Wednesday, July 09, 2008

How do you stop a recession?

The recession is imminent. One of our best friends is a corporate property lawyer. She bought a house a couple of months ago - and right at the last minute the mortgage company were trying to pull the plug on the deal. Can you imagine if that is happening to someone earning whatever corporate property lawyers earn, and someone doing corporate property law for a living - what the hell is it like out there for any old person trying to buy a house with a mortgage? Husband keeps on saying to me, 'I don't know why you give two hoots about the FTSE'. The point is it's the best indicator to the economy we've got. And if it falls by 20% then we're in a bear market that nearly always will lead to recession. If you think about being Chief Executive of say, Marks and Spencer, and suddenly your value and your company's value is reduced by 20% - what do you do? Well there's a few options. The first one though is retract - consolidate, reduce your expansion plans - and a few seconds after that you think about cost savings you're going to make. Labour is the biggest cost. So you start laying people off. It's already happening in housing, finances. Not long before everything else follows. And perhaps even worse than recession is what we thought had vanished from the 70s - stagflation. Massive inflation - this time caused by rising oil and food prices - and rising unemployment.

Anyway the good news is I now have more ideas for an MA dissertation, that could actually be less depressing than the history of dementia. The history of stagflation - what caused it in the 1970s? What caused the UK 'credit crunch'? Will the 'credit crunch' see a resurgence for economic history?

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