Chancellor’s fine job of talking down the economy

Sep 4 2008 by Peter Jackson, The Journal

A CONSTANT theme from some quarters during our current economic troubles has been that we mustn’t talk ourselves into a recession.

As I have long believed that the US and UK economies have fundamental weaknesses caused by huge levels of consumer debt and housing bubbles, the ‘careless talk costs jobs’ theory is not one I have had much sympathy with.

We are no more talking ourselves into a recession than the cartoon character which runs yards over the edge of a cliff, before looking down and falling, has talked itself into gravity.

Anyway, in terms of talking down the British economy I don’t think any of us are in the Chancellor of the Exchequer’s league. In his now notorious interview he expressed the view – since radically modified – that the economy is in a worse state than it has been in for 60 years.

It’s generally agreed that he is wrong on this. Either that, or he knows something we don’t.

To be fair to him, he may just be ahead of the pack on this one; a striking feature of this crisis is the way in which pundits and analysts have had to keep admitting that things are looking worse than they had said they were only a few weeks previously. It is only a matter of months since we were being told that however bad things would get, we definitely did not face a recession, and it was only the wildest alarmists who were arguing that we were.

And what do we find now? Only that no less a body than the Organisation of Economic Co-operation and Development (OECD) is predicting the UK going into recession in the third and fourth quarters of this year.

It is interesting, by the way, that the OECD does not think Europe’s other large economies, Germany, France and Italy, will go into recession, and, at the moment, the USA is growing.

Add to that the fact that sterling is at its lowest level for 12 years against a basket of world currencies and you can only wonder how Gordon Brown can keep repeating the mantra that the UK is uniquely well placed to weather the storm.

Nobody else in the world seems to think so, Gordon.