Britannia Radio

- - - (well perhaps not much will be mine -YOUR future)
The worst is yet to come, says this article.

And that “worse” gets more unpleasant by the day as Brown fails  
either to cut spending or borrowing.  The legacy will be  
impoverishment of the nation for up to two decades.

xxxxxxxxxxxxxx cs
========================
TELEGRAPH              26.2.09
Recession is grim no matter how bored we are of economic doom and gloom
Britons need to face up to its excesses over the previous decade,  
says Edmund Conway.
    
    By Edmund Conway

It is that time of the year. The frost is starting to give over, the  
cold weather is abating, the days are lengthening, and before long  
the leaves will be sprouting on the trees. That's right: it's green  
shoots season.

But not for the economy, even though a cabal of economists and  
commentators are doing their best to argue otherwise. One can  
understand why. All this doom and gloom is dreadfully boring and  
dispiriting. Time, surely, for a change of tone?

There they were, at it again yesterday, displaying rictus-grin  
delight at the latest revision to the gross domestic product  
statistics. Yes, it showed the recession actually began earlier than  
thought; yes the economy is contracting by 1.5 per cent and the  
consumer is bearing the brunt; but wasn't it wonderful that the  
figures were no worse than expected? Mortgage lending and retail  
sales statistics were "horrendous", but were welcomed for not diving  
as deep into negative territory as feared. A slight up-tick in house  
prices becomes a sign of the property market's rebirth, while the  
fact that fewer homes changed hands last month than since at least  
1959 goes unmentioned.

Given how appalling the flow of economic news has been, one should  
hardly be surprised at the desperation to seize on any notes of  
optimism. But it is time for a reality check. The economy is in a  
recession which will last until well into next year, if not longer. A  
further 1.5 million people have yet to lose their jobs. The average  
homeowner is losing £575 a week on his or her home, based on price  
performance over the past year. And we are already mired in  
deflation. Anyone who still doubts this last fact should examine the  
data: over the past five months alone, prices have fallen by 3.8 per  
cent. Even the consumer price index, which excludes house prices and  
mortgage interest rates, is down by 1.5 per cent in the same period.  
Only the annual inflation rate, which still includes the effect of  
the oil price shock last year, is still in positive territory, and  
won't be for much longer.

The only way the country will recover from this recession is by  
facing up to its excesses over the previous decade. We must borrow  
less, save more and rebalance our economy, away from delusional  
financial wizardry towards more manufacturing, more exports and less  
unsustainable spending. [jargon for ‘cutting’ spending -cs]  This  
cultural shift will not happen until we, as a polity, realise the  
consequences of not doing so, and that means many more months – and  
more likely years – of economic gloom.

None of this is to say the green shoots of recovery will not arrive.  
In fact, perversely, Britain should see them sprouting sooner than  
international counterparts such as Germany and Japan. In part this is  
because the Bank of England slashed interest rates so much faster  
than the European Central Bank, and has committed more to  
quantitative easing – printing money, in all but name. In part, it is  
because the pound has fallen vertiginously over the past year, which  
will lead to a wave of investment from those overseas with cash.  
Britain is Europe's bargain basement, its Poundstretcher.

Provided sterling stays weak, more cash will pour in over the next  
few months and the terrifying trade deficits built up over the past  
decade will begin to diminish. House prices, having fallen by 15 per  
cent over the past year, are starting to look like good value –  
though they will probably fall further in the next couple of years  
and will not start rising for quite some time.

Strange as it may sound, however, the arrival of those green shoots  
will not be an occasion to celebrate. The moment good news starts to  
trickle into the system is the very moment that the really difficult  
decisions have to be taken. It is easy to slash interest rates and  
taxes and lift borrowing when you are in the midst of a crisis.  
Raising rates, and cutting the budget deficit by raising taxes and  
reducing public spending, are far more difficult – particularly when  
the collapse of the financial system is a half-dissolved memory and  
the populace is looking forward to the return of good times.

Still, it will have to happen. Those of us who have signed up to the  
idea that the Bank of England should start printing money have done  
so on the proviso that that money is pulped as soon as any hints of  
inflation start to surface. And it is certain that they will. Should  
the Government avert a deflationary spiral and a Thirties-style  
depression, it will be at the cost of unleashing inflation on the  
economy thereafter.

It is clear that, as they try to fight their domestic recessions over  
the next couple of years, all major economies will swell their  
national debts to levels unprecedented in peacetime. Some will  
undoubtedly default: Britain is at risk, as is just about every  
country you could mention. But for those that survive, there is a  
fantastic long-term opportunity. Those nations that prove they can  
bring their books into order swiftly but sensibly will be the ones  
that thrive over the coming decades. They will be the economic tigers  
of the future.

But be in no doubt: the minute those green shoots start to sprout,  
this crisis starts getting really tricky.