Gordon Brown is optimistic on our economy. Does he have any right to be optimistic. Yes, to some degree. In time we will come out of this recession. So it’s all a matter of timing then. Well not quite. Focus on timing misses out on the crucial judgement about whether the economy is currently getting better or getting worse.

I’m an optimist, so I’d like to believe Gordon Brown. But, I’m also a realist, and can see the economy has some dangerous structural weaknesses. Here are two graphs that illustrate my point, one is about the collapsing value of the pound to the Euro, and the other about an upturn in inflation. Both are connected. When the pound loses value, imports become more expensive, which pushes up inflation. The value of the pound is also affected by our ability to fund our national debt. The more pounds we print not backed by any real wealth also helps drive down the value of the pound. It’s a fine balancing act to ensure neither inflation nor the pound’s value get out of control.  

I’m looking forward to read economists, such as Liam Halligan, over the weekend. Also, September’s inflation figures are released by ONS next Tuesday.