tag:blogger.com,1999:blog-8764541874043694159.post8041846785541148515..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: What derailed the UK recovery?Frances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-8764541874043694159.post-51302654152379496092013-07-16T09:22:04.494+01:002013-07-16T09:22:04.494+01:00"(ok, I may buy that a energy price shock hap..."(ok, I may buy that a energy price shock happened, but that still leaves me none the wiser whether that is the main reason for the slow recovery)."<br />This may be relevant?<br /><br />“the past two years have seen a significant discretionary fiscal tightening in the UK. Using the Institute for Fiscal Studies’ definition, the planned cumulative tightening in 2010-11 and 2011-12 rose from 2.8 per cent of GDP in Labour’s final Budget to 3.7 per cent of GDP in the Coalition’s first. We estimate that the eventual tightening was around 3.3 per cent of GDP. Taking the highly uncertain ‘fiscal multipliers’ used in our June 2010 forecast at face value, the total tightening introduced by Labour and the Coalition might have been expected to reduce the level of GDP in 2011-12 by 1.4 per cent relative to its Executive summary Forecast evaluation report 6 level with no consolidation. The multipliers would have needed to be more than twice as large to explain the growth shortfall we have seen. Estimates of multipliers vary widely, so it is clearly possible that the fiscal consolidation exerted more of a drag on growth than we assumed.”<br /><br />http://cdn.budgetresponsibility.independent.gov.uk/23690-OBR-Web-Only.pdf<br />Postkeyhttps://www.blogger.com/profile/11747509012748106827noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-42340931379596999282013-07-16T09:16:40.995+01:002013-07-16T09:16:40.995+01:00"What goes on in Conservative party circles a..."What goes on in Conservative party circles and feeds through into government policy has very little to do with sensible analysis and an awful lot to do with politics."<br /><br />Much as I would like to, I cannot agree that their policies are politically motivated.<br /><br />They were/are, I believe, relying on supply side measures, monetary policy and the new 'voodoo economics' - the Barro/Ricardo equivalence to offset the fall in aggregate demand brought about by 'austerity'.<br /><br />Of course, these policies are more acceptable to 'right wing' governments?<br />Postkeyhttps://www.blogger.com/profile/11747509012748106827noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-18508731470474129582013-07-14T22:38:23.579+01:002013-07-14T22:38:23.579+01:00Good point. I don't know, but obviously it wou...Good point. I don't know, but obviously it would be a significant factor. I suspect more important from 2005-2008, though - that's when there were sizeable subsidies for home insulation and solar heating. Since 2010 I think the main issue has been price, including the imposition of green levies on household and industrial energy bills. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-90078082412205563452013-07-14T17:50:30.156+01:002013-07-14T17:50:30.156+01:00How significantly should we adjust for increased u...How significantly should we adjust for increased useage of energy efficient vehicles, products and better home insulation in the reduction in consumer energy levels during the period from 2005? Would such factors have any importance when looking at short to medium term trends. It did have some effect after the 1973 oil shock.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-51785027663317044482013-07-10T15:36:51.426+01:002013-07-10T15:36:51.426+01:001) Eichengreen, O'Rourke and Krugman were all ...1) Eichengreen, O'Rourke and Krugman were all writing about the US not the UK. <br /><br />2) I'm well aware that the Eurozone crisis did not impact all Eurozone countries equally. And I have not dismissed the idea that Ireland's bailout impact the UK's economy. I am however pointing out that the damage to the Irish economy was done earlier and the bulk of the Eurozone crisis was later - facts that you choose to ignore. <br /><br />3)If the economy is contracting, external cost-push inflation does not necessarily raise consumer prices. It may instead result in retailers going out of business as they are unable to absorb costs and <br />unable to raise prices due to low consumer demand. <br /><br />Your comment amounts to denying the veracity of DECC's figures. <br /><br />4)I am not trying to "identify the cycle". I am pointing out the fall in consumption in 2010. <br /><br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-92075189491092886072013-07-10T12:09:43.019+01:002013-07-10T12:09:43.019+01:001) The most famous comparison was with the Great D...1) The most famous comparison was with the Great Depression was done by Barry Eichengreen and Kevin O’Rourke around April 2009, for which there was a follow-up with newer data in 2010. This was heavily cited. Krugman also wrote about such a comparison in March 2009. Perhaps you can highlight similar studies by economists of such renown that were comparing 1990 or 1979? <br /><br />At the very minimum, the Great Depression should be there along with the rest because it was the one famous economists were talking about. But it's not, which is at minimum suspicious.