Currency union: some arguments

Bella Caledonia published a shortish piece of mine on the political economy of a currency union with Scotland, post-independence. I argued that disputes here reflected both the overwhelming strength of finance inside the UK economy, and the hidden weakness of its current account position. This provoked some debate; my reply is as below.

Don’t believe the hype – this is a bubble, not a boom

This originally appeared on the NEF blog at http://www.neweconomics.org/blog/entry/dont-believe-the-economic-hype-this-is-a-bubble-not-a-boom

I think it was one of the first pieces to express some cynicism about the brave talk of a “boom” that suddenly appeared everywhere last summer. Subsequent events tend to confirm the analysis given here. 

Happy days are here again, if you read the right papers. UK output grew by a mighty 0.6% between April and June this year, on top of 0.2% growth in the three months before that. “BOOMING BRITAIN HAS WOW FACTOR” boasted London’s Evening Standard.

Don’t believe the hype. This isn’t a boom. It’s barely even a convincing recovery. Only after years of stagnation, aided and abetted by George Osborne’s austerity policies, is it possible to present these feeble growth figures as something to boast about. The IMF now forecasts 0.9% growth for the year. That’s a third of the rate of the early 2000s. The economy is limping when we would normally expect it to be sprinting.