The Great Debate UK
The stockmarkets: irrational nonchalance
- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -
Before the credit crunch, we had what I called a Prozac market. Investors on both sides of the Atlantic seemed to be in denial, as irrational as the people who end up in the bankruptcy court because for years they have kept on smiling while the bills piled up unopened.
Last Fall, reality caught up in the shape of the worst banking crisis in history, and we have now had to mortgage our earnings for decades to come in order to bail out the banks. Not surprisingly, by mid-March this year, the Dow had fallen by well over 50 percent from its peak level at the start of October 2007, and the FTSE by nearly as much. In the last three months, however, the FTSE has risen by 20 percent and the Dow by nearly 30 percent. What has happened to justify the recovery?
The best that can be said is that there have been signs that the economic situation is deteriorating more slowly than in the second half of last year.
The economy: reasons to be miserable
- Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own. -
Is the crisis over yet?
In the last 3 months, the Dow and the FTSE have each risen by about 25 percent, the Standard & Poor’s 500 by a third. House prices appear to be stabilising in the UK. Stress-tested and backed by seemingly unlimited government funding, the banks are lending again (if only to each other), so that 1-month libor is down to only 0.3 percent.
