Power & Market

Recession Coming to the UK

A house of cards. A sandcastle. Dominoes. Lots of imagery available to describe our global, socialist economic system. Waiting for a crisis is one thing, considering a way out is another. Watching news from other countries provides signs of things to come which helps diagnose the worldwide problem. From CNBC:

The U.K. economy contracted by 0.2% in the third quarter of 2022, signaling what could be the start of a long recession.

Even in other countries, we see the same will they or won’t they statistical revision game being played, as explained:

The contraction does not yet represent a technical recession — characterized by two straight quarters of negative growth — after the second quarter’s 0.1% contraction was revised up to a 0.2% increase.

If it weren’t for the revision of the Q2 data, the UK would be in a technical recession. What does it matter? Recession or no recession, anecdotally, it’s fair to say few are confident about the state of their nation or economy. 

The learning opportunity comes from seeing how life in the UK mirrors life in America, with financial experts and planners offering few solutions (that stem from the 80’s) to monetary problems.

The country faces a historic cost of living crisis, fueled by a squeeze on real incomes from surging energy and tradable goods prices. The central bank recently imposed its largest hike to interest rates since 1989 as policymakers attempt to tame double-digit inflation.

In addition to rate hikes:

U.K. Finance Minister Jeremy Hunt will next week announce a new fiscal policy agenda, which is expected to include substantial tax rises and spending cuts. Prime Minister Rishi Sunak has warned that “difficult decisions” will need to be made in order to stabilize the country’s economy.

One economist was also cited saying:

...the sharp rise in mortgage rates, and the very early signs of house price declines, point to weaker building activity through next year.

In response to rising prices, we’re offered rising rates, rising taxes and spending cuts, with falling home prices as one of the many side effects. It must be mentioned that these economic problems cannot be fixed by a magical combination of the best tax policy coupled with a mythical optimal interest rate.

Those who seem ignorant of the Austrian Business Cycle Theory, like those in the mainstream media, always leave something to be desired, i.e. an explanation for these periods of inexplicable economic booms followed by periods of inexplicable economic bust.

They normally blame price increases on some exogenous shock, as CNBC blames the problem on an increase in “surging energy and tradable goods prices,” yet this lacks depth and honesty. To them, for some unknown reason, all prices just randomly increased.

It compounds, as to solve the mystery, central banks must then raise rates. With little proof of past successes nor assurances of future successes, we’re told that some time, normally around 30 to 40 years ago it worked swimmingly.

There probably is a technical recession in the UK already, as there probably is one in America. That statisticians play these games to avoid giving the title of recession is not surprising. What is surprising is just how long this game has been played. Ultimately, few remedies are available. Either we change the system from within, or remove ourselves from the system entirely; if not by internal change or external flight, eventually we’ll be consumed by it.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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