INDEX Friday February 12, 2021
Fastest contraction since 1929
This is what a slump looks like. The economy is shrinking at the fastest rate since 1929. Yet according to the latest figures from the ONS (April to December) the Government ran a deficit of £270 billion.
In round terms the economy (GDP) is about £2 trillion. so that represents a huge injection of liquidity. That didn't happen in the 1920s.

Source for the above ONS but taken from BBC web site.

This can not continue because at some stage it will start to stoke up inflation, at this rate even hyper inflation. Recent surveys have suggested that many are better off thanks to the pandemic, and I believe they are.

But that means that the people who are suffering, those on short term or zero hours contracts, and the growing army of unemployed (the precariat), suffered even more than the average. If the comfortable are better off but the average is declining, then those who are not comfortable are suffering terribly.

Some like the Bank of England are trying to talk up the economy by predicting that things will soon get back to normal when the restrictions are lifted. But the shops that have gone out of business are not going to re-open; the pubs who have called time for ever are not going to mysteriously re-appear; the holiday companies and airlines that have slimmed down or even gone out of business are not going to phoenix like fly out of the ashes.

And even if they did a massive hole has been punched into the economy in the shape of the lost demand (the spending) of those people on the margins. You don't book holidays in Tenerife from a food bank queue.
Posted by Jonathan Brind.
Friday February 12, 2021