Like the Road Runner’s Coyote speeding off a cliff, it will take some time before Britain looks down and realises that Brown has led us over an economic precipice. The CPI target of 2% inflation will be a joke – from now until about 2010. We’re likely to hit 5% by Christmas and stay there for a good chunk of next year. It will, quite literally, be the biggest overshoot anywhere in the world now – not just currently, but in the history of inflation targeting outside of Africa. Even the Bank of England is coming to terms with this, so we can forget a rate cut next week.
Citibank thinks we’re already in recession and forecasts growth of 0.3% next year and 0.9% in 2010. Yes, you read both of those figures correctly. Consumer confidence is the lowest since Callaghan was in power. The rate of companies going bust is already almost a fifth higher than last year, and recent data shows their cash reserves are now shrinking at the fastest rate since 1980.
If John Major presided over a moribund housing market, there is no word to describe today’s – the number of mortgage approvals for home purchases is a calamitous 44% below its low in the 1990s. Sterling’s plunge is probably responsible for a third of the British Gas price increase, and much of our inflation.
The political drama has been great these past two weeks, although it is but a soap opera compared to the real life crisis unfolding. The bursting of the Brown Bubble is going to be long and painful for all of us. And this process has, alas, only just begun.
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