Thursday, April 21, 2011

We may Never Recover

Will we recover?  Did we ever really recover from the 2002 downturn?

Even ignoring the issues of "peak oil" or "global warming" there is reason to be concerned that the train has seriously gone of its track.

This according to Mervyn King, the Governor of the Bank of England:
The Governor of the Bank of England warned ...that living standards may never recover from the financial crisis and that households were only just starting to feel the full impact of bankers' mistakes.
Mervyn King told MPs that ordinary people were not to blame for the pain ahead and that he was surprised there had not been more public fury.

"It is not like an ordinary recession where you lose output and get it back quickly," the Governor said when asked if the country would ever recover from a squeeze on living standards on a scale not seen since the 1920s.

"You may not get it back for many years, if ever, and that is a big long-run loss of living standards for all people in this country."

Mr King said that unlike previous recessions, the economy had not needed a shake-up to get industries out of state control or weaken union power and that the people bearing the most pain are blameless.

"They can't look at this and say, 'Okay, something was wrong that has to be put right' and they don't get bonuses on the scale of people in the financial services sector," he told the House of Commons Treasury Committee.

"The cost of this crisis is only now being felt. I'm surprised that the degree of anger hasn't been greater." from Sean Farrell, King Says Living Standards May Never Recover, The Independent (of U.K), 3-02-2011.   ht nc.

Riva Froymovich, Wall Street Journal, April 21, 2011
The risk that unemployment remains at current levels after the financial crisis—including in the U.S.—is a major concern, the Organization for Economic Cooperation and Development said in a report Wednesday.
The OECD listed a number of countries where jobless rates had jumped by more than two percentage points since the crisis began. They included the U.K., Italy, Ireland, Greece, Portugal, the U.S.—where the jobless rate has risen five percentage points— and Spain, where the jobless rate has risen more than 12 percentage points.
"A main concern in countries most severely hit is that persistently high levels of unemployment—and a rising share of unemployed workers facing long spells without a job—will eventually result in widespread deterioration of human capital, discouragement and labor-market withdrawal," the OECD said. "The risk is strongest for youth and less-skilled workers who have been disproportionately affected by the rise in unemployment." 
The first piece noted a surprise that there is not more anger.  I thing the anger is somewhat directionless at the moment.  But as the Middle East has shown, that can change.  Of course, it may not change, in which case many (most?) will be slinking into a slow dissolute impecunious oblivion.


Waldow said...

"[most] will be slinking into a slow dissolute impecunious oblivion."

Yes sir. Well put.

I do a lot to try and get people pissed off, and they just don't seem to have it in them anymore. As I like to say, people now are like guitars with broken strings, no tension, hollow.

But "Some men u just can't reach," so there will be a tipping point eventually, but to be very effective I think it needed to happen sometime well before 2000. Probably in about 1980, which coincidentally was circa a pretty bad recession, a hang over from the financial glut of mid-east oil money from the 70s. That black shit's been the whiskey that drove us all onto a reservation.

Waldow said...

The graph from yr previous post "Hitting the Wall" shows clearly the biggest blow in this battle was indeed around 1980.

russell1200 said...

LOL-I am glad you liked that line. I had to look up dissolute to make sure I had the meaning correct.

We choose to borrow our way to prosperity rather than fight. We have done it at the personal, corporate, and country level. Without the borrowing there might have been a fight. Or there might have been some more realistic attitudes about consumption and finance.

Mr. King appears to be making a different version of the "low hanging fruit being already picked" argument. I started to make a point of it, but realized that that argument did not seem to be that relevant to us. Or at least because of the chart you noted, it becomes harder to make the argument that the "improvements" in the management of the U.S. economy post-Reagan were real. Greenspan is no longer universally seen as the Maestro.