Moneyweek: What makes this recession so different

WTF?_2

From Moneyweek:

http://www.moneyweek.com/news-and-charts/economics/what%20makes%20this%20recession%20so%20different%2014587.aspx

But there's a big difference between today's crisis and the average one in the past. Usually, a crisis hits just one country or one region. That means the affected area can simply devalue its currency and export its way out of trouble.
But that requires there to be someone in the world who actually still wants to buy stuff. However, countries that are willing to play buyer of last resort are now thin on the ground. To a great extent, the US has been in that role for the past decade or so.

..
At a broader level, almost every country in the world has been fooled by cheap money into going down an unsustainable path of economic development. And now all those malinvestments have to be unwound. That will take a long time, and it'll involve a lot of pain – particularly as our governments are keen to stand in the way of the adjustment process.

Not at all easy to see that this is going to be over quickly - unless everyone pretends that we can just keep on going as if nothing had changed since 2007 and not ask too many questions.......

chucky

interesting but doesn't it take the worst case in every scenario that it presents in the article.

kennyboy66_2

I do suspect everyones reference point is merely the last 2 decades.

The 1980-82 recession was brutal both in the UK & the USA.

Germany also had a recession in 1980-81.

Japan grew at around 2.5% but this was significantly down on previous growth or what they had in late 80's - (5% pa 1988-1990)

France escaped, and China & India were irrelevant at that time.

So lots of similarities with ealy 80's recession.

However, even when the recession ends, its effects last for a good few years (unemployment, lower growth).

Mises institute = completely mad, free market fundamentalists.

Generali

This is why spending our way out of trouble in the conventional way isn't going to work. If the Government is going to borrow the money should be used to cut taxes on businesses to allow for more job creation.

I always thought that an interesting experiment (in good times) would have been to cut Corporation Tax, Employers NICs and business rates to 0 or at least very low in Hastings for 5 years for newly created SMEs.

penguine

My favourite quote from this article:

The average financial crisis wipes 36% off house prices over five to six years. So in the US, the bottom is unlikely to come until 2010 at least. And Britain would be further behind than that, as our slump started later.

It baffles me that so many seem to think house prices here are going to level out next year. That just seems really unlikely.

Generali

penguine wrote: »

My favourite quote from this article:



It baffles me that so many seem to think house prices here are going to level out next year. That just seems really unlikely.

House prices won't level out next year. My belief (only tangentially connected to the economy) is that they won't level out for a very long time due to retiring baby boomers wishing to sell their biggest asset - their house.

WTF?_2

penguine wrote: »

My favourite quote from this article:



It baffles me that so many seem to think house prices here are going to level out next year. That just seems really unlikely.

They won't go down forever just as they weren't going to go up forever.

Sooner or later an equilibrium will be reached where prices form some sort of baseline. After that, either years of stagnation or a relatively rapid turnaround due to all the inflationary measures they are implementing as they panic about the shrinking money supply, taking effect.

The Powers That Be are really playing with fire now and I don't think that any sort of long-term thinking is going into what they are doing. It's especially worrying for the UK that Brown will be acting with an eye to the election which will have to be called within two years.

Wookster

penguine wrote: »

It baffles me that so many seem to think house prices here are going to level out next year. That just seems really unlikely.

Its wishful thinking - I am begining to think that house prices will only trough a few months after unemployment has peaked and I fear that won't be the case for anything over 2 years from now.

Futhermore, they won't be rising until employment starts to climb and that could be a significant period after unemployment peaks.

kennyboy66_2

I can well see nominal falls hitting the bottom next year - however real falls low point could be anywhere upto 5 years later.