I Predict a Recession
July 13, 2008 Leave a comment
One of the biggest lies perpetuated by Gordon Brown and co is that the UK is best placed to withstand the global slowdown. Now I might be being a little simple here but we have an economy where wealth for the majority is based on their house price. This drives their spending power and this consumerism keeps the UK economy going. Now falling house prices = less equity to feel rich through = no more new kitchens, bathrooms, plasma TVs (unless youâ€™re an MP).
With this in mind, how the economy fail to fall into recession? Weâ€™re in a bear stock market, people have eye watering personal debts on which their interest rates are going up on, the savings ratio has plunged since Gordon Brown wrecked pensions in his first budget and got rid of tessas and peps. We have a diminished manufacturing industry and a service industry economy which relies on consumerism (and so weâ€™re back to the start).
With Government borrowing billions and the off balance PFIâ€™s and pensions, this country is in a mess and people are only just waking up to it. Weâ€™ve had a 10 year boom of house prices fuelled by cheap money and the likes of Kirstie Allsop saying but buy buy property. This could never continue and indeed the realignment is now taking place.
So what are the economic consequences. Well as the impact of the housing crisis starts to feed through, I expect many industries to topple like dominos in a long drawn out slowdown. New house building has come to a virtual halt and canâ€™t just restart overnight. Unless credit markets open up prontish which is not happening, then the house price falls will continue. Therefore I would be surprised if over the next 2-3 years, growth gets above 1% in any year. There will be a contraction in amongst that in late this and early next year.
Politically, a Prime Minister who has boasted about the end of boom and bust for a decade will look a weakened figure every day. This boast has always been ridiculous as there was no way one man could hold make the economic cycle. Brown could well send Labour into total meltdown come election time with these circumstances.
Having always wanted to be Prime Minister, he should have paid attention to the old adage â€™be careful what you wish forâ€™.