Stephen Green's double-dip warnings

Pot Head

Looks like Boris agrees with him, this from his DT column yesterday, and he praises Ed Ball to boot:

"Whatever you say about Spheroids, he not only has balls. He has ideas. He has conviction. He has a grasp of economic history, and as he showed in his Bloomberg lecture last week, he knows how to mount a compelling argument. Balls is like one of those Florida weather forecasters who has just seen something terrible on the long-range radar."

And then Boris goes on to admit that Ed Balls may actually be right on the economy:

"It must be admitted that his words are finding an audience, even among those who might normally be counted as state-shrinking free-marketeers. There was Martin Wolf in last week’s Financial Times, warning that “Ed Balls’s critique is right”; and blow me down, there was a leading article in the normally pur et dur Thatcherite pages of the Sunday Times. “An awful thought,” ran the panicky headline, “but what if Ed Balls is right?”

If the Right-wing commentariat is getting nervous about the depth of the cuts, what about the Left of the Coalition? What about the Lib Dem rank and file? "

strapworld

Pot Head- an apt name for a potty comment!

TrevorsDen

Where are the words 'double dip' in this report? We see 'further shocks' for 'some' and 'unprecedented ... austerity'. Is there anyone who claims to be able to stand the laws of economics on its head? Is not the real economic imperative to reform our economy for the future and not bury it under a pile of debt where it will continue to ossify?

Ball's policy might (might) put off a slump but we would end up with a bigger one in the longer run and also end up even more impoverished as we pay ever more in debt interest repayments.

How can public services benefit if we are paying ever higher sums in debt repayments? Oh I see we borrow more.

I think its worth pointing out that Balls is not only complaining about the coalitions plans which are only marginally more draconian than labours own, but he is repudiating his own pre-election plans and wants to see no reduction in the deficit at all.

Boris actually says - 'I hope and believe the economy will continue to recover' and is calling for caution on bank bonuses.

Anon

Are there other quotes from Stephen Green referring to a double dip recession because anaemic growth isn't quite the same thing. Growth, even anaemic growth in the less than 1% territory, is not even a contraction nevermind a recession.

@ Pot Head

I'm baffled by Boris and I'm equally baffled by Balls. However, Stephen Green's words act as a caution to both. Advising banks to adjust to the new normal is a message to wake up as to where we are.

If we followed Balls' plan what do you think would happen to the yield on UK Government Bonds? They'd shoot skywards. The only reason yields are coming down is because we've pledged to cut the deficit. If we suddenly suspended our deficit reduction plan markets worldwide would react by demanding a higher yield to finance our spending leading to a reduction in the room for discretionary spending and higher taxes neither of which would do much to create jobs.

Balls can take his platform because he's in opposition. But, and this won't happen often as I don't tend to agree with him, as Tony Blair admitted in his book. People see the taxes coming and stop spending and if we suddenly announced a Ballsian stimulus we'd be clobbered by the markets in such a way that everyone would realise they were about to become much, much poorer.

Stephen Green's words are a message to the world that we have to recognise that this is as good as its gonna get. The days of rapid growth are gone and won't return for years. We will get by with growth of c.1-2% and that'll be it short of a miracle. Its not great but its the least worst option because as Nouriel Roubini said at the weekend we've pretty much run out of weapons with which to combat the recession.

"Slowth" as its being called is the new reality. There won't be sudden jumps in house prices, you won't get an inflation busting pay rise, everything will just meander on sort of as it is getting brighter only very slowly.

But if we print more money bondholders will sell our debt for fear we're tying to inflate it away and thus cut off our credit lines making savage cuts and taxes necessary. If we go to the markets directly yields on our bonds will jump up probably resulting in much the same thing.

What we're doing now is pretty much the only thing we can do and everyone needs to listen to Green's words and stop judging this decade by the standards of the last. Judging today's asset prices by those of 2005 or 2007 at the height of the bubble. We're just not gonna get back there anytime soon but rather that than becoming the Sick man of Europe again...

Michael

I'm a shareholder and investor, but unlike, apparently, some in the city, I do think it is vital that he pursues the proper separation of high street bank's investment arms from their retail banks. It was this lack of separation that caused the financial collapse, as the USA first discovered in the late 1920s and then fixed for half a century by the Glass Steagal act.

Adam

Eh? Nowhere in that speech does Stephen Green mention a double dip. And his analysis is quite in line with the coalition's.

