As Britain tanks by 0.7pc in the second quarter (much worse than Spain at 0.4pc), it is worth keeping a close eye on the very ominous turn of events in the US.
The Richmond Fed's twin indices of manufacturing and services – a very good indicator at the onset of the Great Recession – collapsed this month.
They are now falling at a steeper pace than in early 2008. Current activity in manufacturing fell 16 points from -1 to -17. That is a major shock.
Westminster's most promising MP recently published an illuminating blog post on Britain's 'surprise' bad news:
On 24 May 2011, I intervened in a debate on the economy to say:
I would say gently to my hon. Friend that only a few years ago the banking crisis was not foreseen, and the same people who did not foresee that are still giving us advice. We are probably in far worse trouble than is generally accepted.I’m optimistic about humanity’s potential to make progress but, as I have said, I think economists and politicians have taken us down the wrong path.
In an article for The Jewish Chronicle back in June, he set the lack of recovery in a rather disturbing context:
In their April 2012 Economic Review, the Office for National Statistics showed us that the recovery now compares badly with the Great Depression. In newsrooms and the corridors of power, commentators are beginning to wonder what they have been missing. There are three things:AEP, by contrast, recommends a fresh flow of newly-minted cash:
Firstly, we based our economy on reckless consumption funded by deliberately cheap debt. It was a phenomenon which could never last. After a tripling of the money supply through new lending, there can be no return to those days without accelerating inflation.
Secondly, in their July 2011 report “Thinking the Unthinkable”, inter-dealer broker Tullet Prebon highlighted that six of the eight largest sectors of the UK economy were dependent on private borrowing or public spending.
Finally, when production is directed by the choices of politicians and officials, we cannot know how the public values it. Only the language of price determined by families’ free choices, individuals and firms can convey the relative value of things. With government spending at about 45 per cent of GDP, GDP itself is fictional.
Some businesses are doing well but the problem of the GDP figures runs deeper than is commonly understood. Ours is a great country founded on that essential element for prosperity, the rule of law, but its hope lies in little short of a revolutionary commitment to entrepreneurship. Our society must be based on private production, saving and investment. That requires sound money and a commitment to lower spending, lower taxes, flexible labour legislation and an end to economic interventionism. There’s no other way out.
Needless to say, I will be advocating 1933 monetary stimulus à l'outrance, or trillions of asset purchases through old fashioned open-market operations through the quantity of money effect (NOT INTEREST RATE 'CREDITISM') to avert deflation – and continue doing so until nominal GDP is restored to its trend line, at which point the stimulus can be withdrawn again.But if he's a little bit mad, he is at least self-aware:
And the Austro-liquidationists (whom I love during bubbles, and hate during busts) can all hurl shoes at me.