Itis amazing how many media pundits are making predictions about thepresent recession. Most do not even bother to present evidence toback up their scenarios. And yet somehow there is a consensus thatit will last through 2009, things will get worse, house prices have afurther 15 % to drop and that unemployment will reach three million.
These figures might as well be a guess. We are actually in an unprecedented situation. There is no accurate way of predicting the what will happen. Depending on future government interventions (unknown atpresent even to the Civil Service) and the feelings of many ordinaryindividuals it could be that house prices drop more or less thanthat. Anyway we will not know that the bottom of the market has beenreached until well after the event. Given that many of our biggercompanies are now wholly or partly foreign owned we may sufferdisproportionate job losses.
Bothfigures are actually only of interest to minorities but provide themedia with easy tales of disaster. It must be a small minority ofthe entire house owning population who want to sell and retain thecapital accrued. Anyone selling to buy another property will perhapsreceive a reduced amount for their sale but the purchase should alsobe similarly reduced so any effect of lower prices is of littleconsequence in terms of a place to live. Negative equity is only aproblem in limited circumstances such as an inability to meet themonthly payments. Similarly a million extra unemployed is very hardon individuals but is only about about 5% of the working population.
Theunpredictability of the future course of the recession is especiallytrue as this government along with other Western administrationsflounders in a mire of short-term emergency initiatives which so farhave had little effect. If they continue to try this measure andthat the effect becomes even more unpredictable. For instance, thereduction in VAT has done little or nothing and yet the plan is toreturn to the normal rate either before the recession ends or we arein the process of recovery. While the reduction may have had littleeffect the increase will surely come at an inopportune time which couldwell set back any recovery by several months. The scale ofgovernment, really taxpayer, debt is such that it will dampeneconomic activity for decades. Most of this money has gone to propup a failing system, namely the banks, without any visible plans toinstitute any kind of meaningful reform to isolate the riskier formsof lending and borrowing. There are now some signs that there willbe a change of direction in the next few weeks. As we know nodetails the outcome is unknown. What is more, this is a recessionthat is having an effect across the world, not just in the capitalistWest so that the multiple influences on the eventual outcome arealmost as complex as our weather system and we all know how accuratepredictions of long hot summers have been in recent years.
Howmany of us can remember the day to day effect on our lives ofprevious recessions, in the eighties and nineties? I suggest veryfew, because we adapted to whatever changes came in our circumstancesand got on with our lives. The memories of those times havegenerally faded. Of course for any soothsayer or forecaster to sayany such thing about the present crisis would instantly reduce theirsales potential, be it of newspapers or government policy. In fact itis only too plainly visible that Gordon Brown is reveling in his roleas world saviour and will certainly never make the mistake of aprevious Labour prime minister by saying “Crisis, what crisis?”