Monday, 28 November 2011
Its official, the most recent recession was the longest in almost 100 years
Martin Weale, external member of the Monetary Policy Committee, Bank of England recently gave a speech, where he compared the recent recession with previous ones. It was a shocking assessment.
"We are experiencing the slowest economic recovery since the First World War.There have been six recessions since 1920.... In Charts 1 and 2 I show the time profiles of these (recessions).
The 1932 trough, like the trough in the current recession, was about 7 percent below peak with the recession in 1979 being milder. But we can also see that, for the three completed cycles, the time needed for output to recover to its pre-recession level was no more than four years and one month.
We might now ask how long it is likely to be before output regains its level of early 2008. The central estimate of economic growth associated with the MPC’s latest forecast, published in the Inflation Report, shows this happening in the third quarter of 2013."
To summarize; the 2008 recession was deepest since the end of the second world war, and the recovery has been the weakest in almost 100 years. The UK economy will not return to its pre-recession output level until the second half of 2013.
Here is a curious question; what is the key difference between this recession and previous ones? Quantitative Easing - the Bank of England's attempt to systematically support commercial bank balance sheets by printing money, creating negative real interest rates and robbing savers.
Rather than speeding up economic recovery, Quantitiative Easing has delayed it.