Will we see a "triple"-dip recession?

UK is officially in new recession after second consecutive quarter the economy marked a negative growth. Prime-minister as expected is "very disappointed" and public opinion polls show a decrease in support for the party in power. UK is the first from developing nations to announce its statistics, but soon much other will follow it as obviously the overall recession is inevitable.

This scenario was predicted years ago and has been named a "double-dip" recession. A new recession soon after the unconvincing end of previous recession. But I think we don't see a "double-dip". I just think we see the continuation of previous recession after the artificial growth, pumped by money-print has ended. If we look at the QE measures of Bank of England we will see that it has flooded the market with liquidity that is bigger as amount than the amount of economic growth that followed the "previous" recession. So against every pound pumped in economy we received less than a pound of growth. This is a clear crash of Keynesian economic theory, but it is not now the moment to analyze the reliability of economic theories.
More important now is to find what to do. If money-stimulus decision is not working and another recession comes with money-print ending, so what to do? More money print? I think politics will do exactly this. And just like before, there will be a small growth peak and then - another recession. So then we will have to talk about a "triple-dip" recession... :))
The right answer of the "what-to-do" question is in  the results of previous experiments. The governments tried the easy decisions - money-print and a symbolic spending cuts in budget. But the result is nothing... And this is expected, as printing money is just creating new money, but not creating a new real product. From the other side - a small spending cut means that the basic spending remains. And exactly it is the problem. When the government spends much, the individuals and the business spend less. As the private spending and investment is the growth engine, so it is normal to go in recession with less money for the private sector. It is obvious what is the decision - a drastic spending cut of "Thatcher" type, closing much social programs and pressing people to work instead of laying home and squeezing the social system. Big budget cuts are needed, along with tax lowerings and deregulation. Only this way we will awake the real economy engine.
The author of this text is not a fool and does not believe the written will happen. It is a difficult decision, while the politics prefer easy decisions. That's why the realistic prediction is of a new money-print round, motivated by "weak economy". And a triple-dip soon after that...

April 25th 2012

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