I had a series of depressing meetings yesterday, the overall conclusion of all of them being that double dip recession, or depression, is certain.
But the most interesting incite was about the reason for the Tory hurry to rebalance the economy in such haste when it is so obvious that massive damage will result. Apparently this reflects a widely held view in Tory and banking circles that the next major financial crisis is in 2014 and the government’s books have to be back in shape by then to ensure we can bail out the banks at that time.
There are two problems with this analysis. First the crisis will have happened well before then. 2012 seems likely after deflation emerges next year and asset values collapse. Second, if that’s really the concern then it’s the banks who need to suffer now, not the rest of us.