<br /><br />2) The EZ crisis didn't hit all EZ countries equally. The demand crisis in some EZ countries led to the UK trading progressively more with Germany which is far more competitive. That means that the trade balance got worse because export markets were hit significantly and Germany far less.<br /><br />3) I addressed that. The rest of the post is mostly highlighting that energy prices went up. They did, but the question is whether that was the main thing that led to the inflection of growth rates. And in that most of the post is silent on and relies on the lines looking similar.<br /><br />Also, a cost-push shock should raise the prices of other products along with the energy price rises. That's why cost-push shocks have an adverse effect on competitiveness, because the cost increase leads to manufacturing price increases. Adverse supply shocks tend to lead to price increases, adverse demand shocks tend to lead to price decreases. So to explain the lack of impact of rising energy prices on other products you need....a strong adverse demand shock. And that is actually coming from the other explanations you dismiss. The problem here is that dismissal, not that energy prices didn't play a part.<br /><br />4) If you can't identify the trend, you can't identify the cycle. Simple, really. If anything, the only year that "looks" (and we're back to eyeballing) like an outlier there is 2009. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-21227516574682882172013-07-09T18:16:55.934+01:002013-07-09T18:16:55.934+01:001)You weren't listening, then. Comparisons wer...1)You weren't listening, then. Comparisons were made to both the 1990 and 1979 recessions. And that is what the graph shows.<br /><br />2) The Irish banking collapse had already happened - the sovereign bailout was really only an extension of it. And the bulk of the Eurozone crisis, which did clobber demand from the UK's trading partners, happened later. The timing of the Q4 2010 slowdown in the UK economy can't really therefore be ascribed to the Eurozone crisis. Can I also remind you that the UK actually runs a trade DEFICIT with the Eurozone - and our trade balance has got worse. <br /><br />3) I used "eyeballing" as a start point. But I did not end there. It's almost as if you ignore the rest of the post. You don't think double-digit inflation in domestic and industrial energy prices mattered? How weird. It was sufficient to cause a major recession in 1979. With such enormous price rises, the wonder is that the UK economy DIDN'T tip back into significant recession, really. <br /><br />4) The final graph does show decline in energy use from 2005. But it also shows a sharp fall in 2008 and then a further decline in 2010. It is impossible to say what the "trend" is from that graph, and that is not why I included it. I'm interested in the fact that consumption levelled off in 2009 then fell again in 2010. Rising prices seem a pretty good explanation for that to me.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-44117783442376689202013-07-09T17:50:12.230+01:002013-07-09T17:50:12.230+01:00Interesting angle. At least it's original alth...Interesting angle. At least it's original although there's a lot of strange revisionism in that post. All the comparisons I remember at the time were with the great depression, not with 1979 or 1990. <br /><br />Also, the way the Eurozone crisis is brushed off "because the Irish bailout was expected" is strange. I can understand if we're talking about a crash in asset prices, but we're talking about slowdown in growth. And what about what was happening to demand from the rest of the UK's Eurozone trading partners? Shouldn't it matter?<br /><br />Personally, I don't buy the oil shock theory just because the opening graph look similar to him or the line is squiggly rather than smooth. First, the graph doesn't look similar at all to me and I would like some more serious statistical comparison than this type of eyeballing. Second, most of the other graphs are just showing that energy prices went up (ok, I may buy that a energy price shock happened, but that still leaves me none the wiser whether that is the main reason for the slow recovery).