Remember the Lawson boom? Gordon Brown did not let you forget it. His phrase to describe the Lawson-Major-Lamont era, ‘boom and bust’, was hammered relentlessly into voters’ minds. But only now, five years after the crash, is the full extent of the Brown bubble becoming clear. A note from Citi today throws this into focus – with obvious implications about the future. If the past ‘prosperity’ was a debt-fuelled illusion, then what’s to say we will ‘recover’?
The below is an ‘output gap’ graph that shows the size of the UK economy, relative to its potential. The Lawson boom is there, in blue. But the Brown bubble has only recently been discovered. It’s a hell of a thing to miss.
In pink is what those muppets at the IMF told us at the time. That is to say: they completely missed it — all of it — in their haughty ‘Article IV’ reviews of the UK economy.
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