Policy Exchange's chief economist Andrew Lilico is a man I usually have little time for – not least because he seems to have such weird belief in the power of free markets during recessions and so readily abuses statistics. His latest paper – which I’ve just caught up with but which was issued last weekend - is a case in point.
First he argues there have been many (well, five) double dip recessions in the UK since 1958 – the second dip, however, never lasting more than a quarter which means he pushes the description somewhat since none of the second dips therefore conform by themselves to the definition of a recession – to which I think the double dip concept refers.
The he argues that the UK will see higher growth in 2011 than at any time since the 1980s – the implausibility of which is high.
But last he argues that if he is right – and that an extra dose of quantitative easing soon will deliver this outcome – it follows that the boom he predicts will lead to inflation and substantial interest rate increases and that in turn will lead to a recession in 2013/14.
About this he then concludes:
When pondering the political cycle, think of this: the Coalition arrives; there are big tax rises; then there are massive, unprecedented spending cuts, involving more than half a million public sector job losses; then inflation races away; then interest rates spike up; then, after all that, there is another recession in 2013/14.
And all of this is the optimistic case ‚Äî what happens if the government gets policy right and its policies work. I shan’t sketch you my pessimistic case.
Enjoy selling that one on the doorsteps at the next General Election‚Ä¶
Well I’m glad to see they’re optimistic about the outcome of the carnage they’re prescribing.
I’d just remind them of what Mervyn King said earlier this year – that whoever won this year’s election would be out of office for a generation thereafter. Looks like some in the Conservative Party are already bracing themselves for that prospect.