<br /><br />As to the final graph, it does show that energy consumption went down, but it also shows it was doing so from 2005 and actually slowed down the decline post 2009. So did it fall in 2010 by more than the trend? Or don't we care?<br /><br />All in all, the post doesn't seem very convincing to me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-31130263428044325582013-07-09T00:44:56.787+01:002013-07-09T00:44:56.787+01:00As far as a Conservative-dominated government is c...As far as a Conservative-dominated government is concerned, neither is mainstream. <br /><br />What goes on in Conservative party circles and feeds through into government policy has very little to do with sensible analysis and an awful lot to do with politics. And as I pointed out in the post, international institutions and investors were firmly wedded to the idea of austerity. They've changed their tune now, of course. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-71996236476898786482013-07-09T00:26:26.740+01:002013-07-09T00:26:26.740+01:00Frances,
a simple stock and flows analysis would ...Frances,<br /><br />a simple stock and flows analysis would have given clear indication that front loaded austerity was a bad idea.<br /><br />ps do you consider Paul Krugman or Robert Skidelsky not to be mainstreamAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-10625854268890008892013-07-07T21:00:08.368+01:002013-07-07T21:00:08.368+01:00The vast bulk of Denmark's success in energy p...The vast bulk of Denmark's success in energy policy comes from their roll out of community level co-generation; hot water storage and heat grids. ie demand reduction, not the over-egged production of renewables, useful though that is.<br /><br />Perhaps you could explain in what sense energy savings are unreliable?<br /><br />Re back-up, Denmark pick up power from many sources of which Norway is but one - and they are not THAT reliable, having suffered both severe drought and floods in recent years.<br /><br />I have no interest in the global warming debate regarding it as an irrelevance. What will give the UK energy resilience is energy independence and freedom from reliance on foreign suppliers.<br /><br />You clearly are an advocate of the 'least £ cost' policies which gave us the Dash for Gas and increasing reliance on the benevolence of Norway, Qatar and Russia. <br /><br />I suggest you think again about what you wish for.ChrisJCookhttps://www.blogger.com/profile/04210399176675359293noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-10829057817894325482013-07-06T17:03:53.801+01:002013-07-06T17:03:53.801+01:00A very interesting and informative discussion. En...A very interesting and informative discussion. Energy is the life-blood of modern society, and, therefore drives much of the economic activity. A couple of posts allude to or explicitly mention the movement toward "renewables". No one, however, really addresses the huge economic impact of the funding of the energy "revolution". The UK, Germany, Spain, Ireland and others all are having serious second thoughts about the impact of heavily subsidized non-reliable energy sources. Surely the very expensive alternatives have not only increased the cost of energy, but also has threatened the manufacturing output of many nations. Although some are trying to account for the impact of this movement, I haven't seen a global assessment. Using Denmark as an example is somewhat dishonest as their entire system likely would fail if not for the backup of reliable hydro from Norway. It is becoming more obvious that the CO2 global warming hypothesis is in serious trouble as the new science (and data) question the original projections. Surely this plays a major role in the above calculations, affecting virtually very aspect of economies of nations. The replacement of reliable energy sources with unreliable technologies threatens any recovery.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-2802885403825648102013-07-06T12:26:38.634+01:002013-07-06T12:26:38.634+01:00Fair points, Chris. I confess I don't know all...Fair points, Chris. I confess I don't know all that much about this, although I know the oil market is the most rigged in the world and I'm quite prepared to believe that the Saudis deliberately manipulate prices - and that the US is party to this. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58265938396327572592013-07-06T12:24:03.986+01:002013-07-06T12:24:03.986+01:00I am, of course, talking about politicians, mainst...I am, of course, talking about politicians, mainstream economists and the media. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-10148433401877594062013-07-06T12:08:43.141+01:002013-07-06T12:08:43.141+01:00No-one thought that GDP was at risk:
