I was pondering the popularity of prophets of doom today. Regarding the economy I'm far more predisposed to believe a gloomy forecast than an optimistic one. Last week John Major (out promoting his new book) was giving optimistic forecasts ('green shoots' blah blah).
Today the UN Warns of Global Food Crisis & the IMF says UK austerity is 'costing and extra £76bn'. While they used IMF backing to justify government policy in the early days, now that the IMF have changed their tune the government is ignoring them. And UK construction sector contracts again in August. It will be interesting to see what employment figures are like.
I'm persuaded by those people who say that deleveraging in the private sector has only just begun, and that it will be a long time before we see growth again. One of the questions that is raised by another correspondent on Renegade Economist is the possibility that growth will never get back to the point where we can afford the interest on our loans (which remember are about £7tn at present vs. GDP of £1.5tn). Japan in a similar situation took 15 years to get out of technical recession in 2005, then the credit crunch hit in 2007. They've had near zero growth for 17 years with no change in sight.
What happens to the UK if we have 17 years of near zero growth? Is anyone actually thinking about or planning for this? Or does the blind optimism of the government that this recession is like all the others and we'll bounce back?
If we can't pay our loans we'll end up defaulting. I've already noted the upward trend in business insolvencies. I think we'll see this trend continue. As businesses overburdened with debt during the madness of the debt bubble of the 90's and 00's succumb as Travelodge and Biffa both recently did.
And If we don't bounce back can I get a job as a special advisor to the government?