Britannia Radio

The slowness of the reactions of the government and the Bank of 
England beggar belief!    The rest of the world has known for months 
that the economy had gone into reverse but they still wouldn't 
acknowledge a "recession".   Indeed they only half-admit it now.  
It's not the fact of the  word being treated as a pariah or a voodoo 
symbol of bad luck, but that they refused to take any action 
whatsoever to stop it or even mitigate it.

Now Gordon Brown in a last suicidal attempt to rescue his reputation 
is proposing to borrow astronomical sums to spend our way out of the 
recession.  Foreign and for that matter British,  lenders are not 
stupid, they can see that Brown is steering the ship onto the rocks 
and may well decide not to lend Brown anyt more money to throw away.

The can read the economic runes as well as anyone and for the third 
quarter of 2008  the key ones are:-
==GDP - 0.5%
== FTSE 100 - 12.9%
==Pound dollar rate  =-11.2%

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LATEST - BBC:   Around 200 jobs are set to be lost at the l'Oreal 
factory in Talbot Green, south Wales, with the work transferred to 
France.
  Because they're not worth it ?
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CONSERVATIVE HOME   24.10.08

Does the Prime Minister really think he can spend his way out of 
recession?
Ruth Lea

  The third quarter GDP figure was very disappointing and much worse 
than the markets expected. The overall recorded fall was 0.5% in the 
quarter, with most sectors showing a decrease. There were indeed only 
two exceptions: agriculture, which must have had a reasonable harvest 
despite the soggy weather, and, less surprisingly, "Government and 
other services".

Given that business expectations are worsening, the consumers' feel-
good factor" is evaporating and unemployment is rising quite rapidly, 
it is almost certain that GDP will fall again in the fourth quarter 
and the country will then officially in recession - as defined by two 
consecutive quarters of decreasing GDP.

Given the over-extended state of the consumer and the punctured 
housing bubble, personal consumption is likely to remain depressed 
and the recession is likely well into 2009 with any return to growth 
a tepid and restrained affair. Further cuts in interest rates by the 
Bank of England, pound permitting, and some easing of the money 
markets should help to ameliorate the worst aspects of the recession.

Turning to fiscal policy, the Prime Minister announced on Tuesday 
that he'd spend his way out of recession, as the latest horrendous, 
borrowing data were released. And the Chancellor has talked about 
"reprioritising" capital spending by bringing forward funding 
earmarked for financial year 2010/11 into 2009/10. But there are 
problems with this. The first is that capital projects take time to 
implement and the second is the extraordinarily high risk that 
"retimed" spending merely morphs into "extra" spending - especially 
as any transfer of funding from 2010/11 to 2009/10 would leave the 
spending plans in 2010/11 significantly weakened. A Keynesian 
injection of public spending into an economy may make sense of the 
public sector is in a fit state to increase its borrowing. But the 
truth is, it's not.

Gordon Brown is currently hero of the hour because of the Treasury's 
banking rescue plan - which was necessary, comprehensive and bold. 
The international banking system was collapsing. In early October IMF 
managing director Dominique Strauss-Kahn warned that the world 
financial system was teetering on the "brink of systemic meltdown". 
This week Alan Greenspan, the former chairman of the Fed, called the 
turmoil in the financial markets a "once in a century credit tsunami" 
and commented that events had left him in "a state of shocked 
disbelief". And Bank of England Governor Mervyn King said, slightly 
more prosaically, that "not since the beginning of the First World 
War has our banking system been so close to collapse".

But when it comes to the management of the domestic economy, our 
Prime Minister has been no hero. He has been wilfully spend-thrift 
with the nation's finances. Public borrowing may be as high as £65bn 
this financial year (compared with the budget forecast of £43bn) and 
up to £100bn next year (compared with a forecast of £38bn). These are 
huge sums and we can only hope that overseas investors are still 
prepared to buy British Government debt in large tranches. Mr Brown 
really should not push ahead and try to spend his way out of 
recession. It would be highly costly and irresponsible. And hasn't he 
wasted enough money already?
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TELEGRAPH   25.10.08
After ignoring the warnings, the MPC's cuts will only add to the gloom
It was widely seen as significant earlier in the week when both 
Mervyn King and Gordon Brown decided it was safe to use the term 
recession when assessing our economic outlook.
By Damian Reece

I think their bashfulness in using the "R-word" before now is 
something to do with a misplaced belief their utterances are sacred. 
Mentioning such an obvious truth earlier would have caused panic 
among consumers and markets alike, they believe.

Well, I've got news for them. Consumers and markets have been 
anticipating recession for some time now, a central reason why share 
prices, commodity prices and currencies around the world have been 
falling.

King and Brown's eventual acknowledgement of this fact makes them 
both look spare parts in this crisis.

To give some context, readers of this column have been treated to 
unabashed usage of the   "R-word" for months while we've been calling 
for interest rate cuts.

On June 6, I wrote: "The doves among you should be watching M4 money 
supply growth, which is already falling quite sharply, and the 
purchasing managers' index for signs of weakness over the next couple 
of months. I'll plump for an August rate cut to deliver some relief - 
exactly a year from the onset of the credit crunch." Clearly King and 
the rest of the Monetary Policy Committee disagreed. Nothing happened.

On July 8, I wrote: "Yesterday's news that manufacturing is falling 
at its fastest pace for years simply serves to reinforce the fact 
that the economy has gone from boom to bust in record time. It's 
clear to me we're headed for recession and as soon as that fact dawns 
on the MPC it should cut rates without delay." Again I was wrong, 
apparently. Nothing happened.

Starting to get a sore head from the brick wall I was bashing it 
against, I wrote on September 26: "The MPC's refusal to start cutting 
rates in August of this year will become one of the defining mistakes 
of the 2008/09 recession. Future rate cuts now risk looking like too 
little, too late."

Unfortunately for us, the MPC continued to make the same mistake 
right up until October 8, when it cut by half a percentage point, 
alongside other central banks. Events since then prove the point that 
the cut really was too little, too late.

Failure to act sooner now forces the MPC into taking a series of what 
can only be described as "emergency" rate cuts, starting with a full 
100 basis points soon. The cuts will look increasingly desperate, 
adding to the sense of gloom, not relieving it.

We've had one quarter of negative growth, so Brown won't be 
officially cutting the ribbon on the recession until the end of the 
year. But a 0.5pc fall in GDP would normally be enough for two 
quarters, not one, and there will be no return to growth until 2010 
at the earliest.

As I'm in "I told you so" mood I'll leave you with this from July 26: 
"After growth in April, May and June were weaker, the economy is 
going into reverse at an accelerating speed. It's shrinking and won't 
turn around in Q3, resulting in the first quarter of negative growth 
since 1992. It looks like recession will be declared by Christmas."