Bank of England – ‘Worst slump in 300 years’ expected

TruePublica Editor: We’ve got this story spot-on throughout the crisis – and from day one. When the mainstream media financial columnists and institutions such as the IMF and World Bank were predicting a fall in the economy of single digits in terms of GDP, we were publishing the true picture that the economy was going to take a pounding that would eclipse the financial crisis of 2008. We went a step further and said this year – the economy could see GDP fall by 15 per cent (for the year) and that unemployment would reach 3 million by the year-end when the lockdown was over. We also said, it was going to cost over £600bn to help stave off a wave of insolvencies. These predictions are now published as expectations by the Bank of England. They expect 14 per cent off GDP, 2.5 million unemployed and £660bn stimulus for the economy.

 

As the weeks came and went, the realisation that the COVID-19 induced lockdown was going to cause serious damage to the economy became apparent. We again went a step further and said this recession would be the worst since ‘The Great Slump‘ of the 1500s.

Reuters now reports that the Bank of England really is worried, is saving up its firepower ready for the worst of the economic crash and predicts the worst recession for 300 years. That takes us historically from somewhere between the Napoleonic Wars (1812) and the Great Slump.

“The Bank of England held off further stimulus measures but said it was ready to take fresh action to counter the coronavirus hammering which could cause the country’s biggest economic slump in over 300 years in 2020 before a bounceback in 2021.”

“The BoE said its Monetary Policy Committee kept Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at 645 billion pounds.

However, two of its nine policymakers – Michael Saunders and Jonathan Haskel – voted for 100 billion pounds’ worth of more bond-buying firepower.

In what it called an illustrative scenario, the BoE said it saw a plunge of 14% in Britain’s economy in 2020 followed by 15% bounce-back in 2021.

Such a scenario would require very significant monetary and fiscal stimulus, it said.

Many economists expect the BoE to increase its asset purchase programme next month, before the extra 200 billion pounds it gave itself in March is exhausted by the furious pace of its buying of British government debt.”

Don’t under-estimate what the BoE are saying here. As interest rates are forced to zero-rate policy, it is now preparing for a crash like no other.

“However the economic outlook evolves, the Bank will act as necessary to deliver the monetary and financial stability that is essential for long-term prosperity and meet the needs of the people of this country. This is our total and unwavering commitment” – Governor Andrew Bailey said.

Yes, you read that right. The ominous language being used there is that the BofE is preparing to ‘meet the needs of the people’.

To be fair, Britain’s government has already rushed out generous spending and tax measures worth about 100 billion pounds to try to counter the effect of its lockdown.

The BoE said it expected a 25% plunge in British gross domestic product in the April-June period with the unemployment rate more than doubling to 9%.

Sterling rose after the central bank’s announcement, initially gaining half a cent against the U.S. dollar before falling back a bit.

Last week, the U.S. Federal Reserve restated a pledge to keep interest rates low and continue offering trillions of dollars in credit as long as the economy needs it.

 

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