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Weekend reading: Recession cessation edition

Weekend reading: Recession cessation edition post image

This week we saw more signs that the world was moving out of recession. Well, that France and Germany were moving out of recession.

Both countries posted +0.3% GDP growth figures for the second quarter, causing economists to splutter their croissants and sausages all over Le Monde and Der Spiegel.

In difficult times one has to put aside one’s Little Englander mentality and be grateful for good news, even if it falls at the feet of the Germans and the French.

After all, what happens across the Channel will surely soon follow here (leather shorts, saying ‘Ciao!’ and a sensible attitude towards alcohol excepted).

Both nations are strong exporters, so it makes perfect sense that they are the next to splutter back into life after natural resource economies like Australia and certain emerging markets have been resurrected.

Now it’s time for the UK to start doing what we do best – flogging stuff through financial innovation and arty media campaigns, and buying it, too (France and Germany will lurch back into the red if the U.S., the U.K. and other English speakers don’t join the party soon).

Unemployment is still rising everywhere, but don’t worry too much about that (unless you lose your job, of course).

Unemployment is a lagging indicator. Companies who lay off workers won’t re-hire until they’re sure the good times are back ‘to stay’ (or for what economists would call a two to three year expansionary phase).

In the meantime everyone is still working twice as hard due to ongoing recession rations and the threat of losing their jobs, which means a huge boost for productivity and margins.

No wonder shares have soared.

I know, I know, that bloke on CNBC said the stock market rally was all hot air. It’s not – to paraphrase Clinton it’s the business cycle, stupid – providing that at each step the next gear of growth kicks in.

A few clunks and misfires along the way are acceptable, but if something goes seriously wrong, such as inflation taking off early or GDP declining again as the government stimuli are withdrawn, then all bets are off.

This is a more uncertain recovery than usual, so a big snag is more than possible, but I think we’ll get there in the next 12 months.

Don’t worry too much about the distant future from an national economic standpoint, by the way. I know we owe gazillions and taxes will have to rise and property is still too expensive and kids don’t respect their elders but in my experience there are always big problems.

There are also unknown problems, and more importantly known but rarely discussed opportunities. Over the medium term it all tends to cancel out.

As for the long term, we’ve just lived through a worked example of the uselessness of long-term forecasting and what happens when it fails. The best you can do is set aside something for a rainy day.

This week’s money blog post round-up

  • Frugal Dad introduces the useful concept of a dream budget. (Aside: As an admirer I wish he read Monevator. Are you out there Frugal Dad? 🙂 Perhaps I’m too wordy for him – dads are busy people! )
  • Fabulously Broke named me last month as one of her new favourite blogs, and happily I think her blog is a riot too, though not really aimed at the likes of me. If you’re American and especially if you’re a hip young-ish woman, go check it out.

A few mainly UK-focused articles from the big boys

  • The Independent has put together a property boom piece on the back of some curiously vague research on future house price hot spots.

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{ 2 comments… add one }
  • 1 FB @ FabulouslyBroke.com August 15, 2009, 12:42 pm

    Portugal is apparently moving out of the recession as well, as announced on TV yesterday. Good times are a-coming!

    Thanks for the link back. You really are one of my go-to blogs for serious PF information that is as dry as cat food.

    I am more on the side of fun personal finance and minimalist lifestyle blogging with a lot of personal thrown in the mix.

  • 2 The Investor August 17, 2009, 2:26 pm

    Ah, good to get news in from Monevator’s (temporary) Portugal correspondent. Expect to see you in Shanghai next Tuesday!

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