A long slow fragile recovery

So says Mervyn King the Governor of The Bank of England.

Why?

Well mostly because of the effects of massive public and private and corporate debt.

Well, government debt is getting larger by the minute and even if a government with some sense of fiscal control took over in the morning it would still be cataclysmically bad.

Labour now insist that they can't be responsible now because taking money out of the economy would lead to a worse recession.

The problem is that government spending is taking money out of the economy because money that the government has borrowed is not available for private industry or indeed consumers, to borrow.

Meanwhile whilst politicians are insisting that banks should lend more, including government ones, government is telling (via the FSA) banks to lend less to private individuals and to hold more government debt.

Labour tell an interesting lie about government debt. That is that is was lower when the recession started than when Labour took power in 1997. It is an interesting lie because it is absolutely true. We started the recession with government debt at 38% and in May 1997 it was 40% of GDP. It is a lie because it is used to hide a startling truth and that is that government debt going into the 1990/1991 recession was 20% of GDP, and paying for that recession added the extra 20%.

This is important, because that Labour lie covers up another big issue which is that Gordon Brown has been borrowing massive amounts of money whilst the economy has been growing, not saving up for what is now a very rainy day.

So much for prudence and no more boom and bust!

The BBC has this.