Stagflation

The Sunday Telegraph this weekend reported in shocked tones that the spectre of 'stagflation' was rearing its head. That's odd, I thought, I could have swor that I have been warning of the return of stagflation for a long time now. So I had a look back and here are some of the posts that I have made...

1) 28 December 2007 - 'The party's over' -

'A quick prediction for 2008 that will not warm the cockles of Gordon Brown's heart.

The economy is screwed...

OK, a bit more detail; the economy is well and truly screwed... The pound is about to go into free-fall and so Gordon will want to support it by raising interest rates but that will hit the hard-pressed home buyers who have believed Gordon Brown's "end to boom and bust" rhetoric. Also Gordon has tasked the Bank of England to suppress inflation and even his "preferred" (for which you can read artificially reduced) measure will be going up as inflation enters the economy so the BofE will want to reduce interest rates, but that will suck in more imports and so increase inflation. At earlier points in the economic cycle, Gordon has raised taxes (albeit stealthily) but whilst that was possible in good times without too much protest from the tame media, the media are now less tame and (apart from the ever loyal BBC)increasingly willing to criticise Gordon's government.

It really doesn't look rosy for Gordon, stagflation is on its way and we are in for a very unpleasant four or five years; it could make 1929 look like a mild downturn. Sorry to be the voice of doom but I think it best we face up to reality. '

2) 14 November 2007 - 'Stagflation':

'The economic news just gets worse and worse for Gordon "an end to boom and bust" Brown, today we can read at Motley Fool that

"Shares are sinking, house prices heading south and consumer spending is constipated. Can it get any worse?

It can. Inflation is back on the agenda.

Britain's benchmark retail price index rose more than expected last month, and danger signs are flashing that shop prices could soon be heading even higher."

Oh dear Gordon, being PM isn't as much fun as you thought, is it? Is the economy about to crash and burn, will that make you sad or angry, or both? Do you wish you had called an election immediately you took over from Tony? Too late now, the end of Gordon Brown's reputation for economic competence is nigh. '

3) 27 November 2007 - 'Economy in Tatters part the upteenth but not the last' - I think this article is important to re-publich at puts the lie to the 'narrative' being faithfully presented by the BBC on their labour partners behalf that the economy is failing because of Tory cuts:

'Poor, poor Gordon; he spouted his usual litany of factors that prove his economic genius. Unfortunately whilst in the past the media and so the general public would have believed him or at least said "well he has done quite well, hasn't he", this time he may have more problems. It appears that the economy is getting closer to the point of collapse - "The City was last night calling on Alistair Darling to raise taxes or cut spending after news of an unexpected deterioration in the government's coffers raised fears of a looming £40bn hole in the public finances. In a fresh blow to the chancellor, data from the Office for National Statistics showed that despite a robust performance by the economy in the first seven months of the year, the government borrowed more money in this period than at any time since Labour came to power in 1997. The ONS said that in October - normally a bumper month for corporation tax receipts - the exchequer had a surplus of £1bn, but this was down on the £3.5bn surplus in the same month last year. That left net borrowing for the first seven months of the year at £24.2bn, up from £17.5bn in the same period of 2006-07. Analysts said that with both the Treasury and the Bank of England forecasting that the economy will slow down in the coming months as a result of higher interest rates and the credit crunch, the prospect was for net borrowing in the current financial year to be even higher than the £38bn deficit pencilled in by Mr Darling in last month's pre-budget report. In the PBR, Mr Darling said the government would not meet the budget forecast for borrowing of £34bn, but John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said the total for both 2007-08 and 2008-09 was likely to be "£40bn or more". He added: "At this point in the economic cycle, the public finances should be improving in order to provide some 'wiggle room' in the event of a future cyclical downturn. "The fact that they are getting worse will be of concern to the Treasury since it suggests possible structural weakness and potential need for further tax increases or greater spending restraint.""

I am sorry folks but when borrowing reaches these levels, whilst inflation is on an upward curve, house prices start to fall and rises in economic output look shaky, it is time to look up the word "stagflation" in the dictionary.

Poor Gordon, if only you had called an election when you had the chance; you would have won and you would now be 5 years from an election. Now you are a maximum of 2.5 years away from an election. I think 2.5 years should be nicely in the middle of a massive recession, well done Gordon you have really screwed the country up. Never mind though because your pension is nicely index-linked; it's just a shame that you'll have to spend most of it on security to keep the general public that you have so royally screwed from getting their revenge. '