Posts tagged "depression"

31 Jan 2009
Why the recession/depression has hit bottom

This is a strange kind of post when politicians are getting shot down for mentioning ‘green shoots’ – in a reference to Norman Lamont and the 90s recession.  But you can get all the real information here, this recession will be V shaped, as in very quick and steep down, and possibly up again at the same rate.  But the big question and unknown is where the bottom will be.

We may have hit bottom this week. All the banks share prices have doubled this week but why?  Remember, bank shares are a symptom not a cause. In fact last week all UK banks other than HSBC were going out of business, why the change?   Well, in the far off US of A house prices stablised for the first time in 3 years.  This in theory puts a bottom on the losses the banks in the UK will experience, based on the UK economy following USA, and also that we have lots of US debt over here.

Will it stick?  Well it might this crash however is cyclic, and to misquote Paul Krugman, is the mother of crashes. We have over priced housing, as in Japan early 90s, bank runs like both the 1930s and the 1910 trust fund crisis, and possibly, though thankfully not yet in the UK, a currency crisis like Asia/Argentina in the 1990s.  In fact the Irish are complaining we devalued the £ on purpose,which i am sure we did. Not that we had any choice.

We may have seen the bottom, therefore. In about 4 years we will escape from the crash, I am old enough to have had a father (he was 49 when I was born) who remembered and talked often of the Great Depression.  It genuinely influenced his actions until the end of his life (he was mean with money). I hope this is not the world my children will live in.