Much of the talk about bank bailouts blithely presupposes there will be good times just around the corner – and the state will sell the dodgy assets at a profit to the taxpayer as happened in New Zealand, Hong Kong etc. It’s the “buy on the dips” mentality – the idea that what goes down must go up and the only question is whether we’re in a U-shaped downturn or a V-shaped downturn. Yet there is a third, horrible possibility: an L-shaped downturn. This prospect should be taken seriously, and here’s why.
Despite all the media references to Britain being “on the brink” of recession, we probably entered one in July. The wait for official statistics means we won’t find out until next year. But this will be no in-and-out dip into negative growth. Several City firms are now forecasting the economy UK will contract throughout 2009.
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