Friday, November 28, 2008
We seem to be gambling in a V-shaped recession, that it will all be over by Christmas '09. I see no basis for this hope. We have emerged from a credit-fed boom. It is certain that credit will not return to previous levels, so even if we do emerge from the recession, growth will be slow or non-existent. In addition, people are giving up spending on a large scale. Stephen S. Roache points out that the decline in US retail spending has been the sharpest ever. This is not a bad thing- consumer spending was accounting for 72 per cent of the economy, which is absurd. In fact, I'm not sure any of this is a bad thing. London became a nastier place during the boom. Funny money corrupts and depraves. But present policies seem designed to restore a climate of easy credit and high consumer spending. They will, if people have any sense, fail. A longer recession will give us more time to root out delusions.
Posted by Bryan Appleyard at 7:49 am