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from The Great Debate UK:

Waiting for the other shoe to drop


-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -

The unemployed and the terminal insomniacs who have nothing better to do than read my blogs will know that I have long been gloomy about most of the Western economies. How can you fail to be pessimistic when the world economy is still dominated by the U.S. - a basket case, becoming weaker every day, with a political class too blind or too scared to admit in public the obvious fact that the country cannot carry on living beyond its means?

Now house prices are plunging again and, with the dollar still strong, the prospects for an export-led recovery look bleak. In fact, a return to recession is far more likely, and the markets are starting to show signs of that sickening here-we-go-again feeling.

How will it all end?

Anyone who claims to know how this will all play out is on no account to be trusted, but there’s nothing wrong with trying to guess – in fact, that’s exactly what we have to do before we can decide what assets to invest in, or whether to invest at all rather than simply blowing it all on a long bankruptcy binge.

Two sides to sterling’s tumble


pound-coins-toby-melville.jpgSterling has extended its losses against the dollar to its lowest level in more than two years , trading just above $1.85. As recently as mid-July one pound would buy two dollars and there were plenty of tales of holidaymakers rushing to the United States to make the most of it.

It’s not hard to see why sterling is under pressure, even though inflation is currently well above target and the highest in years: rising unemployment, falling house prices, large trade and budget deficits, and slowing economic growth.