The London Paper – 29 May 2009
So, that’s it then is it? Eight months ago Lehmans collapsed, the cogs of global finance ground to a halt and stock markets began a precipitous dive so terrifying that George Bush claimed that ‘this sucker (e.g. western capitalism) could go down.’ Now, hardly a day goes by without some politician talking about ‘green shoots’ whilst experts across the world claim that everything’s gonna be just peachy. What may confuse readers even more is that as of this week most stock markets have risen by almost 30% since their lows in early March yet jobs are still being lost willy-nilly. So, just what the hell is going on?
Well, I see three main reasons that explain this seemingly bizarre reversal of fortune. Firstly, we are out of the woods to some extent. Any talk of capitalism ending now looks about valid as my claim that QPR were going to win the FA Cup. This is because our governments became so hideously scared that they took extreme measures to bolster our economies. Whatever gripes we may have about capitalism we can have little doubt that it’s fairly resilient … especially when our elites have such a huge self-interest in maintaining its existence.
Secondly, it’s clear that media hype has once again been rearing its ugly head over the last nine months. No-one’s particularly interested in a story about a ‘fairly difficult’ time ahead or the ‘worst crisis for perhaps 15 or so years’. Hence, all we’ve been hearing about is ‘THE WORST CRISIS FOR 80 YEARS’. Whilst I don’t wish to downplay how serious things got there for a minute it always seemed to me that the economic calamity Britain faced in the seventies with its three day week, labour unrest and electricity rationing was possibly a tad more serious. Unfortunately, journos just can’t help whipping up a storm even if it helps talk us into recession.
Thirdly, stock markets don’t reflect near-term reality. They tend to look forward 12 to 18 months and move up and down relative to changes in the expectations that they formerly factored in. Hence, the FTSE 100 has managed to go up nearly a third despite us entering a nasty recession that lasts until perhaps early 2010 simply because it previously anticipated a deeper one that lasted until 2011/2.
So, despite the recent comforting words from ‘experts’ and rampaging stock markets I wouldn’t be popping the champagne corks just yet. Another million British people may still lose their jobs over the next 12 months and I’m a monkey’s uncle if some nasty economic surprises don’t buffet the FTSE 100 seriously before the year’s end.
But that’s merely my view and frankly if I were you I’d ignore it and instead check out how your neighbourhood’s faring and then form your own opinion since the alternative is to be informed by politicians and journalists … and we all know what paragons of honesty and integrity they are!