The Great Debate UK
from The Great Debate:
Last year at the IMF, I spoke about the global outlook in the context of three films. The first was ‘No Country for Old Men’, as the catchphrase of that film – “You can’t stop what's coming” – described the imminent global recession. The second was ‘Apollo 13’, in which the head of mission control, Gene Krantz, is told, “This is NASA’s worst moment”. He replies that if the three astronauts are brought back to earth safely, it will be NASA's best moment – and is proven right. Likewise, if the problems facing the financial sector were addressed properly and it emerged from the crisis in good shape, this would be an Apollo 13 moment for the financial industry.
The third film was ‘Singing in the Rain’, which aptly described the optimistic outlook for emerging markets at the time. But as I pointed out, while Gene Kelly did sing in the rain, he was completely soaked. And so it proved for emerging economies in the wake of last year's crisis. While the outlook for many emerging regions looks good, they are not immune to setbacks in the West.
This year – given the general consensus, the risk of further shocks, and the fact that many countries have already used their policy tools to the full – I used three analogies related to natural events, things beyond our control: a flash of lightning, a tidal wave, and a volcanic eruption.
–Gerard Lyons is chief economist at Standard Chartered. Any opinions expressed are his own. –
Britain is clearly a Jekyll and Hyde economy. Or that at least is what the Chancellor would like us to believe. The bad news we are now seeing in the economy, public finances and across parts of the financial sector will not last. We are in the Mr Hyde phase. But, don’t worry, we will soon be back to the normal Dr Jekyll soon.
The outcome of this financial crisis depends on the economic fundamentals, the policy response and confidence. Chancellor Alistair Darling presents this Budget in an environment where the fundamentals are poor, confidence has been shot to pieces and the credibility of policy and his ability to spend any more is being widely questioned.