FT.com / UK / Economy & Trade - King rules out rapid economic recovery .
The pound fell and yields on government bonds sank to record lows on Tuesday after Mervyn King, Bank of England governor, doused hopes of a swift economic rebound and warned households and businesses of a “slow and protracted” recovery.
How the heck did anyone think anything else?
I sometimes think the City are more stupid than anyone has imagined.
We face serious risk of a double dip recession.
We face rising unemployment for a long time.
We face the election of a government committeds to increasing unemployment and government debt because it is determined to throw hundreds of thousands of people out of work.
We face falling behind because others remain committed to stimulus.
But the City thought all was going nicely until Mervyn King reminded them it was otherwise.
And some say we have efficient markets that price all known data? No we don't: we have markets where the only matter of the moment is how to make cash by close of play.
The whole scenario remians very frightening.
My assessment: we'e still on the edge of a cliff and it's not yet clear we won't fall off. There are two tipping points. One is the commitment of all main political parties to cuts (see my blog this morning quoting Adam Lent on this) and two is the very obvious failure that ha happened to tackle the City.
I'd like to be wrong.
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More likely the markets were factoring in more quantitive easing, although it may be that some fell for Gordon’s green shoots election strategy. The way it is reported in the mass media, and the way the markets interpret it is not necessarily the same.
This means FTSE 6,000 here we come!
Richard,
You seem to consistently make the error of believing that cuts are imminent. The next election isn’t until May next year: realistically cuts won’t start filtering through in any meaningful fashion until 2011, by which time we will be well out of the recession.
Realistically, there will be another recession around 2020: the priority in 2011 will be to start repositioning us for when that recession arrives. The problem with this recession is that Labour let spending get out of control when the economy was doing well, because Gordo believed he had brought and end to boom and bust (though he probably now denies ever saying such a thing)..