Wednesday, November 26, 2008

Xanax country

Trixy wasn't the most well behaved girl at school and her mind often wandered in lessons, except her economics lessons at which she did actually pay attention. And in one of those lessons we pig-tailed girlies were taught that the definition of a recession is two or more quarters of reduced GDP. Hence now, year of our economically illiterate government 2008, we are in one.

A depression is therefore defined as a sustained period of declining GDP.

So, if I look at that graph I can see that we are now officially in recession as we've had one quarter (Q2 2008) of no growth whatsoever and one of negative -0.5% in Q3.

Anyone unfortunate enough to listen to that fool Darling on Monday would know that his growth predictions for 2009 are between -0.75 and -1.25 which is another contraction of the economy and four quarters of reduced GDP. Which could be construed as more than a recession and quite possibly even a depression.

At its worst point, unemployment in America soared to 25%. A decade of easy credit created a false sense of prosperity, while farmers struggled under heavy debt and declining farm goods prices. The ensuing market correction in 1929 evaporated the fortunes of many, with the entire population suffering as consumer demand dropped, jobs disappeared, and factories shuttered against declining orders.

Now swap 1929 for 2008 and tell me that, apart from perhaps the 25% unemployment, would you be so surprised to read that in the Mail in a few years time? Obviously there would have to be some blame on immigration for a decline in house prices to make it realistic, but that's easily introduced into the entire article.

Given the debt we are to be saddled with and the anticipated further drop in house prices which has been allowed, following the legislation by Lawson and Greenspan I will add, to turn into a housing stock market and which did back up the debt culture by making people feel asset wealthy, I don't see 2010 being much better.

The government are rightly concerned about deflation and as such the PBR was one designed to counter that. Once our economy is one of inflation rather than deflation let's hope that whoever is then Chancellor gets on with the job of cutting taxes.

But until then, I think we're in a bit of a stinker which will take more than a jog and a happy pill to shake off. And remember who put you there.

Yes: Most of us.

1 comment:

James Higham said...

I don't think they're concerned at all about deflation or any kind of flation. I think they wish to see it go down and pick what they can out of the ashes.