The 'R' word

There is an old, oft quotes phrase in economic circles, 'when America sneezes the world catches a cold'. This author having woken up with a poor head as a result of a cold and flu bug making the rounds found this particularly relevant when perusing the financial pages.

Like national security, aside from tangible indicators such as soldiers, ships and aircraft much of whether a nation feels secure or not is down to state of mind. The Swiss worry little, Americans rather more - despite the disparity in spending and scale of military effort. The economy is likewise afflicted, and reading the financial press the R word - recession is, at a cursory glance, occupying about one article in two.

Three articles which particularly drew my attention in the US edition of the Financial Times were that California and Florida are in recession as a result of the sub-prime mortgage credit debacle, Airbus forecasts a 50% drop in sales (less travel for business and tourism) and an analysis of which stock exchanges are formally in a bear market phase, and which are teetering near the edge.

All in all, unpleasant reading - though unexpected when put in the context of a bull run from the early 1990s with only a blip related to the 9/11 tragedy in New York and dot.com bubble bursting. As friends say, in a Presidential election year the US economy goes onto hold.

I feel that this coupled with credit woes suggest a recession running into Q1/2 2009. Hardly the most encouraging economist forecast to start the year with. That said on hedge fund made billions of dollars during the sub-prime crisis, so where there is chaos, there is profit...