The surest way to see if John Major is right about ‘green shoots’ is if the BoE stops printing money

This week John Major was wheeled out to try and CONvince the british public that there is a recovery underway in the UK. Obviously Osbourne et-al dare not come out and say the economy is recovering for fear of being proven hopelessly wrong yet again. So after a quick huddle over at the treasury Major was tasked with the job of, no doubt after discussions about how he’s now perceived by the UK as an authoritative voice on such matters and also ‘outside of politics’ with an imagined air of independence.

His choice of words we’re certainly fascinating because he uttered those two words, “green” and “shoots”:

Norman Lamont was taken to pieces by commentators for suggesting there were green shoots, but in retrospect, we can see that Norman was right. Recovery begins from the darkest moment.

Now where have we heard that before? Oh yes, that’s right we heard it all through 2009/10 about how the UK was now on a sustained recovery. Well it turns out that in reality the UK economy has been stagnating now for 4 years, with some quarters GDP a little bit up, and some quarters a down a little bit more, with the net effect being an economy firmly in recession/depression.

This is something we pointed out back in July:

Since 2008 Q2 (ie since the start of the recession that supposedly ended at the start of 2010), here are the quarter-on-quarter GDP figures for the UK:

2008 Q2:    -0.9

2008 Q3:    -1.8

2008 Q4:    -2.1

2009 Q1:    -1.5

2009 Q2:   -0.2

2009 Q3:   0.4

2009 Q4:   0.4

2010 Q1:   0.6

2010 Q2:   0.7

2010 Q3:   0.6

2010 Q4:  -0.4

2011 Q1:    0.5

2011 Q2:   -0.1

2011 Q3:    0.6

2011 Q4:   -0.4

2012 Q1:  -0.3

2012 Q2:  -0.7

TOTAL: -4.6%

That’s right, in total the economy has contracted 4.6% since that start of the previous recession.

So for all the talk of the on/off recessions over the past 4 years GDP in the UK is still 4.6% LOWER than it was 4 years ago – some ‘recovery’.

So whilst we might get a positive in Q3 2012, no doubt with a lot of “John Major was right” headlines, he’ll be proved to be wrong eventually, just like every other ‘green shoots’ utterer over the last 4 years. How can we be so sure?

Easy, the problem in the UK is excessive debt, and there will only be real green shoots when that debt is liquidated from the system. So what has happened to ‘political’ debt (a much better way of saying ‘public’ debt’) in the UK since the Tories have come into office?

Currently the ‘political’ debt in the UK stands at £1.032Trillion and as we pointed out back at the start of this year the ‘political’ debt in the UK when the Tories came into office was just £772Billion.

Or to put it another way Osborne has ADDED nearly 35% to the national debt since May 2010 – a simply staggering amount considering this is meant to be the Austere-Chancellor. Is it little wonder we’ve dubbed him the Fauxstere-Chancellor?

So until all that debt in the system is liquidated the UK can’t possibly ‘recover’. All that debt is doing is bringing forward future GDP to today, and will mean that in the future that ‘borrowed’ GDP will have to be paid back, with interest. Meaning more stagnating in the UK economy with rising costs – classical stagflation.

But there is a very simple way to see if we’re right or if John Major is right. You see if Major is correct in his assessment and the economy is on the road to recovery then there will be no need for the Bank of England to announce any more money printing. Something we expect to happen before the end of the year.

So if you do hear the Bank of England announce more money printing in the future, then the guy who was Prime Minster at the time, and instrumental in LOSING the UK people some £3.4bn on Black Wednesday in 1992, John Major ,was flat out wrong, again. Because if the UK was really on the road to recovery then there would be no reason what-so-ever to keep the money printers printing.

We shall see.

Related posts:

1. Osborne green lights more money printing by the BoE
2. UK Government calls for more money printing by the BoE
3. New construction orders for 2011 down 14.1% – more ammo for BoE money printing
4. IMF now calling for more UK money printing
5. As Blanchflower predicts £225bn in money printing to start next week, can he please tell us where this mythical austerity is?

Link to this article: : http://www.goldmadesimplenews.com/analysis/the-surest-way-to-see-if-john-major-is-right-about-green-shoots-is-if-the-boe-stops-printing-money-8038/

Posted by Thomas Paterson on Sep 20 2012. Filed under Analysis. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.