25 June 2009

"Green shoots" last as long as my salad

A funny thing, the global economy. A month ago, all the talk was of green shoots and how we'd turned the corner. Now, a slew of awful data from the US - see, for instance, dreadful unemployment figures - and equally dire news from the UK where mortgage lending appears to be falling again - and suddenly stock markets are falling again and we're all doomed.

In a way the efforts of some of the media to put a brave face on it are worse than the scaremongers. When the BBC runs a positive story saying that the US economy is doing better because the annualised growth figures were revised from minus 5.7% to minus 5.5%, you know things are very bad.

What's the lesson to take from this? Don't read too much into one or two months' good statistics, or the wave of pundits trying to convince you that the good times are back. In reality, all that the US and UK governments have achieved so far (the Europeans have been rubbish because the European Central Bank are clueless 19th century economists) is to stop things being much worse than they are. But that does not mean that things are going to improve markedly any time soon.

We have some salad growing in the garden which we're now keeping under netting because earlier in the summer when we grew it in the open, when green shoots appeared they were eaten or displaced by birds. A good analogy for the economy.

If you look back at the media for even the worst recessions that the global economy has had - the 1930s, the mid-1970s and the early 1980s - there was always an army of pundits trying to tell you that we'd turned the corner. Eventually, of course, they will be right (hopefully; if not, we're stuffed). But for now, they are mainly talking bilge.

If you have to read pundits, read Paul Krugman, Larry Elliott, or Adam Lent in the TUC's Touchstone blog. They get it right more than most. If you are on the Right (or on the Left but want to know what intelligent members of the opposition are thinking), Ambrose Evans-Pritchard is yer man. There are others as well - I'm enjoying a blog called Labour and Capital which someone gave me a tip-off about in a meeting last week. At some point I should round up these useful commentators onto an economics blogroll - it's just getting the time to do it. Hopefully some time over the summer (that's what I always say).

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