Green shoots with shallow roots

23 May 2009

It’s true there are signs of an economic recovery, says Martin Vander Weyer, but we should also beware a ‘third wave’ of destruction

It’s springtime in North Yorkshire, which traditionally means lashing rain and temperatures like February. But however unseasonal the weather, nature knows when it’s time to wake up: in the first few days of May, my beech hedge always sheds its dead brown leaves and bursts into fresh green.

And so it goes — with rather less certainty of timing — for the economic cycle. We may poison the ground with too much fertiliser, we may plant scarce saplings in the stoniest places, we may waste money on useless seed that was advertised as miraculously fruitful, we may experience ‘weather events’ we never imagined, but in the end, despite it all, the natural course of events is that green shoots must appear. It is only a matter of when, and how many of them are strong enough to reach full bloom.

That’s more than enough of Gardeners’ Question Time, but you’ll see my point, I’m sure. There has to be a recovery at the end of the current recession, and although there are still a few pundits who believe we’re heading for a new economic ice age, the smart money is beginning to bet on recovery peeping through, just as the Chancellor said in his Budget, before the end of this year.

You can see the trend in commodity markets, where copper and zinc prices have been marching upwards for the past three months, as speculators stockpile in anticipation of a revival of Chinese manufacturing. As for stock markets, in April, despite the swine flu scare, the FTSE 100 index of leading UK shares had its best month since 2003, and it has continued to rally in May. Veterans say it feels like the early months of 1975. At the Sandringham New Year shooting party that year, the Queen Mother announced she had prayed for share prices to improve and miraculously, two days later, they started to do so: within two months they had more than doubled. Real economic recovery was still many months away, but that is very often the case when stockmarkets decide to shake off their bear mood.

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Alexander

May 21st, 2009 9:18pm Report this comment

Credit crisis in Russia, Argentina and the Far East took two years to work themselves out, and were then followed by three years of subpar growth. Why do we expect better performance in the UK and US? Sure, we've got more developed markets, but they weren't confronted by a global recession. I truely hope that I am wrong, but I fear that I'm not.

Colonial

May 22nd, 2009 9:29am Report this comment

I believe that the reasons for the crash have been grossly overcomplicated. Or perhaps, as they are simple, they are passed over on the basis that such a monumental economic mess must have highly technical causes.

What we had was a very long, consumer led, boom based principally on a great deluge of lending by the banking sector. Unless an equivalent level of lending is reinstated there will not be an equivalent level of spending. And the resultant economic activity. There is simply no way that the lend and spend pattern of 90 to 97 is going to be repeated in even the medium term.
So the "return to normal levels of lending to businesses" is not going to happen. Normal was not normal. Neither the banks nor consumers have the necessary appetites for debt.

If I am missing something I would truly appreciate being told what it is.

Actually, in a lot of ways the crash is not a bad thing in that it may restore values and reality to the wrecked ethical and moral compass of the West. To see an end to our appallingly wasteful habits, and the utterly useless jobs dished out by bloated local authorities, would be a considerable compensation for being a bit poorer.

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