George Osborne's austerity plan 'risks lost decade' for UK economy

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Source: the Observer

George Osborne should recognise that his deficit-reduction programme is failing and change economic policy to avoid a triple-dip recession, a senior investment banker has warned.

Jim O'Neill, the chairman of Goldman Sachs Asset Management, said the chancellor's continued pursuit of austerity despite signs that the economy was stagnating, including worse-than-expected GDP figures, risked a lost decade for the British economy with low growth and increasing public debt.

Figures unveiled on Friday showed that the British economy shrank in the last quarter of 2012. If the economy shrinks again in the first quarter of 2012, Britain will be in recession for the third time since the economic crash of 2008.

The government insists that its policy of cutting expenditure is the only course available but critics insist that the absence of growth was increasing the deficit rather than cutting it.

Read more: http://www.guardian.co.uk/politics/2013/jan/26/goldman-sachs-criticism-george-osborne-austerity

[DallasNE]

1. That's The Problem With Dogma

Ignore the physical evidence and pronounce that nobody claimed that the turnaround would be quick. Osborne needs to answer the question regarding his projections versus actual results and whether the actual results mirror what that critics said the result would be. But to answer those questions would require that he abandon the dogma and change course so he will never do that. He would rather plunge the nation into still another recession than admit that he was wrong and that his critics were right.

[blkmusclmachine]

2. Austerity is doing what they expected, yes?

Too Big To Jail versus Too Small To Matter. Guess who always wins?

[Turborama]

3. Compare and contrast...

(Note: The UK side shows a recovery was beginning up to 2010, and then Osborne took over as Chancellor of the Exchequer)

[Turborama]

4. Details: George Osborne is destined to be remembered as the most inept Chancellor in British history

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As I had feared, the growth numbers were bad again. The recession deniers had forecast positive growth, of course, but this was just wishful thinking: even the hopeless MPC had predicted a fall in output. A 0.3 per cent contraction means that the economy hasn’t grown for the last year at all. The economy is running on empty. In terms of the speed at which lost output has (not) been restored the economic pygmies in the Coalition are now responsible for a much worse slump than the Great Depression.

The economy was growing nicely when the Coalition took over in the spring of 2010. Indeed over the period Q32009-Q32010 the Labour government under Alastair Darling generated five successive quarters of growth; the economy grew by 2.7 per cent. During the succeeding nine quarters, Q42010-Q42012, under George Osborne the economy has grown by 0.4 per cent, zero over the last year. Four of the last five quarters have been negative.

For comparison purposes over the last five quarters, in contrast to Mr Darling’s growth the economy has shrunk by 0.3 per cent. The economy has still not restored half of the drop in output experienced from 2008Q2-2009Q2 of 6.5 per cent, and there is no chance under current policies that output will be restored before the 2015 election.

Our part-time Chancellor will go down in history as the most inept ever; his austerity strategy has failed; borrowing is up, and the economy has been flatlining for two years. Ed Balls can now say he warned us this was going to happen. Told you so. Triple-dip here we come.

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Full article: http://www.independent.co.uk/voices/comment/george-osborne-is-destined-to-be-remembered-as-the-most-inept-chancellor-in-british-history-8468778.html