Buckle up – we could be in for a rough ride

15th July 2010

The Office for Budget Responsibility has said the recent Budget increases the chances of a double dip recession, as reported here on the Evening Standard 's site.

There has been much smirking from the Opposition who believe that the Coalition has been floored by its own Quango, but it comes at a time when the IMF has upgraded global growth and yet revised down its forecasts for the UK.

The Coalition says that it is a ‘jam tomorrow' approach, growth suffers a little today for stronger growth in the long-term, but is a double-dip now a real possibility?

The spectre of a double dip

3 thoughts on “Buckle up – we could be in for a rough ride”

  1. Drf says:

    The likely future profile for the UK economy with present government policy at least is interestingly predicted by Tullett Prebon economist Dr Tim Morgan in Yesterday’s Evening Standard. See http://www.thisislondon.co.uk/standard-business/article-23953724-chancellor-warned-over-pace-of-drastic-cuts.do

  2. Anonymous says:

    Hi Shaun
    As I understand it Janet Yellen and the Fed are targeting a reduction in unemployment to the estimated structural element of 5.75%. The current levels are higher than 9%? So, they need to reduce unemployment by 3-4%. The implication is that they keep monetary policy loose until the objective is achieved or make it looser if trends get worse. She argues that suppressing long term interest rates will fertilize various channels : ease credit ; hold up asset prices / housing bolstering consumer demand ; slightly depress dollar exchnage rates to assist exports – what I want to know is where is the eveidence for this as opposed to what coincidences that suit the argument can be found and how have the financial markets utilised the QE liquidity?

    Yours and my problem is : what would have been the ( wait for it Yes Minister) counterfactual in the absence of Fed policies?

    1. Anonymous says:

      Hi Shire
      Janet Yellen is one of those most committed to the policy of asset purchases or QE and she has given many speeches with this sort of theme. She has asserted all sorts of things in them which she cannot prove and does not know and in addition has made factual errors in her assumptions about futures markets (my old stomping ground so to speak).

      If you drill through the hyperbole and get to the detail you see that her results are driven by the assumptions she has made.

      Here is a little oddity for you people like Janet Yellen and Adam Posen are those who must feel that markets do not behave efficiently as they are always wanting to interfere in them. Indeed they suggest an extraordinary level of intervention. Yet their analysis invariably uses futures markets etc. to help justify it! How does that work? Are they suddenly now perfect??

      Mr.Posen put his views in the FT yesterday. Unfortunately I was rushing to a meeting so I only put a brief reply online. How can I put it? He seems a little forgetful at times…

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