When is a recovery not a recovery?

It would certainly be right to welcome a recovery if only it were true.   But is it?   Tomorrow’s central forecast of a 0.6% upturn in the second quarter of this year, on top of 0.3% in the first quarter, will certainly be milked by Cameron-Osborne for all it’s worth.   But is it worth that much?   It could well be said that after 4 years of interest rates on the floor at 4% plus no less than £375bn-worth of quantitative easing (electronically printed money distributed to banks), a growth of less than 1% in the first half of the year is distinctly disappointing.   Even if the 1% growth rate were achieved, it would still leave the British economy 3% below its level at 2008, and it’s highly unlikely that even this very modest rate of growth will be maintained for the rest of the year.   And manufacturing and construction are down, and exports have still not lifted.   Some recovery!

What is most worrying about this ‘recovery’ is its fragility, that it is inflated by being talked up by the finance sector, and stimulated in particular by Osborne’s Help to Buy scheme which has ploughed taxpayers’ money into mortgages but without increasing the number of houses being built, which can only push up property prices., thus igniting yet another housing bubble which is the last thing the economy needs.   The real essentials of recovery are still lacking – an expansion of manufacturing and exports which will call down the £775bn cash stockpile currently hoarded by the big companies because they can presently see no future in endless austerity.   And it is scarcely surprising that the ‘recovery’ is so weak when real wages have fallen for the longest period since the 1870-90s.

There are ominous signs that this is the booms of 1988 and 2006 redux.   The recovery, such as it is, is driven by over-leveraged consumers becoming even more indebted in buying up ever more costly real estate they can scarcely afford.   Such an ill-driven boom can only end in tears as before with an unsustainable deficit in traded goods (already £106bn last year, 7% of GDP), rising inflation, and another recession to cut back an untenable boom.

 

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