"The UK has fallen back into recession as the economy shrank by 0.2% between January and March.
A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.
The Chancellor, George Osborne, said the figures were "disappointing" and blamed both the European crisis and Britain's spending in the 'good years'." -- BBC Interview.
How come a dunce like me can understand what's wrong with the economy and what's wrong with what the Chancellor is doing about it, and the world's leaders and economists cannot?
It's simple. The debt bubble left the private sector owing about 500% of GDP and households about 100% of GDP. The private sector is busy paying off debt and/or going bankrupt. They mostly don't want to borrow more because they're over indebted -- they borrowed like drunken maniacs in the boom, and now they have a hangover in the slump. Of household debt about 80-85% is mortgage, but what's left means that there's no market in consumer credit either. Except at very high interest rates -- and anyone can tell you that bank lending rates currently bare no relationship to the Bank of England's base rate.
From the bank's point of view only about 8% of their lending is to the real economy -- i.e. to invest in businesses produce goods and services, and to buy houses. The risk of trying to improve that is that the market is overloaded, likely to stay in recession for some years, and asset prices set to fall even more. So lending to the real economy is not sensible for them, in the sense that they will not make record profits this year like they did last year. They happily take money from the government, but they have no one left to give it to now the debt bubble has burst. Indeed it's still so high Steve Keen is predicting yet another major credit crunch.
So, yes, Europe is a mess, because they too ignore debt, and our (insolvent and uncreditworthy) banks are highly exposed either directly or indirectly and if Greece goes broke and defaults, crashes out of the Euro and uses it's own currency (which it almost certainly will do) a lot of money is going to disappear. Or is that wealth? Still sorting our the difference.
Anyway. How hard is this to understand. It's not that hard is it?
What we need to do, but probably won't, is tackle private sector debt. Have a modern debt jubilee. Then regulate the banks to restrict how much money they can create, and make them loan to the real economy to fund businesses that do stuff and create jobs.
Vote for me. I couldn't do worse than this lot!