Britain is in the grip of its worst economic crisis for 60 years, Alistair Darling has admitted.The Chancellor of the Exchequer warns that the slump is going to be "more profound and long-lasting than people thought".UK Retailers Suffer Worst Month In 25 Years
In an astonishingly frank interview, Mr Darling admits that voters are "p***** off" with Labour and says the party must recover the "zeal" which won it three successive general elections.
Since taking up the post, Mr Darling is said to have faced a crisis "every week", including the collapse of Northern Rock and the loss of millions of people's personal details from HM revenue & Customs.
There have been clear tensions between the Treasury and Number 10 in recent months and many of his comments will be read with dismay in Downing Street.
Mr Darling makes clear that he was not the source of a story earlier this month that he might temporarily suspend stamp duty in order to stimulate the housing market. The leak - which the Treasury suspects came from Downing Street - backfired and led to accusations that the uncertainty caused had actually caused home sales to stall.
The Chancellor says he has spent all his political life trying to avoid "this kind of interview". But his advisers have long claimed that he does not conform to his "boring" caricature and have chosen the eve of the new political season to improve his public image. However, many of his comments will be seized upon by his opponents.
Mr Darling says the economic times we are facing "are arguably the worst they have been in 60 years." "And I think it's going to be more profound and long-lasting than people thought," he adds. Further evidence that Britain is on the brink of recession emerged this week.
A report into house prices showed they had dropped 10 per cent in the last month - the biggest drop in prices since 1990.
And on Thursday David Blanchflower, a member of the Bank of England monetary policy committee, warned unemployment would hit two million by Christmas. Mr Darling admits Labour - currently 19 points behind the Tories in the latest Telegraph opinion poll - is in trouble.
The Independent is reporting Retailers suffer worst month in quarter of a century.
Retailers delivered their worst performance for nearly a quarter of a century last month and there is little sign of relief for them any time soon.My Comment: It appears the UK Office of National Statistics is being run by the same group of clowns that publishes the US GDP data. How did that happen? See GDP Much Weaker Than Headline Numbers for disbelief at some US numbers.
Some 60 per cent of UK retailers said that sales in the first half of August were lower than a year ago, while just 13 per cent said they had increased, the CBI Distributive Trades Survey revealed.
The CBI data reinforces a widely held view among retailers that it could be 2010 before consumers, who are squealing from soaring food prices, utility bills and motoring costs, return to the high street with the vigour of previous years. The survey is also the latest to contrast sharply with the Office of National Statistics' retail sales data, which showed a 0.8 per cent rise in July and have recently drawn gasps of disbelief from retailers.
The figures will add to the clarion call of retailers for the Bank of England to lower interest rates at the earliest opportunity, and came on the same day that the building society Nationwide said house prices were falling at their fastest since 1990.Deflationary Hurricanes
Ian McCafferty, CBI chief economic adviser, said: "Retail conditions have been extremely tough this summer, and the wet August has been a further blow. Sadly, no let-up is expected as we head into early autumn. The business outlook is particularly weak and retailers are having to scale back their employment and investment plans in an attempt to ride out the storm."
Gavin George, head of retail at the accountancy firm Ernst & Young, said: "It is not going to get any better for 18 months."
The CBI said sales were weak across all retailers, except for grocers, which posted modest growth on a year ago. It said the sectors related to the housing market, particularly durable household goods, furniture and carpets, continued to face "very difficult" conditions. For example, all the furniture and carpet retailers surveyed said their sales had fallen between 29 July and 13 August, compared with a net balance of plus 46 per cent for the same period last year.
This was easily foreseeable based on debt. Let's flashback to June 30, 2008 and a review of Deflationary Hurricanes to Hit U.S. and U.K.
Michael Saunders of Citigroup warned that - at 173pc of household incomes - the debt burden is higher even than Japan's when it peaked in 1990, before more than a decade of deflation.I Responded:
Philip Shaw of Investec said: "Although we take the view that the economy will avoid a recession, our confidence is ebbing."
"Avoid A Recession? It will be hard for the US and UK to avoid a depression."Darling Comment Of The Week
What started as a tropical storm called "Subprime" has intensified in magnitude to engulf Alt-A, HELOCs, credit cards, commercial real estate, municipal bonds, corporate bonds, and the stock market, just as baby boomers are headed for retirement.
If you prefer, you can think of this as Many Hurricanes, Many Eyes.
Attitudes Lead The Way
It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. That is the nature of the game. People have to forget what a depression is like to bring about the conditions that cause them. And they did. And they made the same mistakes over again, except larger.
The madness of crowds, however, can only go so far. A significant reversal is now underway. The secular peak in consumption has been reached. A reversal in attitudes towards consumption started with houses, but it�s spreading to cars, boats, and even Starbucks coffee. It will take a long time for attitudes to get back to equilibrium. And attitudes, like pendulums, will not stop at equilibrium once they get there.
The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none. History is about to repeat.
Darling Comment Of The Week: "People are pissed off".
Indeed they are. And there are going to be many more "pissed off" in the coming years as well. Peak Credit has arrived, globally. This is what the backside looks like.
Vancouver take note. The odds that Canada can avoid a housing crash similar to what is going on the US, UK, and Spain, are zero.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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