ࡱ> FHE bjbj 4 ( ( kk8#p57MMMM```4444444$795`\```5kkMM*5`dk8MM4`49+hu,M` #Dp+4@50p5+>:4>: u,u,>:o-l```````55```p5````>:`````````( 1: storm may blow away first rays of sunshine Baron Frankal Sunshine is breaking through, as stock markets rise and liquidity returns. The financial crisis looks over. Rising house prices, quarterly growth and consumer confidence signal the end of recession. Look closer though: for every relieved homeowner is one in negative equity; the economys tiny uptick is dwarfed by the downside risks of the looming end of fiscal stimulus and ensuing public sector cuts. In the aftermath of the average recession, unemployment continues to rise and GDP to fall, taking ten years to return to pre-crisis peak. House prices fall 36% over 6 years. And this is not the average recession: much evidence suggests its effects in the western world will be abnormally prolonged. This is due to the massive global imbalances that made the crisis so deep in the first place. Put simply, deep uncertainty in the emerging world (individuals with no faith in health and pension systems, governments immunising themselves against needing IMF loans) led to the massive accumulation of foreign currency reserves. Today, China alone holds more than the US, UK, Germany, France, Italy, Canada and Japan combined. Thats what enabled easy credit and what now enables our massive debt. In the same boat, the whole western world is now competing for global savings, and the global dollar and euro have huge advantages over boutique currencies like our own. Its almost unthinkable that politicians of any stripe can cut or tax enough to repay the debt, especially given prolonged stagnation. That essentially leaves two strategies: devalue the pound (a strategy already in play) and inflate away the debt. Although theyll stay low as long as possible, the medium-term outlook for interest rates is high for a sustained period. This steep rise in the cost of capital, consistent with a repricing throughout the system of risk (artificially low before the crisis) strongly suggests that todays severe curtailment in investment is less aberration and more trend. If successful places like Manchester and businesses based here want renewed investment, that means looking for it in very different places. If we dont change our direction, says an old Chinese proverb, well end up where were headed. First published in the Manchester Evening News as Storms may blow away first rays of recovery sunshine on 1 October 2009,  HYPERLINK "http://core.webfactore.co.uk/images/6945.pdf" http://core.webfactore.co.uk/images/6945.pdf     89FGHPSchz & J X [ ^ h   e f r w     S T ûóóûèΨûΨèΨhwmhsmCJaJhwmhb.0CJaJhwmh5CJaJh}CJaJhsCJaJhwmh]CJaJhwmCJaJhL6hwm5:CJaJh6inhL66hL65CJaJh]5:CJaJ9G  $a$gds $xa$gd} $xa$gds$7dhx<7$8$H$]7a$gds$7dh<<7$8$H$]7a$gdb.0 ! $ ( / 2 D F J U \ ` d ]z~fhiuĻhAhB0J6CJaJhBhB6CJaJjhB6CJUaJhB6CJaJhL66CJaJh}6CJaJhwmhwmCJaJhwmh]CJaJhwmh5CJaJh}CJaJhsCJaJhwmhsmCJaJ2hPumhh"jh"Uhsh{`6hwmh}6CJaJ $a$gds21h:pC. 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