ReplyDeleteMost of the "out of recession" countries are recording slightly improved GDP's because they are throwing borrowed money at the problem, thus building up massive debts which some of them will possibly never be able to repay, and creating government non-jobs to improve the unemployment figures which will cripple their economies further down the road. Subsidising their housing markets, and obsceneties like "cash for clunkers", extreme measures used by the UK and US, are further distortions used to goose the GDP figures, but likely to cause more pain further down the road.
The alternative, paying down debt, and accepting a shorter and sharper recession to emerge leaner and fitter on the other side is the more prudent and logical solution which few politicians of any country have the guts to promote.
So, poor old UK, in the deepest of doo-doos, might be considered to have been pursuing the second path, facing up to the consequences of "borrow, spend, and waste" and taking the medicine today for a better recovery tomorrow.
This is the paradox.
Imprudent, financially profligate, McDoom and the Badger have been quantitatively easing more than almost anyone else, and stoking up the deficit to the extent that our nation's credit rating faces a downgrade, yet we are still one of the few nations still officially in recession.
Things must be far worse than they seem.
I feel sorry for Osborne because he will be thrown in at the deep end come next May.
So long as we, the taxpayers, are paying the new round of lavish bank trader bonuses, I for one am very happy with the situation. I am sure you all feel the same. Hurrah for our very sensible City-dominated Britain, which is run in the interests of ordinary people like us!
ReplyDelete