UK Finance Minister George Osborne after learning that the British economy has now contracted for two quarters running:
“The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt.”
UK GDP fell slightly over the last two quarters—0.3% in 2011q4 and 0.2% last quarter (note: the UK statisticians do not annualize their quarterly changes the way we do; annualized, UK GDP is declining at a rate of about 1% over the past six months).
Government spending, year-over-year, is at about zero now, as shown below. It’s true that UK inflation is uncomfortable, increasing at around 3.5% over the past year. On the other hand, their 10-year gov’t bond yield is not much higher than our own, around 2%, so just like here, markets are telling the government to eschew the bloodletting and offset the demand contraction.
But the authorities are sticking with the leeches, and this in the land of Keynes! Wasn’t it Jung who defined insanity as doing the same thing over and over again, yet expecting different results? The proof is left to the reader.