The UK economy might as well be The Grand Old Duke of York’s Army: for six months the UK economy has been marching nowhere.
The UK economy might as well be The Grand Old Duke of York’s Army: the 2011 first quarter’s UK GDP was up 0.5% and the 2010 last quarter’s was down 0.5%, so for six months the UK economy has been marching nowhere – until you go behind the numbers, that is.
GDP, you see, is a synthetic calculation, comprising: Consumption + Investment + Net Exports + Government Spending. Consumption is down according to the retail figures, industrial investment is on hold, net exports are neutral despite the biggest devaluation ever of the Pound Sterling, which of course sends up the price of imports and therefore inflation, now at 5.5%, – official, but not actual which is much higher.
And then there’s government spending, which from this second quarter is set to contract with the cut-backs to deal with the legacy of New Labour’s catastrophic deficit. Thanks Tony and Gordon for landing us well and truly in the soup – Le Potage de Stagflation no less, a vulgar-tasting dish that we last experienced after the last Old Labour government in 1979 thoroughly cocked everything up, as ever. Plus ca change – whether it’s Old or New makes no difference with the Labour lefties – plus c’est la meme chose: in a word, BUST.
The 2011 second quarter has many headwinds to cope with, beginning with two consecutive 3-day weeks, which the knick-knack sales from the Royal Wedding aren’t about to make up. Then there’s the turmoil in the eurozone along with rising inflation and interest rates, the stuttering recovery in America where growth has slumped to an annualised 1.8%, the severe problems in Japan and revolutions throughout MENA and the overheating inflationary surge in the BRICs.
And that is before the massive debts across most of the G20 are factored in, along with the insolvent banks in Europe and America. All-in-all, it is not a rosy picture: the recovery is anaemic and the future is fragile, everywhere. And the double-dip and Banking Crisis 2 loom large, and Ireland, Greece and Portugal are already in recession.
No wonder gold is the only currency that is moving onwards and upwards, past $1,500 and still rising. And the true extent of the debt problems was only brought home to those that rule us when S&P put US debt on negative watch, with two years to come up with a deficit reduction plan. Two years? Why so long? Aah, because there’s a presidential election in November 2012, that’s why.
Nevertheless, the rating agency’s move has moved the debt issue to the forefront of the agenda, now. And Japan is in a similar debt-ridden state and downgraded to AA-. And the eurozone banking system will be underwater if the PIGS go under, with Greece on the edge right now.
What was that old schoolboy’s ditty? Germany was Hungary, took a bit of Turkey dipped in Greece; Greece was slippery, bumped into Italy and kicked little Sicily right into the middle of the Mediterranean Sea. Well, it won’t just be Sicily that’s kicked off course if this lot blows, it will be the global economy.