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Mikhail Liebenstein

The Economic Recovery Sponsored By Nike

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http://www.telegraph.co.uk/finance/finance...pe-were-in.html

I like this way putting this, it will capture the imagination of the general population in a way no amount of economic discussion can.

The shape of the recovery will be a swoosh, basically this is just a variation on an L, but hey let's not ruin a good means of communicating lower house prices.

Economic recovery: is swoosh the shape we're in?

Steep dive, shallow recovery: a tick may be the shape of the economic recovery

By Martin Vander Weyer

Published: 7:00PM BST 12 Jun 2009

You've seen it a thousand times on Tiger Woods's baseball cap; if you're a jogger or a tennis player, you may even display it on your trainers. The Nike "swoosh" is one of the world's most recognised logos, but it could now take on new significance, as the answer to the pressing economic question of the day.

I don't mean "When will Gordon go?" – a poised dagger would be a better symbol for that – but a question that affects our wellbeing even more directly: "What shape is this recession, and how soon will it end?"

To which one senior government adviser responded this week with "the swoosh": an all-but-vertical plunge followed by a much slower, shallower recovery. It's a persuasive idea, particularly in relation to the conventional alternatives.

We know we're not looking at a relatively painless V-shaped recession, in which recovery is as swift as the fall: there have already been too many job losses and too much damage to the public finances for that. Nor are serious economists betting on a U-shape, in which we would bob along the bottom for a few months, then see house prices and high-street cash registers suddenly light up like it was 2006 again. Instead, some pessimists are braced for a W, or double-dip recession, in which just as we begin to feel better, something gruesome knocks us back again.

But there has also been a lot of loose talk about signs of recovery, encouraging us to feel we're definitely not in the grim territory of an L-shaped slump, which would mean no significant upturn for the foreseeable future; or even worse than that (one for which there's no convenient letter, but let's label it the "backslash" model), a bottomless downslope to total collapse.

So where exactly are we amid this jumble of symbols, and how good is the Nike analogy? It comes down, I'm afraid, to one of the most irritating phrases in the political lexicon: green shoots, or lack of them.

Back in the 1991 recession, the then chancellor, Norman Lamont, was howled down for claiming to have spotted some. Failing to heed that lesson, Gordon Brown's feisty sidekick Baroness Shriti Vadera declared in a television interview in January this year, "I'm seeing a few green shoots but it's a little bit too early to say exactly how they'd grow." As a result, she was so mocked by the media that she had to be dug out of trouble by Lord Mandelson, and was renamed "Shooti" by the Whitehall officials she habitually terrorises.

More recently, Richard Lambert of the CBI talked of "green shoots with shallow roots and plenty of dark clouds on the horizon", while Treasury select committee chairman John McFall came up with his own variation: "Green roots, not green shoots. Things are coming forward a little bit, but people are still feeling the effect of it and unemployment will still go up over the next six months."

Circumstances have certainly changed for the better since Shooti's blunder, and even since Alistair Darling met widespread derision when he predicted in his April budget a return to growth before the end of 2009. I'd say Lambert and McFall both got it about right - and I'll try to flesh that out without using the cursed phrase again.

There is clearly a lot more happening in the housing market than was the case in the dead of winter. One bride-to-be, house-hunting in west London, told me the other day that "every time we see a house we like, someone snaps it up at close to the asking price".

I looked at a few flats myself a couple of months ago but decided to sit tight. Now they seem to be selling briskly, and I had one agent ringing me at 8pm ("things are hectic") to urge me to jump in. Mortgage lending was up 16 per cent nationally in April. Lenders such as the Woolwich have begun offering more competitive terms again; and though house prices are still generally falling, Land Registry figures suggest that in many areas the rate of fall has slowed almost to nothing. The turn of the swoosh, you might say, if you're optimistically inclined.

Similarly, in the business world, measures of retail and service-sector activity, hugely important slices of our economy, have started to look a little perkier. So, too, has industrial output, although that is partly to do with the "destocking" effect: production was so severely cut during the winter, to make urgent savings, that stocks of finished goods are now too low to meet demand – hence the Honda factory at Swindon resuming car production after its four-month shutdown.

One way or another, these trends have prompted economic bodies with no political axe to grind to issue surprisingly upbeat assessments of UK economic prospects. The National Institute of Economic & Social Research, for example, says it is "very possible" that growth in the second quarter will not turn out negative (as it was, to an alarming degree, in the previous two quarters) but zero – indicating recovery even ahead of Darling's timetable.

