By Martin Skinner
I’d been building up to my blog last week on the assumption that more Quantitative Easing would be implemented and support for the banks would be effectively unlimited. With these now in place it seems to me unlikely that we will suffer the severe double-dip that many are worrying about. As last weeks’ comments show this isn’t a view shared by all – and it shouldn’t be expected to be; it is just my opinion based on information currently available and forecasting can be a mugs game these days.
Regardless, the news in the financial press is undeniably better now than it was 9 months ago and either my finding out I’m going to be a dad has given me rose tinted spectacles or optimism is returning to the City.
Anatole Kaletsky used the example of the irresistible force and the immoveable object at the height of the crisis and argued that the willingness of governments and central bankers to use unlimited guarantees and in theory at least inject unlimited capital (£200bn so far) into the economy was the only way to reverse a classic run on the banks. This was necessary because banks will rarely have enough money to pay all of their depositors out if confidence goes completely and they all want their money at the same time.
My argument now is that this tactic has succeeded – however it takes a while for markets to shift from ‘batten down the hatches’ to risking capital reserves on growth. Understandable when you consider just how close we came to utter economic collapse.
In the Sunday Times last week John Waples reported on three top chief execs calling an end to the recession in the last week or so – Sir Stuart Rose at Marks & Spencer, Stephen Hester at RBS and Eric Daniels of Lloyds.
Tonight I went to a presentation by St James’s Place Wealth Management and the theme was very much that the returns offered by ‘riskier’ assets like equities, corporate bonds and property greatly outweighed the minimal returns offered by cash at 0.5% – and the expectation was that economic growth was likely to outperform expectations. I agree.
What do you think is going to happen next year? And what do you think will be the 2010’s top performing asset classes?
In Other News
Some other great articles from the weekend press included:
- David Smith – Are the central banks blowing new bubbles?
- Irwin Stelzer – Barack Obama’s policy errors will stymie the US recovery
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