Crisis? What Crisis?
The title of this post is taken from two sources. One was a headline in British tabloid, The Sun, in January 1979, when then-prime minister James Callaghan denied that strike-torn Britain was in chaos. The second was the title of a 1975 album by prog rock band Supertramp that famously showed someone sunbathing amidst the grey awfulness of the declining industrial landscape.
Are we now getting blasé about the latest crisis? Not so long ago, perfectly respectable economists and financial analysts were talking about a new Great Depression. The world was on the brink, it was said. Now, though, consensus appears to be that it is all over bar the shouting. The world is safe.
Wealth managers at Barclays have gone as far as telling their clients to get over it.
Move past the crisis …. The past year’s events were deeply traumatic for most investors, but now is the time to move on, and take a more “business as usual” approach ….”
Such bullishness may not be comforting to the record numbers of jobless in parts of the world, but it is bordering on consensus. It is left to the likes of perma-bears such as Nouriel Roubini to try to burst the bubble of optimism on which many are floating. The economist began one of his latest articles bluntly:
Think the worst is over? Wrong.
Roubini’s main point is that unemployment is likely to get worse rather than better and that many U.S. jobs that have been lost will not come back.
Now, there can obviously be a disconnect between markets and economics, but the former tends to be based on assumptions about the latter. So which is right? Are we out of the woods? Or should Supertramp be firing up their keyboards again?