In that case, why aren't we talking about a V or U-shaped recovery and, while we're at it, thanking Brown and Darling for doing a fine job of steering us away from the rocks? Because the risk factors remain huge, the banking sector is still far from good health, and the catastrophic state of the public finances will be a drag on the economy for years to come.

Listen carefully to what the Bank of England has been saying in recent months, and you begin to understand the whole picture. Yes, there have been stimulating effects from ultra-low interest rates, the VAT cut last November, the Government's decision to maintain public spending however much it had to borrow to do so, and "quantitative easing". And a weaker pound helped breathe life into a potentially moribund manufacturing sector during the winter.

But if banks are unwilling to lend to businesses, both to provide cash-flow while turnover is slow and to fund capital investment for future growth, then one vital element of the recovery formula is missing. Meanwhile, unemployment will continue to rise, denting consumer spending and putting added burdens on the welfare budget.

There will be more high-profile bankruptcies, and perhaps even bank failures; there could be a sharp oil-price hike or a devastating flu pandemic, or both. And, whether under this failing Government or its successor, taxes are going to have to rise, taking another big bite out of the productive parts of the economy.

If all those risk factors come true, we'll be looking, at best, at an italic L-shaped recovery, with no more than a hint of a distant uptick. If just some of them happen while in other sectors the current positive signals are sustained, then that Nike flick of the paintbrush looks like a pretty good guide to the long, slow recovery we can expect. The association it brings to my mind is one of gradual, straight-line acceleration: from where we are now, that's a very desirable thing.

Martin Vander Weyer is editor of 'Spectator Business'

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Shameless self bump as its on topic.

My summary of this article is that it is predicting a very very slow recovery. We have had a massive drop in GDP (which has taken 18 months), and GDP growth will now pretty much be static, just small year on year growth over the next 6 years. In fact if adjusted for inflation it may actual be negative real growth in my book.

swoosh-7961411.jpg

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Shameless self bump as its on topic.

My summary of this article is that it is predicting a very very slow recovery. We have had a massive drop in GDP (which has taken 18 months), and GDP growth will now pretty much be static, just small year on year growth over the next 6 years. In fact if adjusted for inflation it may actual be negative real growth in my book.

swoosh-7961411.jpg

Noooooooooo... I hate the term "negative growth"... makes me feel nauseous just writing it

IMPO it will be a dis-formed "W" with a leaning up bit at the end... there will be a fall after the current bull trap and then a slow recovery caused by the shackles of our immense debt placing a massive inertia on growth

Edited by Bubble&Squeak

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Noooooooooo... I hate the term "negative growth"... makes me feel nauseous just writing it

IMPO it will be a dis-formed "W" with a leaning up bit at the end... there will be a fall after the current bull trap and then a slow recovery caused by the shackles of our immense debt placing a massive inertia on growth

You mean one of these:

Edited by mikelivingstone

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Shameless self bump as its on topic.

My summary of this article is that it is predicting a very very slow recovery. We have had a massive drop in GDP (which has taken 18 months), and GDP growth will now pretty much be static, just small year on year growth over the next 6 years. In fact if adjusted for inflation it may actual be negative real growth in my book.

swoosh-7961411.jpg

GDP Growth figures take account of inflation.

It is amazing the level of economic illiteracy on this site!

Which is only surpassed by the level of twisted lemony bitterness and paranoia.

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Shameless self bump as its on topic.

My summary of this article is that it is predicting a very very slow recovery. We have had a massive drop in GDP (which has taken 18 months), and GDP growth will now pretty much be static, just small year on year growth over the next 6 years. In fact if adjusted for inflation it may actual be negative real growth in my book.

swoosh-7961411.jpg

Bet you're glad you never bought that silly car now?

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GDP Growth figures take account of inflation.

It is amazing the level of economic illiteracy on this site!

Which is only surpassed by the level of twisted lemony bitterness and paranoia.

which inflation does it take into account, oh guru?

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GDP Growth figures take account of inflation.

It is amazing the level of economic illiteracy on this site!

Which is only surpassed by the level of twisted lemony bitterness and paranoia.

When I'm being specific I use the terms "real" or "nominal" , above it was probably self evident what was meant.

There are such things as real GDP growth and nominal GDP growth, after all GDP is not a % but a aggregate money value.

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Guest มร หล&#3
Well said Mr Parry - kept me on the straight and narrow.

Good lad Mikey,

I didn't buy the new motorbike either.

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