Business minister sees risk of triple-dip recession

LONDON Sun Dec 9, 2012 7:51pm GMT

Britain's Business Secretary Vince Cable speaks at the CBI annual conference in London November 19, 2012. REUTERS/Suzanne Plunkett

Britain's Business Secretary Vince Cable speaks at the CBI annual conference in London November 19, 2012.

Credit: Reuters/Suzanne Plunkett

Related Topics

LONDON (Reuters) - Business minister Vince Cable said Britain could fall back into recession for a third time since the 2008 financial crisis but expected the economy to stagger on with minimal growth.

In an interview published on Sunday, Cable, one of the most senior ministers in the coalition's junior Lib Dems, said Britain could also face a Japanese-style stagnant "lost decade".

"There is a real worry about (that), a real risk of that," he said. Asked if the economy was heading for a 'triple-dip recession', after falling twice into negative growth since the financial crisis, he said: "There is certainly a risk."

"I always try not to get drawn into forecasting arguments (but) there is clearly a risk. The most likely outcome is that we continue to bump along the bottom," he added in an Observer newspaper interview.

Conservative Chancellor George Osborne announced new official forecasts on Wednesday that slashed expected growth to 1.2 percent in 2013 and 2 percent in 2014, with the economy seen shrinking this year by 0.1 percent.

Cable, a former economist who is responsible for Britain's industrial policy, has long said Britain's economy is starved of demand, but supports the coalition's austerity programme aimed at slashing its budget deficit.

The government hopes that loose monetary policy and record low interest rates will nurture a private sector recovery, but Cable said he hoped the Bank of England's new governor Mark Carney would come up with fresh ways to assist the economy when he takes up the post next summer.

"We have got to have a very expansionary monetary policy, which we have had until quite recently, but I sense the Bank of England is running out of steam, or perhaps motivation. A lot depends on this new governor," he said.

(Reporting by Tim Castle; Editing by Rosalind Russell)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
mgb500 wrote:
I think Cable is correct – unlike those numpties Alexander & Osborne – at least he has long experience of the business world. Osborne did some shelf stacking & Alexander looks like he should be sitting his A Levels next year!

The UK is facing years of bumping along the bottom….unless it goes really bad and we come to the economic continental shelf & then folks, it’s a long, long way down!

Dec 09, 2012 8:33pm GMT  --  Report as abuse
DR9WX wrote:
It requires a tremendous amount of wealth generated in the real economy to make interest payments to the financial sector.

Why are we paying interest on electronic money that the banks simply type into our current accounts when we sign for a loan?

Why is this electronic money only created when we borrow it?

At some point this system ends. You can’t keep borrowing electronic money and paying it back with interest.

The vast majority of our money is electronic. All electronic money must be borrowed into existence. We can mathematically repay the principle but not the interest. Without growth the system ends.

Can’t we just have a new system where the BoE determines how much money we need and puts that amount into or out of the economy? Without interest payments?

If we need 100 billion, then create 100 billion. There is no need to pay interest on the 100 billion simply for using it. Electronic money does not wear out or cost anything to make.

If we start to get deflation then create some more money.
If we get inflation then remove some money.

How?
The government spend vast amounts of money so that can be the mechanism. They can spend a bit more or a bit less, depending on inflation. If they want to control the money then allow them to control it properly.

The banks have shown themselves to be irresponsible. Take their ability to create electronic money from them, simple.

Now house prices, come on, sort that out too.

Then pensions.

The Government ought to be looking after us. Us being the cash cows.

Dec 09, 2012 10:59pm GMT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.