Things are rapidly deteriorating In the US, UK, and the Eurozone. Let’s take a look a couple top stories starting with Hundreds of thousands face job loss in UK, says top economist.

Britain’s economy is tipping headlong into a recession that could last more than a year and cost hundreds of thousands of jobs, warns Professor David Blanchflower, a member of the Bank of England’s interest rate committee, in an interview with the Guardian today.

Blanchflower says the Bank must cut interest rates rapidly to prevent the downturn being too painful, and thinks the UK could be in for a worse time than even the United States, where interest rates have already been slashed and taxes cut to stimulate the economy.

The economist said the recent rises in unemployment are “the tip of the iceberg”. The number of people out of work and claiming benefit is 840,000 but the broader measure of unemployment is 1.6 million, 5.2% of the workforce. Blanchflower said it could climb to more than 7% – a figure that would mean several hundred thousand people losing their jobs.

His warning comes days after the chancellor acknowledged that the slowdown could be “profound” and hinted he would change the Treasury’s fiscal rules as the slowing economy looks set to bust them.

Today a leading thinktank, the Ernst & Young Item Club, says the economic outlook for Britain is like a “horror movie” as a result of the credit crunch and tumbling house prices.

Deflationary Hurricanes In US And UK

I agree Blanchflower having previously stated Deflationary Hurricanes to Hit U.S. and U.K. In fact, I believe the US is in deflation now.

However, Blanchflower is mistaken if he thinks lower rates are going to be some kind of magic bullet. One look at the US should be proof enough.

Ugly Picture In Eurozone

Ambrose Evans-Pritchard is writing European recession looms as Spain crumbles.

The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.

Industrial production for the EMU bloc fell 1.9pc in May, according to fresh Eurostat data. It is the sharpest one-month decline for the region since the exchange rate crisis in 1992. Officials in Berlin have warned that Germany’s economy could contract by as much as 1.5pc in the second quarter as export orders crumble.

Industrial output in both Italy and Greece has slumped 6.6pc over the past year. Portugal is off 6.2pc. “It is a very ugly picture: we’re on maximum alert,” said Emma Marcegaglia, head of Italy’s business federation Confindustria.

Rome is now lobbying for a “New Deal” to revive Italy’s economy through massive infrastructure projects.

Jacques Cailloux, Europe economist at the Royal Bank of Scotland, said a “reverse decoupling” is now under way as Europe goes down harder than the US – just as it did after the dotcom bust. “There is loss of momentum across the board. We can’t exclude a recession,” he said.

Spain is now spiralling into the worst crisis since the Franco dictatorship. “The economy is in dire straits,” said Dominic Bryant, Spain expert at BNP Paribas.

The global economy has clearly peaked. Clearly the US, UK, and EU are not prepared for it. Is any country?

Mike “Mish” Shedlock
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