The difficult slog ahead

paracelsus

And on that cheerful note...

How long before Brown et al try to spin this as some great heroic effort?

Josh

Interestingly, this has been a recession in which the antidotes have been popular e.g. low interest rates, cheap money etc. In the 80's and 90's, inflation prevented any fiscal stimulus and interes rates had to be hiked to squeeze inflation out of the system. This has been different. However, we cannot have 0.5% interest rates for too long. Once interest rates start to rise again, and once all of the fiscal and monetary steroids ( hat tip to Vince Cable) have been withdrawn, Gordon Brown will know what it means to be the most hated man in the country ( I believe that honour is currently held by the paedophile community)

jon

So instead of -5.7% gdp plus 10% cut of government spending -5% gdp equalling -10.7% technically a depression it is looking like a w recession with the next leg coming after the election when government spending is cut.

Eric Blair

And to think people thought you were a beacon of honesty in the politics-economics field.

You've just surged past Evans-Pritchard, D.Smith and Kaletsky in the desperate shilling stakes.

If anyone has wasted their time reading this do yourself a huge favour and read Karl Denninger and Peter Schiff to see how badly you're being deceived by coporate Big Media.

oldtimer

Well Mr Timms would say that, wouldn`t he?

By contrast on the BBC 6pm News, the BBC Economics Editor stated that the BoE was to pump another £50bn into the economy via QE because the economy was weak. The public view, per the Politics Home poll published today, is that just under a quarter think that the economy is improving, half thinks it will stay the same and a quarter think it will get worse.

My own experience is that things are still getting worse - shops are still closing down where I live (considered a relatively prosperous area), prices are going up, savings rates are next to non-existant. Where is the upside?

The BofE justifies QE on the basis it is necessary to stop inflation falling below 2% and says "but the Bank will not let inflation get out of control". On our family shopping basket inflation is definitely over 2%.

There is a disconnect between the official waffle on these matters and every day reality. In my view it is QE that is at least partly behind the increases in house prices and share prices that everyone quotes as "evidence" that things are getting better. Looks more like the start of another unsustainable bubble to me.

Jim

So you want us to be back at the peak of an unsustainable bubble within 5 years? When young couples couldn't afford houses?
I guess it would be nice for bankers and politicians, but it isn't going to happen. As you point out the stimulus has had an effect, which will wear out in Q4. Then it's payback time. You are also ignoring the new structural energy deficit, which is going to hit harder over the next few years as we import more energy, we no longer export.
No, sorry but this is the beginning of a long depression, until the debt is gone nothing can change that.

jay

Yes and I was one of the 5000 today yipeee what a fab time to be job hunting.

Cheers Gordon

mitch

Meanwhile back in the real world the brownturn is gettin worse.
Shuffling money about might make GDP go up but does precious little for the man on the street.

Moraymint

Fraser, I regret to say that you and other similarly-minded commentators keep making the same mistake when you look at the issue of economic recovery.

Without writing a tome here, please refer to the following links to understand where I'm coming from. Peak Oil is the elephant in the room as far as economic recovery is concerned.

http://tinyurl.com/nmemcg

http://tinyurl.com/kks8yw

Your astute comments would be welcome.

PS I've spent that past 2 years and will spend the next 3 years moving my family towards self-reliance and self-sufficiency. Mankind's era of cheap energy is now coming to a close and all those folk (including you, Fraser?) hankering after a return to relentless 3% pa GDP growth are whistling in the dark. Perhaps literally in the next 5 - 10 years.

Jeremy

So the early eighties recession was bad, but this one is worse?

And our projected climb out of the current recession is far less steep, far slower and will take far longer than was the case in all of the previous recessions - as indicated on your graphs?

Is that right?

It's a bit worrying, Fraser, to say the least. I don't like the look of it. What are the social, political and economic consequences of this slow and low projected recovery going to be? How will it impact upon the individual?

And the reason, you say, for the difference in character between this recession and the others is because this is a debt-fuelled recession, whereas the others were inflation-fuelled; and inflation-fuelled recessions are quicker and easier to sort out and recover from than recessions of the debt-fuelled variety. Oh dear.

Thanks Gordon. Thanks Labour. That's quite a legacy you've left us...dragged down by war and debt.

