Friday, 18 September 2009

Dan Hannan gets the shivers

Dan's Telegraph blog carries a couple of graphs that show why Dan is distinctly unconvinced by the 'it's all over' headlines in the press about the recession. And there are indeed parallels between this little breathing space and the big dip that followed the minor recovery of 1930.

"After the 1929 crash ... the stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30% below the peak of September 1929. Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year.By mid-1930, interest rates had dropped to low levels, but expected deflation and the reluctance of people to add new debt by borrowing, meant that consumer spending and investment were depressed. In May 1930, automobile sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930; but then a deflationary spiral started in 1931."

Austrian school economists blame government economic intervention for delaying the adjustment of the market, and indeed making things worse and recovery more difficult.

Is Dan right? Is the worst yet to come? Or was this just another bog-standard recession, a normal business cycle dip, with the added flavour of a banking crisis? We'll have to wait and see, I guess.

6 comments:

electro-kevin said...

How did the song go ?

Fool if you think it's over ...

This is the depression during which Britain gets relegated.

Weekend Yachtsman said...

The "it's all over" headlines are probably orchestrated by Mandelson as part of the general election campaign.

And you know, a few more favourable MSM items and they might not be a million miles away from winning.

The Cameroon are nowhere near as far ahead as they ought to be, given the disastrous state of the government.

All this "soon-to-be-annointed" stuff the Tories are coming out with at present is much too hubristic imho.

Anonymous said...

No, Gordon Brown and his Scottish cabal haven't finished with us English just yet. They have a score to settle stretching back about 3 centuries.

Coney Island

Budgie said...

It's not over because of our enormous debts.

Admitted government debt plus PFI plus the unfunded state pensions total as much as UK GDP. The public's debt is £1457 billion, making a grand total of twice UK GDP, or nearly £3 trillion, or about £120,000 per household.

We cannot continue like this. Even if we only pay back half of this debt, it means a 10 percent cut in our consumption for more than a decade.

Yokel said...

A quick look at Karl Denninger on the other side of the Pond will surely dispel any thoughts that we can start to party all over again. In particular I landed on No Folks, It's Not Over... (Junk Bonds). Coincidence?

Bill Quango MP said...

USA retail figures were very good.
Unfortunately, like our manufacturing ones, it was the cash for clunkers underpinning the rise in spending. Strip that out and they are just better, not spectacular.
Still a long way to go and a dip after Xmas as likely as not.