Thursday, 24 May 2012

Recession is biting hard

The Office for National Statistics has just revised down its estimate for economic growth in Q1 2012. Previous they said GDP had shrunk by 0.2% but now they reckon it is more like 0.3%.

You will recall the economy also shrank by 0.3% in Q4 2011.

This graph from the Beeb needs looking at in some detail...

Look at how the current recession compares with the previous "worst ever" recession, the Great Depression of 1930-34 (strictly speaking it started with the Wall Street crash in October 1929.)

The depth of that previous recession was much the same as our current recession (which does not really have a name yet) but we are still swimming along under water whereas at this time in the Great Depression they were already out of it and back into positive growth.

The difference between then and now is that then the government took the pain on the chin, allowed deflation to occur, especially in asset prices, and once the economy had found a new base it started on the up-track again. This time they are continually kicking the can down the road and postponing the economic pain.

The result of this refusal to face the music means that the total hardship people will experience over the course of the recession will be much greater than it needed to be.

No comments: