Recovery Confusion? Yes. No. Maybe?
First Published Date : July 12, 2009 ADawnJournal.com
As weeks go by in 2009 and we wait for the increasingly bizarre financial drama to play itself out to a conclusion we can at least rely on the assembled highly-paid financial experts who make up institutions no less venerable than the International Monetary Fund and OECD to favour us with the information that there will be a recovery, definitely, next year, but it might not be as strong as we imagined. On the other hand it might be. Then again, at least there will definitely be growth in the economy. There probably will, anyway. We don’t know how much. What we do know is that it will follow a contraction in 2009, and that contraction will be around 4%. Or maybe less than that. Maybe 2%.
The thing is, these conclusions are arrived at after no small amount of study and analysis by people who genuinely know how money behaves, and they have certainly got more of an idea how things are set to pan out than most of us – more of an idea, in fact, than at least 99.9% of us. And that last figure is not a forecast, it is a fact. But when the forecasts we read differ so considerably from week to week, and these forecasts emanate from people who really know this stuff, who digest the important figures with absolute certainty due to careers spanning decades – what on earth are the relative greenhorns to think? If the experts are predicting zero growth one week and 2% the next, 4% contraction one week and 2% a month later, what are we to do with that?
It would do the reader and indeed the writer a massive disservice to call any of us financially illiterate. It could even be said that one of the few bright sides of the global recession is that it has made the average individual a lot more financially savvy. People who could not have distinguished a contraction from a recovery a year ago, who eighteen months ago knew only that bulls and bears could have been found together in a Chicago sports awards dinner, all of a sudden have a lot more of an idea what is happening – even if they are largely powerless to prevent anything. The fact that we all know a little more about the markets is something which will hopefully work in favour of preventing a similar recession any time in the near future.
For the time being, what can we believe with any concrete certainty? Well, the rest of this year will see continuing contraction, on balance. We can be fairly sure it will be light in comparison with the contraction that has gone before it. We can be sure, too, that next year will see a recovery of sorts. A recovery with appreciable growth might be possible. We should definitely see some growth. But don’t put any money on that coming true, because if the IMF are not certain, who can be?