Lance Grundy

And what a difficult slog it is going to be. Regardless of how much money the Bank of England ‘prints’ or how long interest rates are kept down, there is the not so small matter of that £1,459 billion of UK personal debt. It was there before the credit crunch hit, it is still there now, and it will still be there long after the crisis has been declared over.

Jeff Randall sums it up in THIS article in the Telegraph "Bankers don’t live in the real world."

The key quotes are:-

"In the real economy, where millions of consumers are being stretched on the rack of over-indebtedness and rising unemployment, the credit crunch's impact is not only still hurting – it's getting worse.
For, unlike the banks, most people who have made poor decisions about borrowing and spending cannot "write down" their losses and move on to the next whirligig of self-indulgence. They are stuck with obligations – credit cards, personal loans and mortgages – unless they decide to go bust and abandon their homes. Even then, not all of the pain goes away; it simply shifts to a new phase of discomfort, as any bankrupt will tell you."

And…

"With real wages under pressure, and the burden of historical debts only ameliorated by low interest rates, but not removed, too many British consumers remain hopelessly over-leveraged. Spraying them with yet more cheap money merely delays their day of reckoning."

Thomas Cussans

Fraser:

Brown as Shadow Chancellor was relentless in highlighting the Tories' economic failings. He managed, quite falsely of course but that was the mark of his then political effectiveness, to present the recession of the early 90s, in retrospect a mere blip, as an economic Hiroshima, a calamitous failure. In much the same way, from May 1997 he succeeded in making a supine press believe that he had inherited an economy on the point of meltdown.

In reality, the precise opposite was the case. Nonetheless, the myth of 'Britain's greatest-ever chancellor' was being assiduously spun.

Twelve years later, his true legacy is revealed: an economy castrated by a man in thrall to his own mysterious shortcomings, a man consumed by bitterness, eaten alive by a barely contained belief that the world has always conspired against his self-evident genius.

The question now is less how have we been reduced to this pitiful state, more why are Dave and his boys not making clear that we are ruled by a kind of psychopath.

Brown's legacy – economic meltdown, debt of unimaginable proportions, a vast underclass of benefit-dependent numbskulls, a grotesque expansion of government on all levels – is properly terrifying.

Why is this not being screamed about? Why have we not already taken to the streets?

Is despair the only rational reaction?

It increasingly feels like it.

2trueblue

The media had a 'love in' with Nu Labour for so long that real journalism took a holiday unitl 18mths. ago when reality kicked in, and everyone put on their thinking caps and realised that they had been sold a pup. Now that the media are back on-line and have taken charge of their brains, we are getting somewhere.
This government have destroyed our culture, taken our liberty, wrecked the economy, and we will have to put it all together. Lets hope that the next government have the integrity, intelligence, will, and ability to connect with the real public to put it all together, and see us on the road to recovery.
The fact that the BoE has seen fit to pump in a further eye watering £50billion today gives us a clue that this is a dire situation that has no quick fix. My six grandchildren will pay the price.
Thank you Gordon Brown.
When you were told on your arrival at the treasury 12yrs ago that that you had inherited the best economy the country had seen since WW2, and your reply 'I don't want to know'. Gordon, you know nothing. Labour, You are the KNOW NOTHING PARTY.

Fearless Frank

Why do (some) people still regard a rise in house prices as a good thing?
Isn't that what, partly, got us into this mess??

Steve Tierney

Fraser, I'd love you to be right but I think you're in lala land.

My own feeling is that we have not even reached the worst yet. That'll come towards the end of the year and early next year when the QE is called to a halt. At which point we will look back on the current levels of unemployment wistfully.

I suspect this time next year we will STILL have no end in sight and things will be far worse.

Karla

Now if the recession has indeed bottomed out why on earth has BoE put again the printers in a spin to churn even more worthless paper? They surely must know something we don't, namely that things are far from being very rosy. They know they can't fool all people all of the time but hope they can fool some people for the next 10 months, and they are keeping their fingers crossed.

Edward McLaughlin

The only point of having 'an economy', is because it provides a means for the population to work and earn and pay its way.

So if we're losing workers at the horrendous rate quoted here, and until that trend is turned around, then all other figures are meaningless.

