Wednesday, April 22, 2009

Smoke and mirrors

I'm not going to pretend I know what the Budget has in store, but I'm pretty certain it won't be giving much away. Most pundits are predicting that Darling will admit to the worst recession since the end of WW2 as well as various measures relating to housing, VAT and car scrappage.

They are probably right - not because these pundits are geniuses, but because they've been briefed beforehand about what to expect. I actually find this a bit sad - just about the only thing that made the budget interesting was the fact that nobody knew what was going to be announced. These days the whole thing is usually revealed piecemeal in the weeks leading up to the speech. Usually the Chancellor keeps one or two aces up his sleeve, but something tells me they may be in short supply this year.

What most pundits are suggesting is that Darling is set to announce plans to revitalise the economy by going down the "green route". To be honest, I'm not entirely sure what that means in detail - but I doubt that anybody else really has any idea either as it is very much unexplored territory. If the Budget were an old map then following the green route would lead to an area marked "Here be dragons".

What I am certain about is that the various news items over the last few days suggesting that there are signs of recovery are not coincidental. They've been carefully planned and leaked to distract from what is likely to be one of the most austere Budgets in living memory - one that will hit the average man in the street very hard in his pocket.

I'm not convinced by these signs of recovery. The Great Depression followed the same pattern - including a slight recovery shortly after the crash first struck in the late 1920's - but it was brief and insubstantial. Within a year it was clear that the fundamental problems were still there and that depression was all but guaranteed. I believe we'll see the same thing this time around - only it will hit Britain far harder than the Great Depression did.

All the talk about recovery in 2010 is just smoke and mirrors designed to hide the elephant in the room - massive corporate, government and personal debt. Don't be fooled by it. Debt is the symptom of prolonged economic depression - just as it is for any household. Debt is the symptom, the credit boom is the driver and globalisation is the cause.

Always has been - always will be.

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