Friday, April 24, 2009

UK GDP falls 7.6 percent

OK, I admit it; I'm playing around with the numbers.

The preliminary GDP estimate for the first quarter shows a drop of 1.9 percent relative to the last quarter of 2008. Annualize that number (which means you multiply it by four) and you end up with a GDP fall of 7.6 percent. The UK has now been in recession for a year. The credit boom isn't looking so clever now.

As the economic slowdown accelerates, there is nothing that the Bank of England or the government can do. UK policy makers managed to contrive the fastest slowdown in a generation while interest rates were close to zero and the fiscal deficit was in excess of 7 percent of GDP.

If anyone wanted proof of the futility of Keynesian economics, the UK provided an excellent test this year. Likewise, if anyone wanted to learn about the limits of monetary policy, they need look no further than at the MPC's rate decisions since August 2007.Of course, things would have been so much worse if they hadn't acted!

UK economic policy reminds me of a line from a song. I have forgotten the title of the song, but the line, which contains a series of shocking double negatives is:

"Nothing I do don't seem to work; it only seems to make matters worse."


  1. Is it necessary to multiply it by four?

  2. 19th Nervous Breakdown.

  3. But Brown isnt doing Keynesian stuff anyway.

    He was spending more than he took in tax all the way through the boom; now the tax take is 200 billion off the level of spending he's just sticking it on Cameron's (and all of us) credit card..

    The man has never goverened, he's just run the country into the ground fixated on "getting" the Tories.

    The queen should tell him to stick his knighthood up his fat gay arse.

  4. AC: "Of course, things would have been so much worse if they hadn't acted!"

    Not for the pensioners who were using the interest on their life savings to make life a little more comfortable.

    All that crap the Socialists spout about fuel poverty, caring for our old. Well, we see exactly what it is worth when a socialist thinks there are a few votes to buy.

    I suppose killing off a few pensioners through worry or fuel poverty may be the socialist plot to fix the UK demographic timebomb?

  5. Nice words once again :)

    I have this deep sense of foreboding due to how bad things are overall, in spite of interest rates being as good as they can get.

    Fact is our position on interest rates is unsustainable, if the need for gilt yields doesn't push them up then printing money and the resulting inflation surely will.

    If anyone does buy into the housing market reaching bottom then think again.

    The housing turn around is based on unsustainable interest rates. When normal service is resumed all those who've joined recently on cushy variable rates will find out why you don't want to listen to the Council of Mortgage Lenders.

  6. I suspect the figure will be in excess of 7%. Given that recessions of this type are like snowballs that get exponentially larger.

    A few companies have difficulties initially and go into administration and a few people lose their jobs- no big deal - but the knock on effect is that suppliers don't get paid and fall into trouble themselves and can't pay their bills and so on and so forth.

  7. to annualize you should actually do 1.019^4 = 1.078 or 7.8%