THE TELEGRAPH: The big question is whether the extra cash will actually be spent, says Edmund Conway.
As far as markets are concerned, this is World War Three. Share prices have fallen so far and fast in the United States that they are back where they were when Bill Clinton was finishing his first term and John Major was still clinging on to power. Despite a small pick-up yesterday, the sense of misery and resignation remains so pervasive that US markets are now priced for either world war or full-scale depression.
Stocks are better value than they have been for all 1,680 months since 1870 save for brief periods in 1920 (post-WWI adaptation), 1932 (Great Depression), 1942 (WWII) and 1982 (stagflation hangover), according to calculations on the US markets from Lombard Street Research.
Observing this recession is rather like watching slow-motion footage of a car crash. And at the front bumper of the vehicle are share prices and money growth. Shares started really sliding last autumn, just before the bankruptcy of Lehman Brothers coincided with a sudden and unprecedented collapse in world trade. But the impact of the collision is still travelling through the frame of the car, shattering individuals' fortunes with inexorable inevitability as it passes on. Investors have abandoned the markets because of their fright about the slide in profits and the rise in redundancies that lie ahead in the coming months.
Yet for all the sound and fury, the full scale of the impact has yet to be felt. It will only be at the end of this year, when unemployment is closer to three million than two million, that we will truly know how it feels to be in the thick of a recession. Sir Fred Goodwin may consider himself a victim of unreasonable public recrimination now, but I dread to think how the revelation of his pension would have gone down six or eight months hence with 10 per cent out of work for the first time since the 1980s. >>> By Edmund Conway | Thursday, March 5, 2009
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