An L-shaped downturn?

Adrian Sells

Of course we are likely to see an L-shaped downturn, or - to put it more starkly - a depression. We are currently enduring a generationally catastrophic banking and credit crisis. Yet again the authorities are in disarray and proving themselves tardy in their responses. Soon the backlash will begin and with it will come a whole load of unhelpful and backward-looking regulation that will not be designed to deal with the grim future we will be facing, but rather with the problems of the last decade which are no longer relevant. The situation is as dire as it gets.

Alfred T Mahan

In the wise words of the Master of Pembroke College, Cambridge, quondam Head of SIS, Sir Richard Dearlove:

"We're fucked. I'm fucked. You're fucked. We're all fucked."

kinglear

Fraser - you are right about this.It will take several years before people have the guts to do very much - and the banks won't get gung-ho for at least 5 or 6 years.

Wily Trout

Mr Balls is keeping a very low profile - I thought he was the backstage economic genius whilst Gordon Brown was Chancellor..Balls to the Treasury?

Joanna

Fraser, interest rate cuts right now are pushing on a string. When you have a banking system in crisis and bank lending has ground to a halt, its price is not what matters. The focus must be on restoring confidence in the banks. A guarantee is a nightmare and implies state control of the whole system, so a capital injection is the least bad option.

As for the MPC, I'm sure they will cut rates, as their mandate is to focus on inflation in 2 years time. If they think there's going to be an L shaped recession they won't be too worried about inflation. So it's not the mandate that's the problem now.

I agree thought that it was a problem over the last decade when they should have had a second mandate to control bank lending and asset price bubbles.

Short the UK

Our leaders have been hopeless. It all reminds me of Northern Rock. Waffle, waffle. The BOE should immediatley cut rates by 1%. The banks that need it should be re-capitalised immediatley. If not RBS could go down and we would heading closer to Iceland. This is now a national emergency. Capitalise the banks and cut rates this week. No dithering!!!!

TrevorsDen

I am just wondering - when was the last time exactly that Brown said - "an end to boom and bust"

Short the UK

Never mind this week. They must do it by 8am. This is a national emergency!!!!!!!!!!!!
15 hours to RBS-Day

TGF UKIP

If the Tories are to make any mileage out of all this they need to start and keep on referring to Gordon as Borrow and Bust Brown.

If they don't, as is already starting to be evident, Gordon is going to slide away from blame for anything by just blaming America and irresponsible bankers.

mac

Admiral Mahan - 'twas actually Sir Richard Mottram, then PS at the Department of Transport, and now chairman of Amey.

Pete, Scotland

Fraser, it can't be as bad as you are making out.

I have two reasons for thinkg this:

1/ The mainstream media would be holding the Government to account for their part in this, and they are not.

2/ The Tories would be holding the Government to account for their part in this, and I don't see much evidence of this.

As a floating voter worried about my job, my (small) savings and what the future holds I want somebody, anybody, to stand up and take charge.

I want them to lay out clearly how we got into this mess, who was at fault and how we get out of it.

In this time of crisis Cameron spouts bullshit saying that this is no time for party politics, I interpret that as that he doesn't have any more of a clue on how to deal with this than Brown.

So, I come back to my original point. What is the problem? and why are some people picking on our Great Leader that is going to see us through this 'crisis' when there are no better alternatives on offer.

For some reason Her Majesties opposition seems to be caught in the headlights of the financial situation and is completely dumbfounded as to what to say or do. Which justifies Brown's novice attack.

Keep up the good work Fraser, all will be out in the end.

Alfred T Mahan

mac - thanks for the correction. And for the promotion from a mere Captain!

english Mike

bank of england never had independence, it was mandated to target a price index , not inflation. They were a simple tool of GB ignorant government

Edward McLaughlin

It ain't looking good for the rabbits.
Then it's the seagulls. A bit tough I'm told.

hadrian

Fraser's right to pose the gloomiest prognosis. The simple fact is we've all been living beyond our means for years and no government has had the guts to face up to the underlying challenge- least of all our ironically dubbed 'iron chancellor' whose iron has vanished to rust as he's simultaneously been ditching our national gold reserves.
For prescience I recommend going to Christian economist, Gary North who as far back as 1986 was predicting all this in his book 'Honest Money'. In the intro he warns:
'There is a debt crisis in the making. It is international. Every industrial nation on earth faces a crisis that could dwarf the crisis of the 1930's. The banks of the world have done the bidding of the politicians....The result..is the same: the money is gone...The money was spent, the pyramids were built and now the West's banks are sitting on top of a mountain of IOU's that are never going to be paid off , at least not with money that is worth anything.
Tis means that you and I are sitting on top of those IOU's for it was our economic futures that the idiot bankers played with. But it's partially our fault; we trusted them, year by year. There are no solutions. The loans are sour. There will be default. The practical forecasting questions we need to get answered are these: How soon will the default come? What kind of default will it be? This book asks a different qusetion: what violations of biblical principles did the West commit that led us into this mess? It also asks :what should we build on the ruins of the present system after the collapse?' (p5-Honest Money)
Incidentally one fundamental culprit North identifies is our whole 'fractional banking' principle. That truly is radical, scary, but if the hard reality, it ain't going to go away unless we face up to the challenge which is where North says the political guts, and everyone else's, are crucial!

Stickler

Fraser, you keep banging on about the "HMT-appointed" MPC as if it's just another branch of the government. But - and correct me if I'm wrong - doesn't HMT appoint only 4 out of a nine man team?

Yes this may be 4 too many, but you keep peddling this point that the committee is appointed by the treasury - suggesting the whole thing is - which is simply not true.

The bigger problem, perhaps, is the fact that the committee cannot itself decide what their inflation target should be.

Fraser Nelson

Stickler there are indeed four externals but almost all the MPC are HMT appointed - including of course the BoE governor and his two deputies. The fuss over King's reappointment and Charlie Bean reminded us that it's a real power struggle. I do bang on about it, because I think its important to strees that we simply do not in Britain have an independent central bank in the way other G7 economies do.