As the Spectator reveals the growing rift between the governor of the Bank of England and Brown, the latter, according to the Financial Times, having been left 'fuming' at the former's 'gloomy' (honest?) predictions for the UK economy, the reality of the deep political cynicism of Labour in their plans to dupe the electorate into a false choice between Labour 'optimism' and Tory 'austerity' begins to sink in.
Given this Government's track record on forecasts, as well as some of the worrying indicators coming out at the moment - not least the Standard & Poor revelation - I don't think it's too unreasonable for King to take a sober view of things. In which case, this becomes a telling sign of how Gordo likes his independent bodies: erm, toeing the Labour party line, and helping in the great struggle against the Tories. And it's rather dispiriting if he's letting these party poltical instincts damage relations with the Bank of England at a time of economic crisis.So once we strip away Labour's lies and spin, what is the most likely direction of this, the worst recession in British peacetime history? What is it that Brown and his acolytes would like us not to know?
Brief research on some boffin economist websites reveals the most likely outcome in all its stark truth: a so-called double dip recession. Over to them:
Total GDP contraction to date now stands at -4% on a quarter on quarter basis...Whilst a bounce back in the economy is expected going into the 2010 election, however the tax hikes and spending cuts will in all likelihood trigger a double dip recession during 2011 to 2012 as illustrated by the above graph [top of page].Economist Robert Shiller, favoured by George Osborne, agrees. The Spectator again:
What this means is that there will continue to be a major shortfall in tax revenues and therefore continuing budget deficits and hence deeper public spending cuts and therefore continuing downward pressure on prices and hence inflation may remain subdued even beyond 2010 after a temporary rise inline with the bounce in GDP.
UK Inflation Conclusion - Extreme Deflation as measured by RPI is near an imminent end, forward inflation will remain subdued despite economic recovery into the 2010, election as the risks of a double dip recession remain which would be accompanied by lower inflation.
As for the Tories, their rhetoric may be about to get even more cheerless. One of George Osborne's favourite economists (whom he referenced here) warned today that Britain could face two recessions in quick succession. Seems like gloomy ol' King may be onto something...It's vitally important that the Tories reveal the extent to which Brown's continued reckless overspending during a severe debt crisis will cause not recovery, but a brief respite in early 2010 - which was always his cynical plan - followed by another serious recession, leaving an entire generation exposed to negative growth and all its attendant personal, social and national pain. The only way to head off this desperate threat is for Brown to be ousted as soon as possible and his appalling, short-sighted and duplicitous, politically motivated programme to be torn-up and replaced with a new one that's genuinely designed to fix the problem now.
The Tories have to be honest with the people of Britain and warn them that Brown's short-termist economic insanity could lead to catastrophe for the British economy. The people must be convinced they cannot believe a word he says and the Tories must seek to force him out, preferably this summer, in the hope that the severe damage he has done can be confined to a single period of recession instead of the dreaded - and now eminently likely - 'double dipper', 'W'-shaped 'lost decade'. It will go much harder for us because in the absence of a Japanese-style manufacturing capacity to prop-up the deficit, the only thing Britain will be producing for the forseeable future is debt. Among OECD nations, that would be historically unprecedented - and utterly humiliating.
If you doubt the dishonesty of Brown and his glovepuppet, Darling, just remember the forecast downgrades (see below) between November 2008 and April 2009. They weren't just 'off-beam', they were lies. They're doing it again with the UK bank stress tests. We can't come through this without facing-up to reality, something the current regime ruining Britain is psychologically and morally incapable of doing. Until we are shot of them, no recovery will be possible and years of pain are almost guaranteed.