Okay, that&#...<em>No-one thought that GDP was at risk:</em><br /><br />Okay, that's flat-out false. Plenty of people thought that the British austerity would be disastrous, and lo and behold it was. If you don't believe me simply do a search on "austerity uk gdp" in 2010. <a href="http://www.guardian.co.uk/commentisfree/2010/may/17/george-osborne-austerity-measures" rel="nofollow">Here's one example.</a>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-73539348213982559842013-07-06T11:02:35.505+01:002013-07-06T11:02:35.505+01:00Frances
My take is that the major financialisatio...Frances<br /><br />My take is that the major financialisation was the re-inflation of the bubble after the price collapsed to $35/bbl in late 2008; the Saudis panicked, and after Obama's election (he's a Big Finance president not a Big Oil president like Bush) JP Morgan sold the Saudis prepay contracts funded by the wave of panicked inflation hedger investors at that time.<br /><br />You may remember the super-contango in the first half of 2009 as this money inflated the price. Also the fleets of tankers off the UK storing oil funded by the contango and which the Daily Mail laughably said was caused by greedy speculators 'hoarding' oil.<br /><br />The Saudis have since acted de facto as an oil central bank, keeping the oil and/or product price pegged between levels which on the one hand (oil price collar) avoided revolution in Saudi, and on the other (product price cap) did not threaten re-election for Obama in the US.<br /><br />In 2010/11 we saw the Iran risk premium, through the influx of speculative money. Now we see Rowhani's election, and an incoming government which will definitely aim for accommodation with the US. Obama's problem is the head-bangers in Congress, and I don't think he can relax financial sanctions even if he wants to.<br /><br />But I digress onto my favourite subject, Iran.<br /><br />I don't buy the entire story of Chinese demand for consumption, I think (impossible to know) a lot of it has been reserve building. As for the North Sea benchmark price, that market is - and has been for maybe 12 years - owned lock stock and barrel by BP and Goldman Sachs. As Izabella has pointed out there is now very little spot oil which is unencumbered by financial claims such as prepay. Restrictions on production simply make manipulation/support of the price that much easier.<br /><br />The current 'tightness' is purely artificial,and the backwardation misleading. The WTI/Brent spread has IMHO been prima facie evidence of the financialisation of oil.<br /><br />The Brent market in the last 8 years has been the subject of the greatest market manipulation the world has ever seen.<br /><br />It makes Hamanaka's copper peccadilloes look like a Vicarage Tea Party. The resulting financial flows are so great they are almost incomprehensible, and the sheer audacity of the US/Saudi grand bargain (not their first) is staggering.ChrisJCookhttps://www.blogger.com/profile/04210399176675359293noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-13922769074503621382013-07-06T11:00:57.423+01:002013-07-06T11:00:57.423+01:00I remember at that time (2010) the notion that the...I remember at that time (2010) the notion that the West was using QE to lower real oil prices and that oil producers got together to prempt this 'devious' plot by increasing oil prices. Since then the situation has changed with fracking & over supply of oil becoming more topical.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-10385385895545854972013-07-06T10:06:39.516+01:002013-07-06T10:06:39.516+01:00Very interesting argument, Chris.
I don't ag...Very interesting argument, Chris. <br /><br />I don't agree that the 2010-11 energy price spike was entirely a financial phenomenon. Financialisation was a significant factor - and I think the Fed's QE pushed up oil prices, too. But at that time demand from EMs, especially China, was soaring (it has since reduced), and North Sea production was squeezed. Oh, and the Deepwater Horizon spill ran from April - September 2010. So in my view there were both endogenous and exogenous factors putting pressure on world energy prices. <br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-30891723084544018502013-07-06T09:57:27.767+01:002013-07-06T09:57:27.767+01:00Excellent analysis as usual.
