Tuesday, November 3, 2009

Don't be sucked in by false economic optimism

After a year or so of economic doom and gloom I suppose I should be happy with all the talk of recovery and the recession ending. The trouble is I don't buy it. Yes GDP may be grudgingly growing again and the champers might be flowing in the City, but you would expect that with all the money (and low interest rates) that governments around the world have thrown at the problem. But does that mean a lasting recovery? For some countries maybe but for the US I have my severe doubts, as I wrote in this article:

As for the UK, the housing market is rising once again and there are signs that the economy will start to recover after 6 quarters of decline. Again I am dubious partly because of the dire state of country's finances. If the government sort the problem by raising taxes or cutting spending the squeeze will have to be so tight that this will tip us back into recession. If they don't then the deficit will drag on the economy and the pound for years. As for the housing market recovery I'm not sure it's such a good thing that they have managed to get it going again - is the only way Britain can keep its economy going by pumping up mortgage debt??

Now a quick word on Spain. Actually there are not too many words of optimism here and not surprisingly given the state of the Spanish property market. I posted this article on our website 3 months ago and stand by it:

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