It was far worse in our day! Oh really?

Is this the worst recession in our life time? Over at NI Crunch talk, a bold attempt to get local business talking, I’ve offered a different thought based on a session with Lord Donoughue, special adviser to Jim Callaghan during the IMF crisis of 1976 and the following politically fatal winter of discontent.

Not that things are exactly chipper today of course, even according to the very limited measure of the consumer prices index (CPI) showing a less than expected fall in inflation but with deflation looming as the real enemy. The Times records the ominous details of the Bank of England report:

“Recent figures from the high street indicate that the Government’s 2.5 percentage point cut in VAT has so far failed to reignite consumer spending in the run-up to Christmas.”

Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London

  • Glencoppagagh

    “Recent figures from the high street indicate that the Government’s 2.5 percentage point cut in VAT has so far failed to reignite consumer spending in the run-up to Christmas.”

    No reason why it should. The cut reduces the price of any item by less than 1%. Besides, the VAT cut is in force for another year so there’s no rush.

  • Ulsters my homeland

    “It was far worse in our day! Oh really?”

    just a wee comment on that phrase. Oul timers are always telling us ‘it was far worse in their day’. I was talking to my Da recently about there not being much heat and he started santering about how the winters were worse in his day and us uns (me) never experienced real cold [lol]…..and then in the next breath he rubbishes climate change and calls it a load of huey.

    rant over.

  • Greenflag

    The main difference between then and now is that back then there was an ‘understanding ‘ if somewhat naive belief that Governments being sovereign entities could by implementing economic policy and adjusting interest rates somehow ‘fix’ the economy . In practice the UK just kept on devaluing the Pound against the Mark and other currencies in the hope of becoming ‘competitive ‘ . The only industry which they ever really became competitive in was in Financial Services and now that’s been seen to be a crock of shit .

    Despite all the ranting by Dave among others on the issue of ‘currency’ sovereignty the simple fact of life is that even the USA despite being theoretically ‘sovereign ‘ in the sense it can print as many dollars as it likes or adjust it’s interest rates the facts of the present worldwide downturn mean that even the USA is strapped between the proverbial rock and hard place . Interest rates are at an all time low and the Feds are talking about a 0% rate even now . But still the economy will not budge and neither will the banks let go of whatever cash they have and people are only spending on essentials .

    Truth is that the present economic downturn is the result of 8 years of Republican profligacy on top of a 25 period in which the median wage in the USA barely moved for most most US males and average household income rose by a desultory couple of percent . This at a time when productivity gains totaled over 30 % throughout the period . So where did all the extra cash profits go ?

    Into the bank accounts and retirment accounts of the already wealthy many of whom have now seen their ‘retirement ‘ funds and home equity values carved out by the Wall St voodoo merchants of hedge fund ponzi schemes etc etc .

    So with America underwater and no easy way out the rest of the world is just going to have to wait and see if somehow the Obama ‘magic ‘ wand ‘ can work wonders .

    It’ll have to otherwise this coming recession will be on course for another 30 ‘s repeat .

    And remeber folks it’s not the poor you have to worry about when things go badly wrong . The poor are used to poverty . it’s the tens of millions of Americans who are seeing the little bit they accumulated skived away by feckless banking authorities and negligent governmetn oversight .

    Mr Bernard (made off with 50 billion ) Madoff was suspected of running a ponzi scheme as far back as 1999 but the ‘authorities’ were too undermanned to carry out a proper audit and in any event they were only staffed to send in an ‘expert’ once every 5 years 🙁

    Un ******ing believable but that’s the way Wall St liked it .Much easier to steal investor’s monies when nobody is checking up on your thieves department 🙁

    Keep to the Euro and the Yen for now -it’s too late for Gold . As for your dollars and pounds -if you dampen them and let them dry for 15 mins they’ll make good arsepaper 🙁 not as absorbent as the Zimbabwean dollar well not yet anyway !

  • John K Lund

    I have been in the textile manufacturing business for 50 years this coming year. I have never seen a slump like this in all those years. The previous two generations saw the Weimar republic’s financial collapse, to us as Germany was then our principle market a debacle leading to the Great Depression world wide. What is worse is that we no longer have the sustantial manufacturing base to export which we previously enjoyed,whilst taking advantage of our weak £Sterling.The city and the service sectors have shown how truly useless they are. Trading would be more fulfilling on a monopoly board. Labour have always blown it but the two B’s have surpassed all of their predecessors attempts. The Conservatives will have to come in and sort this complete and utter shambles out. They will be facing inflationary pressures with the continual devaluation of Sterling. Forget joining the Euro at its present exchange rate we would become the paupers of Europe. Our present style economy is just one huge retail and services High Street sucking in imports which are now 25/30% dearer. Remember when our trade was in balance and people word wide wanted to buy the Bank of England’s bond issues.At the end of the Second World War there were 4US$ to the UK pound. Brown has gone from two to one i.e. HE HAS HALVED THE NATION’s WEALTH and he still claims he is the World’s saviour.
    Northern Ireland is in the worst position for recovery as our Soviet Style economy cannot survive without huge subventions fro the UK taxpayers.

