Gulp!

FRIDAY, JANUARY 23, 2009

Gulp!

Brown's boom and bust GDP in action

During Evan Davis's rather poor Today interview with Gordo this am, G came up with a new one.

According to him, the current bust doesn't count. You see, under the terms of the International Convention on Evil Tory Boomnbusts, busts are only scored against a player if inflation is out of control, and interest rates have had to be racked up. Since that isn't the case here, this does not actually count as a bust. So he shouldn't have any points deducted from the huge score he amassed during the boom years.

Unfortunately, Davis then got into a yes-no pantomime wrangle over whether this is a bust, rather than staying focused in on the insanity of Gordo's massive credit boom. He even let G get away with his other Great Lie of the moment, which is that the FSA has been an excellent financial regulator, blown off course only by the incompetence of foreigners (see many previous blogs eg here).

This morning's GDP stats show the economy has already shrunk by 2.1% in just six months, which is dire.

All the mainstream GDP forecasts are now heading South at a stomach churning rate. The consensus forecast is already at -1.7% for this year, and will be cranking down further.

This is definitely going to be worse than the early 90s recession. Then, GDP fell byjust 2.5% (1990 Q2 to 1991 Q3), and this time we've already lost 2.1%.

We reckon it's also going to be worse than the early 80s decline, when GDP fell by 5.9% over roughly two years (1979 Q2 to 1981 Q1). What we're looking at here is much more like the thirties.

And just to repeat what we've blogged many times - we're doing much worse thanany other major economy. Which is the direct result of Labour's huge wobbling debt bubble, bigger even than America's. Once again, here's the key chart (and see this blog):

Brown can run from culpability by claiming that under "the rules" his bust is somehow different. But the truth is that his policies that are directly responsible for turning a drama into a crisis.