Firstly, in my view,...Excellent analysis as usual.<br /><br />Firstly, in my view, the inflation in fuel prices was a purely financial phenomenon caused by the influx into oil markets of 'inflation hedging' passive investors who were mis-sold oil market price by investment banks.<br /><br />Through this attempt to avoid inflation, these 'muppets' actually caused it, and we have seen as a result a transfer of purchasing power from oil consumer economies to oil producer economies. <br /><br />That bubble and transfer is now coming to an end - possibly with a bump, as in 2008 - as this money flows out to inflate nominally income producing property and stock price.<br /><br />But I digress.<br /><br />It's interesting that what is bad for the economy is good for the environment. How then can we square this circle?<br /><br />The answer is to follow the Danish approach, which has since 1973 been to mandate an over-riding 'least energy cost' policy principle of minimising carbon fuel use for a given output of electricity, heat and power.<br /><br />The result? Since 1980 Denmark's GDP has risen by 78%; energy use has been flat; and (imported)carbon fuel use has significantly declined. Also, a country of 6m souls grew the largest wind turbine manufacturer in the world, Vestas, and amassed an unmatched body of expertise in heat engineering as they built out a network of community heat infrastructure and co-generation.<br /><br />They were able to fund this because they had widespread wealth and - for most of the time (the neo-liberal rot has since set in) - decentralised devolved fiscal capability funded by local land taxes. <br /><br />So how can anyone else fund it?<br /><br />Simples. <br /><br />Monetise energy - within suitable framework agreements -through prepay instruments, and invest directly, through loans denominated in energy, in nega watts and nega barrels of energy savings.<br /><br />One of the Big Trades of the 21st century will be the exchange of the value of knowhow and knowledge/IP for the value of carbon fuel saved.<br /><br />As I said recently at conferences in Baku and Tehran: don't just prospect and drill for oil and gas; prospect and drill for oil and gas savings. The Iranians don't really have a choice at the moment.<br /><br />ChrisJCookhttps://www.blogger.com/profile/04210399176675359293noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-3700158665721248042013-07-06T08:37:46.372+01:002013-07-06T08:37:46.372+01:00Many countries exhibited a similar reduction in GD...Many countries exhibited a similar reduction in GDP at that time:<br /><br />http://www.starmass.com/china-review/global-economy/images/large/major-countries-GDP2.jpg<br /><br />I assumed it was a global reduced demand for goods and services, but maybe global energy prices were impacting also. (I am looking more deeply into it now....)<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-11319367674157739452013-07-05T19:43:28.787+01:002013-07-05T19:43:28.787+01:00A v. good post.
"Personally I'm inclined...A v. good post.<br /><br />"Personally I'm inclined to exonerate the Bank of England here. The usual response to high consumer price inflation would be to raise interest rates." <br /><br />I disagree. There is no theoretical reason to react to headline CPI. There is a whole literature on the optimal inflation target, for instance see Aoki (2001) and Mankiw and Reis (2003).<br /><br />The conclusion of this literature was that central banks should target core inflation and ignore price changes due to volatile commodities prices such as energy.<br /><br />King undoubtedly knows this literature, but others on the MPC over the period clearly did not (shockingly including Besley who called for rate rises in mid 2008 and less shockingly Sentance who called for tighter monetary policy for pretty much his entire tenure on the MPC).<br /><br />This was unforgivable lapse in monetary policy. The economy was hit by non-persistent supply shocks, (energy and taxes) which textbook monetary policy suggests should be ignored, yet the MPC did nothing or called for tighter policy.<br /><br />As in the Great Depression, the ongoing great recession is due to a failure of central bankers.<br /><br />Oh and is it just me or was King's call for austerity in 2010 effectively arguing: we need to tighten fiscal policy now, so we can keep monetary policy at the zero lower bound for longer?<br /><br />Mankiw Reis (2003) http://dash.harvard.edu/bitstream/handle/1/3415322/Mankiw_WhatMeasure.pdf?sequence=2<br /><br />Aoki (2001) http://www.sciencedirect.com/science/article/pii/S0304393201000691Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-14987110353029500302013-07-05T14:54:44.142+01:002013-07-05T14:54:44.142+01:00I agree with Mr Cox above that this is a brilliant...I agree with Mr Cox above that this is a brilliant analysis. Must admit that I have been saying much the same thing for the last couple of years (to normally deaf ears). Also odd that the OBR and IMF/OECD also point to rising energy/fuel prices as the main reason for the UK missing its growth forecasts, and yet even they get little attention.