8 june 2011, the rocky road has no short cuts

Good coverage of monthly "manchester monitor", which surfaced in the guardian, on the basis of the city's economy being rather crestfallen and unsure, with little to drive investment or confidence. This is grist to the mill of the "time for plan b" brigade, whose basic case is that too much cutting, too quickly is leading us back into recession. Too basic. Whilst there is no doubt that a consequence of fiscal contraction is the economy's inability to create a sustained recovery, it is not its cause. That goes back over a decade to global imbalances, the credit boom, the almighty bubbles it created, especially in property, and lax regulation that enabled financial engineering to ride roughshod over the long-term consequences of the volumes hyperdrive the markets got into. There was no-one there, admitted alan greenspan, to take away the punchbowl once the party got going. Now someone has. Had they not, the consequences of that would have been much worse than the dampening effect we are experiencing now and will likely experience for a long time to come, even with the softening at the edges we are likely to see, within the wriggle room "the plan" allows. This is more or less the imf's verdict in its highly-authoritative annual "article iv" analysis of the uk economy, which concludes that catastrophe has been averted and we are climbing the long, slow and rocky road to recovery. Fiscally, they are right; but monetary-wise not. Like many others they are far too blasé about the rise in inflation (12 april) and the risks of stagflation now becoming embedded, so trapping the economy on a path to a different but equally devastating medium-term scenario; huge food and energy rises today's fuel on the fire.