2011 Q2 Growth figures

Just for the record … it’s being announced that UK 2nd quarter growth is barely positive. One again, there are “special factors” that get in the way – a tsunami and a Royal Wedding, warm weather and Olympics tickets, ffs. These really are very, very poor excuses.

And these are preliminary figures. So there’s still time for that downward revision …

Still, it could be worse, according to our Chancellor. We could live in Greece.

“And it is positive news too that at a time of real international instability we are a safe haven in the storm.”

Watching the TV, it seems that this is our fault – we aren’t borrowing money to spend (even if we can find a bank to lend it). Possibly because those whose jobs aren’t being cut may well be offshored.

Or maybe because we’re saving up to let their kids go to College. Or to help out parents whose care funding has been cut. Or because their pensions are under threat, so they need to save more. And that’s assuming that you can afford food and energy.

Ultimately, the problem hasn’t changed. We’re not making enough. And we need people who have disposable income to buy things. That won’t happen if they’re worried about their jobs disappearing.

So there’s no Income Tax and VAT – both of which help reduce the deficit. So if Ozzie blindly carries on down this path, we’ll end up with even more cuts needed. At the end of the last set of figures, commentators were feeding the line : “if a Chancellor admits there’s a Plan B, then Plan A is dead”. Well, George, you’ve had three months to put together a Plan B. Or – if it’s more politically expedient – find ways to moderate the impact of Plan A.

Stephanie Flanders’ blog points out that we’re not doing as well as comparable countries.

This was, actually, so very foreseeable. I wrote about it in January, because it was so clearly rooted in dogma, rather than economics. It needs sorting out. And I think that means either a Chancellor who actually knows what he’s doing, or one who will listen to someone who does..

[Edit 13:34]

Ozzie apparently thinks this absolutely flat growth has the advantage of “stability” – unlike less stable Euro countries (such as Germany) which actually have growing economies. Unbelievable.

IMF Review of the UK Economy

I’m sorry to keep banging on about this, but much of the deficit reduction pain would be mitigated if we were actually growing our economy. That would mean more taxes, less unemployment and less benefits. Although when it all goes wrong, we can expect our Chancellor to be surprisedly holding up his hands claiming all of this was unforeseeable.

Now all of this is very fraught. It’s a bubble that depends on confidence. So the journalists are telling us that as soon as the existence of a Plan B in admitted, then Plan A is dead. All of which means that we need to read between some especially wriggly lines when looking at reports.

The BBC has been airing a fascinating series by Adam Curtis – “All Watched Over by Machines of Loving Grace“. Which reminded me that the chief  function of the IMF seems to be to safeguard the investment of international bondholders – often at the expense of the economies of the individual nations.

And although the film highlights this in the context of the Far East crashes – particularly the Indonesian riots of 1997 – it’s easy to see the patterns repeated recently in Greece, Portugal and Eire. An initial “bail out” results in a capital exodus, and more assistance is then required. The taxpayers then have to pick up the tab.

A quick aside:

• There’s never actually been much risk of nations defaulting – it’s just another excuse to charge higher interest.
• Maybe the bondholders should carry some of the risk of the free markets they push us all into.
• Ironically, one of the benefits of debt reduction may be that we get out from under this tyranny – but I bet we still continue to borrow money
• According to Peston (from memory), our average debt repayment is 13 years. So there is no real reason to rush the cuts. 

But I digress … The IMF report is apparently supportive of our government’s deficit reduction plan. But once again, we’ve a downgrade of a growth forecast – down to 1.5% from a hardly spectacular 1.7%. But it’ll be alright “in the Medium Term”. Jam tomorrow, then.

Similarly, we’ve got inflation at 4%. And the IMF think this will return to 2% by the end of the year ( presumably as the VAT increase drops out). However, as we’re getting almost 20% increases in Gas prices, and world food prices aren’t reducing I suspect that this might be optimistic.

The IMF is keen not to rock the boat, but as the BBC report points out, the previous assessment of our economy as “on the mend” has been revised to “repair … is underway”.

Actually I’m not on my own here.  A whole bunch of economists have written an open letter to the Guardian suggesting that these policies might need a bit of tweaking. And Stephanie Flanders seems to be keeping real on her ‘blog.

Meanwhile, lots of the cuts have still to be fully implemented, and we’re also hearing that manufacturing output is dropping and confidence in the economy is down to 10%. Retail spending is falling. All suggesting that this experiment in reviving Thatchernomics is whirling us further down the plughole (just as a reminder – it didn’t work the first time).

2010 Q4 Growth figures

Well, the UK economy shrank in the last 3 months of 2010.

Our PM says that

“the worst thing to do would be to ditch your plans on the basis of one quarter’s figures”

It’ll be interesting to see how many quarters’ figures it takes. Because if growth doesn’t happen, then we’re going to end up with even more cuts.

The Tories seem to have an inbuilt belief that we have to take our economic medicine – that the nation can’t recover without pain. This extends to a fallacy that the pain will result in recovery. Neither of these is actually true.

This attitude is a hangover from the Thatcher era, when British industry might have had a chance of surviving if interest rates hadn’t been raised at a ludicrously fast rate. Companies failed not because they weren’t viable, but because they didn’t have a chance to adapt to the new rules.

So now – as well as the deficit – we have negative growth and inflation moving to the “out of control” zone (something which won’t impress the Tory-voting pensioners). And – with the knock-on of the public sector job cuts – reduced income tax revenues.