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British Election Looming
Winner of US Economic Slowdown: David Cameron

Statistics now show the U.S. had an economic slowdown at the end of 2014. The biggest winner? Perhaps British PM David Cameron. The Times (of London) reports:

The US economy’s breakneck growth slowed in the final quarter of last year, paving the way for Britain to be fastest growing major economy of 2014.

America’s GDP expansion dropped by almost half in the last three months of 2014 to 2.6 per cent, behind the 3 per cent growth expected by economists, as strong consumer spending was offset by a contraction in business expenditure.

The slowdown from 5 per cent in the third quarter meant that the US economy grew by 2.4 per cent over the year, behind Britain’s 2.6 per cent growth.

The Brits have a general election coming up next year, so you can bet you’re going to be hearing more about this if you live in Britain or follow international news. But the news is good for more than just a talking point. As we wrote during our ongoing Power Series, Britain’s continued economic might is its main source of clout on the world stage; when mainland Europe and the U.S. falter (as is happening in a big and a small way now, respectively), Britain’s stock goes up.

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  • Fred

    But . . .but. . .but that’s IMPOSSIBLE! Austerity destroys economies. Printing money for stimulus is the only key to prosperity. Paul Krugman said so. How could a former Enron advisor possibly be wrong?

    • Andrew Allison

      Not just Great Britain (still the country’s name notwithstanding it’s diminished greatness), but Ireland and Spain too demonstrate that living within ones means (aka “austerity”) is a good thing, that failure reform (as in Greece) isn’t, and that Krugman has his head you-know-where.

      • Curious Mayhem

        Somewhere warm and dark, I suppose.
        In Britain’s case, like the US, having your own currency and monetary policy is the key. That’s the major problem with Greece. Austerity is one thing — you do have to live within your means, and all borrowing now is future spending brought forward — so that the piper will have to be paid at some point later. However, if you also combine austerity with (a) structural reform, and (b) currency depreciation and monetary easing, you can, in time, increase your means, by generating growth.
        Live within your means, then increase your means — that’s the ticket.
        However, no major country has done the final thing that needs to be done, which is increasing short-term interest rates back to a realistic level — say, about the inflation rate, plus a little — that will increase saving and discourage short-term borrowing. This monetary easing in the face of mountains of debt — starting in Japan in the 1990s — is all designed to keep insolvent banks and governments afloat by allowing perpetual refinancing, instead of biting the bullet of restructuring. The monetary easing then encourages other forms of financial engineering — like large companies issuing bonds to buy back stock shares, artificially boosting their prices; or extreme forms of “junk” (high-risk) lending — as well as increasing wealth inequality by massively inflating asset values.
        Only non-phony interest rates will eventually fix this, encouraging productive lending in the real economy for investment — not consumption — purposes. But non-phony interest rates will end the financial market party that restarted in 2009, after two big setbacks (2000-2 and 2007-9). It will also require governments to reduce or eliminate their deficits and start paying down debt and will push a number of still-insolvent financial entities into receivership — which is where they should have been in 2009.

  • Nathaniel Greene

    Rubbish. A difference of .2 percent is insignificant. In any event, 2.5% is hardly robust. The third and fourth quarter growth figures for the UK were 0.7% and 0.5%. More importantly, the author has demonstrated an incredible ignorance of the true state of the British economy. It hovers near disaster. Under its “austerity” policy, UK debt has risen from 40% of GDP to over 90% of GDP in just four years. That’s Greek style debt. Its trade deficit is large and growing since the demand for its manufactured goods have declined dramatically. Without the “City” which provides over 25% of British revenue,there is no British economy. And the “City” relies on Third World and European prosperity.
    For the US, British austerity has forced the UK to slash its Armed Forces to a level that they are virtually useless to the United States in any major conflict.

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