Wednesday, 20 October 2010

Reckoning for a nice decade

Ten sober years to come

Later today the UK will hear about its public-sector budget cuts.

I shall hide from the radio till these have been actually announced, to avoid yet further painful speculation before the facts.

Suffice it here to note that, Mervyn King, Governor of the Bank of England warned yesterday (as if warning be necessary) that the next decade will not be nice –

History suggests that after a financial crisis the hangover lasts for a while... A sober decade may not be fun but it is necessary for our economic health.

All at sea, in the same boat

However gloomy this might look domestically, there is always the consolation of Schadenfreude, the UK economy being better set, I gather, to see itself through the present unpleasantness than the economies of Greece, Italy, Ireland and, er, France... And Hungary too, I guess.

Mr King had a word about this too. Speaking yesterday in Wolverhampton, not a thousand miles from where I sit now, he said that greater prudence in Britain would be the UK's contribution to a 'grand bargain' that countries worldwide must strike to see off the threat of protectionism and avoid a 'disastrous collapse' in global economic growth. Nations have to set aside self-interest and draw up a plan for common economic reform. Deficit countries, like the UK, need to save more while surplus countries, like China, need to 'shift away from reliance on exports'. In an oblique reference to political pressures in the United States, he added –

The need to act in the collective interest has yet to be recognised ... unless it is, it will be only a matter of time before one or more countries resort to trade protectionism. That could lead to a disastrous collapse in activity around the world. Every country would suffer ruinous consequences – including our own.

This morning China announced a tiny increase in its interest rate. No big deal in itself, just a signal...

Two new acronyms

NICE: Non-Inflationary, Consistently Expansionary – the decade just passed
SOBER: Savings, Orderly Budgets, and Equitable Rebalancing – the decade to come.

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