Tuesday, January 25, 2011

Double dip?


Recovery taking place under Labour. Tories get in, cut 50% as much again as Labour planned, and, as was widely predicted would be the result, we slide sharply back into recession (not a snow-driven blip, either, as this graph makes clear, though George, being an expert PR man has done a very effective job today of blaming it all on the weather).

Maybe it's too soon to judge, but middle of this year it may well be clear that "lightweight" Osbourne will go down in history as the man who fucked Britain.

11 comments:

Anonymous said...

Why do you think that graph shows that the contraction in growth was not due to the weather?

wombat said...

How does the graph show anything about the weather or not???

Doubt if Osborne will feature much in history for it - a great string of politicians have been working away an that theme for ages.

This interest in George Osborne is becoming a little unhealthy (unless you have accepted a large advance on your next book to be titled "George Osborne - My Part in His Downfall" I suppose).

Stephen Law said...

Yes you are right graph does not show anything about weather - sorry, was tired. But in fact independent sources say that weather accounts for only 0.5 drop, so in effect economy is now flat-lining. If the next quarter shows anything below zero, then we are looking at a double dip, not a blip. There was a marked slow down even before the weather hit.

Stephen Law said...

"This interest in George Osborne is becoming a little unhealthy"

Yes you are probably right!

Anonymous said...

Might want to check out http://www.spectator.co.uk/coffeehouse/6646203/what-to-make-of-the-gdp-fall.thtml for an alternative perspective. Perhaps the most pertinent point given the OP is number four: the cuts have not, in fact, started yet, and state spending has continued to increase (which, by your logic, should surely mean that the economy should still be growing?).

Rocky said...

@ anonymous above:

but then you also have to remember that individuals, businesses etc. don't start taking the effects of cuts into account only at the point that they actually begin to come into force, they adjust to them well in advance (certainly I know my own employer is doing this), so the effects of cuts will be felt to a certain extent before they actually happen

Tim Stephenson said...

I think George Soros had it right when he said earlier in the week that the government had done the right thing at the start but now maybe the time to slow things down to prevent a recession.

Stephen - don't you think that the current government getting in is good for the democratic health of the nation?

Stephen Law said...

Yes Britain feels so much more democratic now!

Are you joking Tim?

Tim Stephenson said...

I'm not joking. I'm just glad I live in a country where there is a regular change of government. How long would you have wanted the Labour government to last for? If there had to be a Tory government at some point to maintain the democratic system, isn't a period when there is a need for significant cuts a good time? (Just the people to do the necessary).

Hugo said...

Stephen,
As Anonymous says, the cuts have not started yet. Therefore your argument fails.

A fall in GDP is inevitable now regardless of any policy whatsoever. This is because the economy is "unbalanced", meaning that the interest rate has been artificially lowered by government inflating the currency, which caused people to make "malinvestments". The government can only expand their bubbles for so long before no additional spending will keep it going -- the bubble must burst.

It is not Osborne's fault that we are in a recession: the recession is the inevitable "great recalculation" after a bubble when unsound businesses kept going by the bubble are exposed as unsound, go bust and their resources redistributed. This takes time.

Additional government spending will prolong the recession and make it deeper. Osborne is not cutting enough.

The model of "the economy" being "too weak" to withstand cuts in government spending is meaningless nonsense. That's not how economics works.

To put it simply, Keynesianism has been disproved by the 20th century but it seems that no amount of evidence will convince some people even if it's staring them in the face.

Hugo said...

P.S.

The budget deficit is approx £200 billion a year. What would you cut?

It's not an excuse to say that we shouldn't cut yet because the economy is "too weak". That's merely deferring the question.

When the economy has "recovered", what would you cut?