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Tuesday, 21 April 2009

What we will miss about the prophets of doom

By David Marsh

For two years now, we have collectively gorged on tales of tears and deeds of downfall. If the bulls really are back and the economic and financial misery is about to end, here are 16 reasons why we will miss the gloomy times.

1. Role-play will be a lot less pleasurable. We have split the world into two pantomimic parts: the evil (the bankers) and the good (everyone else). In future, sorting out villains and victims will require more imagination.

2. The crisis has favoured inexpensive, socially constructive pastimes such as bird-watching, book-reading and communal needlework. More aggressive activities will soon be on the rise again.

3. The prophets of doom have had a field day. Yet we feel strangely comfortable with the Cassandras. We have enjoyed being told that the light at the end of the tunnel signals an approaching train. Now we will have to get re-acquainted with the optimists – a much more dangerous and unsettling bunch of people.

4. During the recession we profited from empty planes, hotels, restaurants and buses. When recovery comes we will have excess demand again. The good life, when it returns, will be a lot more crowded.

5. Prices have been falling. Is that not what everyone always wanted? Now everything – from apples to yachts – will be going up again. And won’t we now all start suffering from the Great Inflation? What would you rather have: Austerity Britain or Weimar Germany?

6. The central banks have become the people’s friends, with even the European Central Bank cutting interest rates. Not long from now, rates will be rising again. Goodbye to bargain-basement banks, dirt-cheap consumer credit and rock-bottom mortgages.

7. Many high street stores selling goods that no one wanted to buy have closed, prompting art galleries and other edifying enterprises to move in to the vacant sites. Alas, all these shops peddling tawdry knick-knacks will be back with us again.

8. People have started to eat less. Obesity has been on the decline. There has been a boom in home-grown vegetables. Once the economy starts to grow again, the nation’s health will plummet.

9. Dinner party talk of house price rises will return. People will no longer be ashamed of being estate agents. Sons and daughters will again want to go into investment banking rather than eco-farming.

10. We will have to get used to a new, painful jargon. “Quantitative easing” was bad enough. The vocabulary of recovery is still less elegant. Prepare for the central banks selling their enormous holdings of government bonds to drive up interest rates. Practise saying “quantitative firming”.

11. Service blossoms in a downturn. Waiters wait, usherettes usher, doormen open doors. GDP growth = general grumpiness.

12. It is good to have scapegoats. We have been delighted to blame the mess on George W. Bush, the former US president, and Gordon Brown, the UK prime minister. Now President Barack Obama will take all the credit for the upswing. He may become slightly smug. The upshot: anti-Americanism will surge.

13. Energy use will rise again. With a good strong depression under way, we thought we had global warming licked. Not so! We will have to endure a new and mighty role for Opec and the sprouting up everywhere of new nuclear power stations.

14. Reining in the Russians will be more difficult when the oil price starts to push through $100 a barrel. So it will be scowls, not smiles, from President Dmitry Medvedev. And let’s not even think of how the Iranians will start to behave.

15. The bane of the 21st century – current account imbalances – has been coming nicely under control. Now all this will be out of control again. The dollar will plummet. Worse news, the foreign exchange dealers will run out of other currencies to sell it against.

16. China will really start to throw its weight around when its export motor goes back into overdrive. Mandarin will be the new official language of the European Union. Forget the SDR. The central bankers’ new official currency: the renminbi.

Once everything gets back to normal, we will soon begin to discern the green shoots of a new crisis. And it will be a lot worse than the 2007-09 version. Happy times!

The writer is chairman of London & Oxford Capital Markets. He is the author of The Euro: The Politics of the New Global Currency

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