Mark Cannon

As one or two others have observed, Mr Hoskin is writing nonsense. Nowhere does Mr Green use the words "double dip" or suggest that the present government's policies increase the chance that we will suffer a further recession. So what's the point of Mr Hoskin's piece?

oldtimer

His comments simply reflect the present reality facing the UK.

HSBC has adapted to the "new normal" by shifting its focus (ie location of the CEO and his strategy team) back to the Far East. If Green helps reinforce in government the conservative HSBC approach and attitudes to lending, borrowing and spending then his will prove to be a wise appointment.

Dorothy Wilson

pot Head: But editorial in the Sunday Times then goes on to argue that he isn't right. In other words, the question in the heading was a rhetorical one.

Dimoto

Oldtimer: plus HSBC's concentration on the high growth countries, we could do with some of that too.

At the height of the bubble, many of these so-called "conservative/free market" analysts were cheer leading for Brown/Balls(read some old David Smith and Anatole Kaletsky articles), presumably for narrow self-interest (moral hazard anyone ?)

A lot of the current jitters on "cuts" and "double dips" are probably also due to self interest by journos and "spokespeople" who are starting to realise that they are not as personally wealthy as they had thought.

According to "our correspondent", with one leap, Balls has escaped from being a main architect of the economic ruination of this country, to being some sort of economic savant; I don't think so.

You really couldn't make it up.

New horizons

It seems to me that Ed Balls' economics are based on the same premises as those of my (thankfully) ex-wife:
She:,'Yes, this is a new credit card.'
Me:,'Why?'
She:,'Because my others won't work.'
Me:,'Er, how's that?'
She (testily):,'Because they are full.'
Me:,'Come again.'
She (really irritable now):,'They are over the credit limits.'

Eventually, she was forced to file for bankruptcy.

Simon Stephenson

Very well written, Anon (1.02pm).

An intelligent, rational opposition is essential to the health of any democracy, and I would be applauding the Labour leadership if he were focusing its misgivings upon genuinely debateable assertions and stances taken by the coalition. As Jeremy Warner argues in today's Telegraph, for example, the assumption of a relatively seamless take-up by the private-sector of the 600,000 public-sector job losses looks much more like hope than reason, and so the principle of how the government would expect to address rising unemployment is an essential and legitimate area for political debate.

But Labour are not doing this. They're taking the Low Route of offering to be a foghorn for all the irrational nonsense driven out of the general population by fear. It's totally irresponsible of Balls etc. to give oxygen to the idea that we need give no consideration to the negatives that would result from opting to try to spend our way out of short-term hardship. This isn't what democratic politics is supposed to be about - trumpeting whatever crazy, paper-selling idea the tabloids have implanted into the minds of the masses.

TGF UKIP

Dorothy Wilson it's just Pot head up to hisw usual tricks. We've just got to remember that he is ultra New Labour and, therefore, take at face value not a word he writes.

Simon Stephenson

Sorry about the cock-up with the underlining in my 8.52pm comment. The emphasis was supposed to be only on "the principle".

Simon Stephenson

Double-Dip

This is the latest buzz-word to be co-opted into the battle to present everything as either good or bad, black or white. So the drip-drip of modern persuasion is that avoiding double-dip is "good" while falling into it is "bad". In itself, it's utter poppycock, as Roger Bootle explained in the Telegraph 2 or 3 weeks ago.

It is wholly possible that the best economic policy for this country to pursue is to have a short, sharp clear-out of businesses and industries that are costing more than they are producing, to allow a refocus and deployment of resource in areas where we can operate economically. By the modern rules this would be "bad". On the other hand it may be possible to avoid double-dip for a long time by propping up uneconomic activity, and lurching along at a growth rate well below the natural rate one would expect from innovation and productivity improvements alone - all the time falling behind those countries that have adopted the "bad" policy set out above. Modern standards would categorise this double-dip avoidance as "good".

It just goes to show that the zeitgeist of the age, compulsory over-simplification, can, and does, lead us down the wrong path.

Dimoto

Talking of the zeitgeist: A few days ago, Robinson was explaining to Marr, that Balls' "grow out of recession" was one extreme, and the Tories "massive cuts" were the other.
Of course, the goldilocks option was the Miliband formula ....
Triangulation is alive and well in the remnants of new Labour (and in the BBC evidently).

Ian Stewart

I do trust that you will all keep your sang froid when the dip comes to pass? I wonder who you will blame then...