  • Comrade Stalin


    Germany’s collapse did not cause the great depression. Other way round.

    The Conservatives will have to come in and sort this complete and utter shambles out.

    There were three or four recessions when they were last in power, and they gave us the ERM crash and high interest rates. Your faith in them seems to be somewhat misplaced. The truth of the matter right now is that they don’t have the answers, and Brown’s tricks – such as PPIs – were taken right from the Tory party playbook. I’m not sure how differently they’d have done things had they been in charge.

  • Mack


    These videos

    all 8 of them are worth watching to get an overview of the economic missteps taken by the USA. Their decline from the world’s greatest producer and creditor into the world’s biggest debtor and consumer nation.

    Peter Schiff being blunt and direct to the USA mortgage bankers association in 2006.

    Nouriel Roubini was sounding alarm bells back then too, and is also worth listening too.

  • Mack

    Comrade Stalin, John K Lund

    First might I say great comment John. I really hope your business pulls through.

    Hyperinflation in Germany predates the great depression by decade. The London Ultimatum that war reparations be paid in foreign currency & gold caused a massive devaluation in the Mark (as the government issued Mark denominated bonds to raise cash – massively increasing the money supply, thus devaluing each note. If any of this sounds familar stop me…)..

    The Great Depression was caused by the collapse of solvent banks along with insolvent banks caused by a run on all banks due to collapsing confidence in the banking system (due to their profiligate lending in the roaring twenties, again if this sounds familar stop me..). Depositor protection was brought in after the horse had bolted the stable. No attempt was made to save the solvent banks from bank runs, had that protection been in place – they would have been able to take over the imprudent insolvent banks (good drives out the bad).

  • Greenflag

    John Lund ,

    ‘I have been in the textile manufacturing business for 50 years this coming year. ‘

    In the one business or did you have to jump ship a few times . Textiles has been predominantly outsourced for the past almost 30 years imo ?

    Your faith in the Conservatives is touching But personally speaking neither the Tories or Labour have the ability to do anything other than muddle through in present trading conditions . It seems as if we are into a 1970’s rerun with only currency devaluation seen as a way to recovery .

    Oddly enough Germany’s medium size engineering sector has done well these past 25 years whereas Britain’s has never recovered from Thatcher’s hatchet job on British manufacturing in the 1980’s .

    You may consider yourself lucky to be near retiring age . The future of textile manufacturing now lies East of the Gulf of Aden . No Tory or Labour Government will change that fact of economic life .

  • Greenflag

    mack ,

    Thanks for the link . I’ve been reading Schiff for a couple of years . Nobody wanted to listen to him then and nobody wants to listen to him now either . To escape from the present mess requires ?? yes you guessed -more spending on manufactured imports by western consumers who are at least in the USA ‘bust’ saddled with enormous debt , with pension funds pillaged and home equity values in the bin . Mr Bernard (madeoff with your money ) Madoff has tarnished whatever was left of the financial services sector’s reputation and must surely be the last straw for those who still believe that bankers and financiers can ever be trusted to regulate themselves .

  • Dave

    Greenflag, what you ignore in your rant is that America got itself into its economic mess by the policies that you advocate. As a supporter of big government, you should note that Bush made government 46% bigger during his two terms. The mess was created by the big government that you so favour. Bush was never a supporter of small government or laissez-faire or supply-side economics. Bush is a Keynesian, borrowing massive amounts of money (deferred taxation) to squander on economic “stimulus packages” and proffering a policy of cheap credit to encourage consumer spending on the demand-side – and the more he embraced state intervention in the market, the more America slide into economic mismanagement. America’s foreign exchange reserves now amount to a minuscule $73 billion because Americans have been encouraged to borrow and spend by deranged Keynesian polices that have simply created debt and not wealth. Bush spent 21% of GDP in 2007 at the executive level of government with the federal level spending a further 12%, giving an ignominious total of 33% – that is akin to Euro levels of economic backwardness. Obama wants to spend an addition 10% of GDP. The logic being that as government spending makes a mess of the economy, you should increase government spending and make an ever bigger mess of it. As P.J. O’Rourke wrote, “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.”

