Ambrose Evans-Pritchard argues in the Telegraph this morning that:
The damp kindling wood of global economic recovery is poised to catch fire.
For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging.
He acknowledges that he is out of line with most forecasters (me included) in saying so.
His belief that an increase in money supply, mainly in China, heralds recovery seems misplaced to me in an era of QE.
And I do not see a combined round of real investment sweeping China, the US and EU (the UK excepted). But again, I may be wrong.
What I am quite sure of is the UK could not share in such a recovery in any meaningful way. We have a government committed to shrinking GDP over the next four years. That's what cutting government spending from 40% to 36% of GDP means: the cut is not only itself a direct contributor to reduced GDP but the reduced activity does in turn have a multiplier effect that means that the private sector also reduces its activity as people have less money to spend.
The OBR assume such spillover effects are small - which is the inverse way of their saying they think the benefit of government spending is very limited, but it's almost impossible to see how they come to their conclusions. And in that case whatever happens in the rest of the world we're set on a downward strategy by choice, thanks to the Chancellor and his dogmatic belief that we must shrink the state even if it spites us to do so.