Besides which, Jim's question above, is worth repeating (and perhaps answering):
"So you want us to be back at the peak of an unsustainable bubble within 5 years? When young couples couldn't afford houses?"

Chuck Unsworth

Five years? Was this something that Alastair Darling has suggested?

Only five years? Wild optimism. It'll be fiteen at least.

Phoney Brown and his incompetent cronies have done immense damage to us all. We are virtually bankrupt, and the fruits of their stupidity and blind arrogance will be visited upon the next two generations.

This government has completely undermined the prospects of our children. Yet all government actions are based upon a one year, maybe even six-month, horizon. Vision? My arse.

Adrian Sells

Judging by many of the comments, one would have to say that there is a great deal of scepticism about your call that this recession might be over. Understandably, because the precedents you use relate to previous and dissimilar recessions rather than the long term depression in which we are currently mired - which has no recent precedent other than Japan.
Debt bubbles of the order of the one that engulfed us all in the West over the last decade take a very long time to work off and we are most probably destined for (at best) a "W" double dip economic slump, although I fear it's more likely to be an internet performance ie "www".
However I can't help but hope your irrational exuberance proves to be right. Just don't bank on it.

TrevorsDen

Mr Cussans is far too kind to Gordon Brown.

And Grundy/Randall are right as well. Bankers are a group of people totally divorced from reality. That they continue to receive bonuses for the privilege of still being able to draw breath is obscene. £10 million for a chief executive?? Let them go and earn it somewhere else then And let these bankers realise that soldiers are fighting and dying for their country (for a pittance) whilst they plunder it.

Oh dear - spare us from 'peak oil'

Fergus Pickering

I want a further drop in house prices so that my daughter can buy a house. I want a rise in interest rates so that my investments improve. I want increased spending on the NHS and education because that's where my nearest and dearest work. Does this mean voting for Cameron? And don't tell me anything about finance or economics. My eyes glaze over when anyone does that. O Lord reserve for me a crown and do not let my shares go down. Oh, and one last thing. Why do so many of you talk in those terrible cliches - a peaking bubble, Lord preserve us. Does it mean youdon't know whatyou are talking about?

Chuck Unsworth

@ TrevorsDen

So, how do you feel about Peak Energy?

Any views on electricity supply/demand?

Simon Stephenson

We'll get nowhere until we understand the fallacy of assuming that gaming the system is an effective way of achieving its purposes. Virtually the entire financial services explosion was gaming - contrived acquisition of value already created somewhere else - but we are still pursuing the false idea that it was actually new wealth creation.

As a nation, have we really become too stupid to realise this?

Tiberius

A very good thread. I say that as someone who absorbs all these opinions in the hope that I can draw on them to help keep my and my employer's head above water.

But who knows? Nine months ago, I was faced with an exchange rate to frighten any importer to death. One buys forward contracts to hedge against $1.35 and parity in the euro. Looking at today's rates, I needn't have bothered. Some advisers were close on the euro (1.10 -1.15 as the settled rate), but no one was forecasting the dollar rate to exceed 1.60 this year.

We are all on our own, I'm afraid, because no one knows what's going to happen. I'm no fan of Stephanie Flanders, but her response to the new £50b of QE by BoE just about sums it up: they've taken out an insurance policy. If that's the best the BoE can do, what can any individual do to secure prices and asset value?

Publius

Tell you what, why not just print the money and then pay off the debt with that. Problem solved.

Ben Maccer

I'm not an economist - can anyone explain to me what they're expecting to happen roundabout Q11, when suddenly things start to look much more optimistic?

Denis Cooper

I would like to see a chart showing how the recession would have developed if Mervyn King had gone along to turn on the printing presses on March 11th, and had then discovered that none of them worked and they couldn't be repaired ... figuratively speaking.

I don't believe that there's been any significant spontaneous economy recovery, yet; like a Harrier jump jet the economy has been pulled out its dive by the vectored thrust provided by quantitatitive easing, but probably it's still nose down rather than nose up.

Without the Bank continuing to print new money to buy existing gilts so that the Treasury can sell new gilts to borrow enough to cover the government's budget deficit, public spending would have to be cut savagely, and then we would crash and burn.

That much seemed obvious, and I'm surprised that so many people were surprised by the Bank's decision to keep the presses rolling.