Vince warns against inflationary boom following recessionary bust

Today’s Financial Times notes soothsayer and Deputy Lib Dem leader Vince Cable’s latest economic warning:

Vince Cable called the recession before it hit but now the Liberal Democrat has another worry preying on his mind: that Britain might find itself emerging quickly from the crisis and straight into a new era of rising inflation. On the day the Bank of England announced plans to pump £75bn into the economy, Mr Cable warned that this expansion could fuel a return to “old-style boom and bust” unless it were handled with extreme caution.

The Lib Dem Treasury spokesman is not known for his blind economic optimism. Indeed, he was pilloried as “Dr Gloom” for his warnings on the housing bubble just before the property crash. But the former chief economist at Shell International believes that the fear over job losses and home repossessions has accelerated Britain into “a very deep crisis” that will at some point lift. “Once that fear has gone, things could indeed turn around quite quickly,” he said.

Mr Cable refused to predict when that might happen but he could see a situation in which the next election were not overwhelmingly about the current crisis but about how parties map out a sustainable future for Britain.

And speaking of his own fame and the Lib Dems’ prospects, Vince had the following to say:

Since his stint as the party’s caretaker leader in 2007, Mr Cable has developed near cult status, admired for his dry wit and unflinching pronouncements on the economy. His publishers plan to capitalise on his high profile with a book on the economy and an autobiography.

Does he ever regret deciding against a leadership bid? “No, no. I’m very fully employed,” he replied. Nick Clegg, his party leader, was doing “very well” and making “solid points” in parliament. “The party is in good heart, which is in significant part down to him.” Predicting a strong showing in the election, Mr Cable argued that the party was “well dug in” against the Tories and would make gains in Labour areas.

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