As this Blog has pointed out time and again, no serious attempt has been made to re-balance the UK economy away from shopping and house price inflation driven by borrowed money. Thus it is that, as things in the global economy turn sour, as now they are, apart from some tinkering to make our banks more resilient (but far from shockproof) we are about where we were as the economic weather took a nasty turn 2007. Then it was the credit crunch which gave the signal. Now it is the collapse in oil prices, the slowdown in China and the realisation that there is another credit crunch rumbling beneath the surface; this time in the East rather than the West. Stock markets in London and across the world are crashing, as is the value of the pound against the dollar and to a lesser degree against the Euro. Yet coupled with the ultra low oil prices this could be good news.
The cost of motor fuel and energy should fall, putting more money into people’s pockets and exports should be more competitive and therefore grow. Unfortunately the market for exports has shrunk and though lower, the pound remains competitively overvalued. Imports will remain cheap, too cheap to offer enough incentive for a real revival of home production of consumer merchandise. So it is not all bad news but the very bad news is that we have done nothing to put the economy into a position to take full advantage of what good news there is.
Meanwhile the Bank of England Governor makes yet another speech to explain how he got it wrong in the last one and announces that yet again interest rates cannot be increased without risk to the faltering growth that is still just alive. So the Bank has now sat on its hands for close on nine years and its various committees do no more than waffle. The reason is plain. Economies cannot be managed by committees of wise men and women, because too many decisions about interest rates, liquidity, investment, economic modelling, employment and expansion are political. So HMS Great Britain approaches the storm with nobody at the helm.
Except Osborne. Whose forecasts of a few weeks back already look dodgy. He must be getting worried. So must Cameron. Behind them both a tousled figure with haystack hair looms. You know his name. He knows that within the coming headwinds there is a route to a better economy through mobilising the twin benefits of lower energy costs and a lower pound. It would mean abandoning austerity and going for growth. For Osborne and Cameron this would represent a humiliating U turn, from which they would never recover. For a new leader with haystack hair it would be a fresh direction in which to lead the country to better times.