It is always gratifying to be proved right. And so here at MoneyWeek, we’re feeling frightfully smug, albeit a little depressed. It is hardly as though we want to watch the UK economy flounder, nor to disprove Gordon Brown’s theory that we have left the era of boom and bust behind (always an unlikely boast: economic cycles have been part of British life since at least 1570, when Shakespeare’s glove-maker father went bust, thanks to a UK recession).
But though this magazine, along with a few other sceptical voices, has long been suggesting that the economy is in for a tough time, it seems not many people wanted to listen. Consumers kept on wielding their credit cards as though money grew on trees (and they could be forgiven for thinking so, given the banks’ willingness to lend even the least reliable customers huge amounts of money).
Without journalists pointing out it would all come crashing down – and a word or two from the Treasury wouldn’t have gone astray – how were the hapless consumers supposed to know they ought to be preparing for the harsh realities of economic winter? Yet the press stayed silent. And the chancellor remained tight-lipped. Only a couple of brave souls dared suggest that everything in the garden was far from rosy.
But now everyone has finally starting telling it as it is – not good. Far from being the end of boom and bust, the boom has just come to an end and the bust is round the corner. Fashions change, people change (perhaps this time JK Rowling’s father will feel the effects of a recession), but some things remain with us – and the spectre of economic downturns is one we just can’t shake off.
The most recent quick fix was to cut interest rates. But that’s unlikely to work again. Sir John Gieve, the newest member of the Monetary Policy Committee, might be a former mandarin at the Treasury, but he may have to change his pro-cut views. The OECD’s latest forecast for the UK economy not only depicts pain to come, but also points out that “inflation has been increasing and is now above target”. They conclude that there’s not a “compelling case for further rate cuts”. Making the doves’ lives rather more vulnerable to the hawks. Add all these factors up and it looks bad for Brown. Perhaps he should forget his ambitions to move in next door, fly to South America, and find a bargain to cheer himself up.