  • Greenflag

    Mack ,

    ‘Hyperinflation in Germany predates the great depression by decade.’

    I have a Reichsmark Note with I think about 15 0’s on it . It was reputed to be of just enough value to buy a roll of toilet tissue back then .

    Can anyone explain or has anybody any idea of why Zimbabwe which has been through ‘hyperinflation ‘ now for at least three years still keeps functioning ? The Germans threw in the towel after a couple of months . Perhaps because the Germans had a large middle class at the time who simply would not pursue the ‘lie’ any further whereas Zimbabwe has so much of it’s population at the point of utter destitution that nobody cares any more ?

    Seriously folks this is an interesting comparative as between cultures and economies at various stages of development .

    In times like these with the USA and UK gearing up to do a ‘Mugabe ‘ on the money printing presses people should hold on to their hard assets mainly property and gold if they have . Even if property is worth a lot less now it will be worth something if and when we pass through this mess .

  • Mack

    Greenflag, Dave ,

    On currency sovereignty, I’ve mentioned it before (and I know Dave has strong views), but as long as the currency is well managed (that is holds it’s value) I don’t think it matters who is doing the management. When Gold or Silver were currencies (and there are still those who regard them as such) – there was no sovereign state to manage them (money supply was limited only by mining, conquest or trade).

    If money is a future claim on the fruits of human endeavor, all you really want of it is that it retains something of it’s ability to purchase those fruits in the future (low inflation) and if you owe the fruits of your endeavor to someone else that it does not become an ever tightening noose around your neck (no deflation).

    Currency manipulation (e.g. Chinese style) strikes me as a violation of the property rights of the individual that fundamental to capitalism.

  • Greenflag

    Dave ,

    ‘you should note that Bush made government 46% bigger during his two terms.’

    In order to finance an illegal war and kill some 400,000 people -create 4,000,000 Iraqi and Afghani refugees and cause some 4,500 American deaths plus tens of thousands wounded, traumatised -crippled for life . That kind of activity requires money and then there are the 100,000 plus private ‘contractors a.k.a Cheney’s friends who also have to be paid via the public purse .

    ‘The mess was created by the big government that you so favour.’

    I favour strong government oversight and intervention when necessary in the financial , education and health care sectors which is not necessarily the same thing . Health care in the USA is now on track to consume almost 20% of the US economy . Left in private hands it will consume even more of the economy due to the greed of insurance , drug and the medical/legal professions . We’ve seen where the greed of the ‘banking and financial services sector has led . How many more ‘madeoff with your money ‘ Madoffs are still at large among the denizens of Wall St ? Hanging is too good for them imo.

    ‘Americans have been encouraged to borrow and spend ‘

    This is not a new phenomenon . The entire world economy has been built on the American prediliction to spend and borrow at least since the end of the 1970’s. What has happened over the past 30 years (under mostly Republican presidents ) has been a slow emisseration of large sections of what was once called the American middle class . Now America is ‘dividing ‘ between a small extremely rich minority (those who have not yet been jailed anyway ) and most of the population who have seen whatever savings they have accumulated ‘robbed’ by hedge fund thieves and con men who were given free license to steal by negligent government . Now they expect the ‘large’ now emisserated former ‘middle class’ to spend ?

    As I said earlier Americans need to consider the introduction of capital punishment for large scale ‘financial ‘ crimes whether committed by those in either the private or public sector.

    Not that that will solve the present problem . But it might induce caution among the white collar criminal class in the future.

    Your suggestion that Government should do nothing but allow the chips to fall where they may, may appear logical in terms of traditional economic ‘good sense ‘behaviour . Unfortunately man is also political animal as well as an economic one . The last thing the world needs is for America to disintegrate a la Weimar Republic . We know where that leads .

  • Greenflag


    ‘but as long as the currency is well managed (that is holds it’s value) I don’t think it matters who is doing the management.’

    I’m in favour of ‘currency’ holding it’s value- but I disagree with the second part of your statement . We live at least in theory in democratic states where the people have a right to choose the management . The fact that people sometimes like to elect ‘managers ‘ who promise them something for nothing or at least on borrowed money just makes the achievement of the first part of your quote above more difficult if not unattainable in the longer term .

  • I definitely like your logic. The article is very well written and said.Keep giving posts like this in future.