British Economy Now Worse Than When In The Great Depression

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A few days ago Max Keiser on the BBC’s flagship Daily Politics show explained why in his opinion the UK economy is “screwed”. The Washington’s Blog has put forward its reasons for why the UK is in a worse position now than it was in the Great Depression. As usual, a chart can say it best and the velocity of money graph below does just that.

Royal Bank of Scotland Says Worst Economy Since Before Queen Victoria Was Crowned

Leading British newspaper the Telegraph reports today:

Ministers today admitted Britain is facing “very, very grave difficulties” after figures showed the economy did not grow at all in 2012.

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Economists from the Royal Bank of Scotland said the last four years have produced the worst economic performance in a non post-war period since records started being collected in the 1830s.

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It’s the worst economic performance since at least 1830, outside of post-war demobilisations,” he told The Daily Telegraph. “It’s worse than the 1920s, it’s worse than the Great Depression.”

He said the economy has been “heading this way for a long time” because of the scale of the problems that came to a head in the 2008 financial crash.

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The top economist at RBS, which is mostly owned by the Government, said it is difficult to recover when much of the world is facing similar problems.

“It’s the scale of what happened in 2008 but also the build-up to that,” he said. “Compared with other recessions [like in the 1980s and 1990s], this is happening all over the world. There’s not a quick and easy way to export your way out of this.”

(In a separate article, the Telegraph notes that the UK is heading for an unprecedented triple dip, as its economy shrunk .3 percent in the fourth quarter of 2012).

We’ve repeatedly warned that this is worse than the Great Depression …

What Do Economic Indicators Say?

We’ve repeatedly pointed out that there are many indicators which show that the last 5 years have been worse than the Great Depression of the 1930s, including:

Mark McHugh reports:

Velocity of money is the frequency with which a unit of money is spent on new goods and services. It is a far better indicator of economic activity than GDP, consumer prices, the stock market, or sales of men’s underwear (which Greenspan was fond of ogling). In a healthy economy, the same dollar is collected as payment and subsequently spent many times over. In a depression, the velocity of money goes catatonic. Velocity of money is calculated by simply dividing GDP by a given money supply. This VoM chart using monetary base should end any discussion of what ”this” is and whether or not anybody should be using the word “recovery” with a straight face:

 British Economy Is WORSE than During the Great Depression

In just four short years, our “enlightened” policy-makers have slowed money velocity to depths never seen in the Great Depression.

(As we’ve previously explained, the Fed has intentionally squashed money multipliers and money velocity as a way to battle inflation. And see this)

Indeed, the number of Americans relying on government assistance to obtain basic food may be higher now that during the Great Depression. The only reason we don’t see “soup lines” like we did in the 30s is because of the massive food stamp program.

And while apologists for government and bank policy point to unemployment as being better than during the 1930s, even that claim is debatable.

What Do Economists Say?

Indeed, many economists agree that this could be worse than the Great Depression, including:

Bad Policy Has Us Stuck

We are stuck in a depression because the government has done all of the wrong things, and has failed to address the core problems.

Instead of bringing in new legs, we keep on recycling the same old re-treads who caused the problem in the first place.

For example:

  • The government is doing everything else wrong, as well. See this and this

This isn’t an issue of left versus right … it’s corruption and bad policies which help the super-elite but are causing a depression for the vast majority of the people.

Source: Washinton’s Blog

Hands Up Who Thinks Things Are Worse Than Great Depression

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Apparently the following , (click on the the links for their comments)

Check out full story at ZeroHedge.

 

UK Recovery Slower Now Than The Recovery After Great Depression

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Looking at the chart below will tell you the the UK’s recovery since 2008 has been much slower than even the recovery after the Great Depression.

So what went wrong. Well according to economist (and external member of the Bank of England’s Monetary Policy Committee) Adam Posen when looking at the US recovery compared to the UK

Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did – taking local governments and automatic stabilizers into account – and this had a material impact on consumption. This was particularly the case because a large chunk of the fiscal consolidation in 2010 and in 2011 took the form of a VAT increase, which has a high multiplier for households. The fact that British real incomes were hit harder than American households’ incomes by energy price increases could be ascribed in large part to the past depreciation of Sterling, which also hit real incomes directly. All combined, these factors significantly dampened consumption growth in the UK, with knock on effects on investment and stockbuilding.

Source: The Economist

 

Europe is Warmup, US is Main Event.

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Peter Schiff CEO of Euro Pacific Capital, gave an interview on RT’s Capital Account. Below is the video clip but the main points are as follows:

  • We are in intensive care and zero interest rates prevent the cure.
  • We need higher interest rates, more savings, lower property prices, less government spending and to balance the books.
  • Europe is the warmup and America is the main event.
  • We are where the real sovereign debt crises is going to be and it will be enormous.
  • It was going to happen because of mistakes government made in the past, but it will be worse because of mistakes made in the present.
  • We haven’t had a free market for a long time and is getting less and less free.
  • The more government gets involved in the economy, the more they screw it up.
  • We are going to have an inflationary depression worse than the 1930s. Everything the government is likely to do will exacerbate it.
  • The more government stimulate, the worse it gets.
  • We are a lot sicker than we were in the 1930s. We know what the cure is but we can’t get the politicians to allow the economy to swallow it.
  • We are in a climate where real tyranny can flourish. Look at what happened in Weimar Republic, Germany. After hyper-inflation we got the Nazis.
  • We are going to have civil unrest and rioting.
  • Ultimately we will have price controls even though government currently are denying we have inflation, because prices will be so high.
  • Government may start to silence the voices of people. They can already classify anyone they want as a terrorist.
  • Young people are getting the message now. So there is hope.

The Best We Can Hope For Is Two Lost Decades – Steve Keen

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In a hardhitting interview on the BBC programme Hardline, Steve Keen (Australia Economist) has outlined his thoughts about how we are already in the next Great Depression but also how he sees a way out. The key points are as follow:

Lost Generation of unemployed youths leading to violence.

Rise of Hitler types through despair.

Creditors have set the political agenda for last 30 years.

Debt for investment purposes is good but debt for asset speculation is bad.

Jubilee was the old method of writing off debt, we need a newer model.

Solution :Write off peoples debts by Governemnt creating money and giving to everyone. This enables them to pay down their debts to the banks so this replaces any losses that they have. Everybody gets a boost rather than giving directly yo the banks.

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