Monday, January 28, 2008
Monoliners may make financial crisis a whole lot worse
Yet it is going to be a very difficult balancing act. If it turns out that the system is even more fragile than it currently looks then the Bank may be compelled to cut rates more vigorously. A certain amount of conservatism, caution and circumspection is
Who said high finance was boring? Last week, as markets gyrated and the US central bank unexpectedly cut interest rates, the new obsession for the markets, the media and ordinary people alike was whether we are heading for recession. Well, are we or aren't we, and if so, what can be done about it? Too much attention is paid to the R-word. In this country, by common agreement among economists (a rare thing) a recession means two consecutive quarters of falling output (i.e. negative economic growth). Quite why it is two quarters and not three, or indeed one, I am not sure. On this definition, the UK had a recession in 1990-92 and 1979-81. But since the war, in most developed countries, recessions have been rare.