<br /><br />Which is odd because any "water cooler/down the pub/reading the papers" analysis of what most people have to moan about economically is high electricity and gas prices. And also high food prices (partly caused by the rise in transportation and fertiliser costs which are oil-related).<br /><br />You are right to remind us that back in June 2010 there didn't seem to be much concern that a recovery was under way and that fiscal consolidation could be started safely (I'd query your "small mandate" comment as all three parties electioneered on "cuts worse that Thatcher's"). And I'd agree that Osborne's potentially biggest mistake was not adapting his June 2010 strategy when it was clear that higher oil and energy prices were having a material impact on inflation and thus household incomes. <br /><br />The only other issue I'd throw into the mix is one of confidence or animal spirits. Prof Blanchflower almost daily tweets that Osborne "talked down the recovery" with his language of austerity and "verge of bankruptcy". However the confidence indices don't show any great drop in consumer confidence until 2011. <br /><br />However what I have always felt was the bigger confidence drainer was the fact that the BBC news daily led with Robert Peston from Athens suggesting that wholesale European economic collapse was just days away.<br /><br />Coming back from an expensive shop at Sainsburys, having spent near £100 filling up your car, opening you gas bill whilst turning on the evening news was never going to result in a strong consumer recovery in 2010/11. <br /><br />Shinseihttps://www.blogger.com/profile/09237888519217740228noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-38461010479420687692013-07-05T12:00:39.925+01:002013-07-05T12:00:39.925+01:00At the time that I am writing about in this post, ...At the time that I am writing about in this post, global energy prices were rising sharply, and these fed through into double-digit inflation in domestic and industrial energy prices in the UK. I haven't discussed the causes of the global energy price rises in this post, but high demand from China plus the Fed's QE2 and weakness of the dollar were a large part of it. I noted in the post that HMT made matters worse by failing to use appropriate fiscal policy to offset the effect of such high inflation in energy prices, and by imposing fiscal consolidation at the same time. The weakness of sterling also increased the inflationary effect of global energy price rises. But the supply-side shocks I am talking about in this post are not directly due to either HMT or BoE policy. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-50897337069160245432013-07-05T11:51:16.344+01:002013-07-05T11:51:16.344+01:00The point was that because the BoE supposedly targ...The point was that because the BoE supposedly targets inflation, it was essentially forced to withdraw stimulus when hit by a supply side shock. If you target the price level and a supply side shock shifts the SRAS curve up, it must necessarily lower demand. Don't forget that the UK was hit by a number of supply side shocks, in effect, because of regulatory changes. Shifting the Higher education budget onto consumers through higher fees was a pretty obvious one, but also various components of the CPI are regulated, e.g. energy, water, etc, and these were allowed to rise in line with their agreed contracts at a time when demand was falling and a free/competitive market would have been forced to cut prices, or at least under pressure to do so.<br /><br />So the BoE was responsible, but only indirectly via its inflation mandate. King did his best by ignoring some of the regulatory changes - the "looking through" language, but the UK needed to let the CPI rise above 5% just to stay in the same place in the SRAS curve, never mind "support the recovery". <br /><br />So yes, a supply side shock derailed the recovery, but only because the BoE targets inflation. So you can blame the treasury for writing the mandate and failing to foresee the combination of a supply side shock in a primarily demand side recession.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-84522952460621416322013-07-05T07:01:06.631+01:002013-07-05T07:01:06.631+01:00Brilliant analysis! Interesting that the US is now...Brilliant analysis! Interesting that the US is now ramping up its economic growth on the back of cheap oil and gas using fracturing technology. Will we be next? Will the green energy lobby find itself marginalised because, quite clearly CO2 is a benefit, not a threat? Will all those useless windfarms become redundant?devonseaglasshttps://www.blogger.com/profile/02637463423116171963noreply@blogger.com