While the global economy is struggling to emerge like the phoenix from the ashes of a near collapse , up pop ‘experts’ whose life’s mission is geared towards bashing progress on the head. It’s as though these officials, analysts and self-appointed gurus have no idea that the world’s market are largely driven by sentiment. And it seems they care not that their doom-laden pronouncements may sour the mood of investors, lenders and consumers or turn into self-fulfilling prophecies. How I wish they could be rounded-up and rendered incommunicado for six-months on a desert island. Then, like water, the world’s economy would be liberated to naturally find its own level.
In truth, such loose-tongued individuals are partly to blame for the downturn. When news emerged that US mortgage giants Fannie Mae and Freddie Mac were in trouble, analysts predicted America would be finished for a generation. It’s no wonder that stockbrokers’ computer screens began flashing red and perfectly sound banks had to be rescued, as terrified customers queued to withdraw their deposits.
The fact is that largely have a life of their own. There is no oracle capable of foreseeing what’s ahead, with the possible exception of Paul the Octopus, who, if given the chance, would probably be more accurate than most of the analysts. There is no financial genius with a crystal ball. If such a person existed he or she would have warned the world about the upcoming economic tsunami long before it occurred.
Since no one knows anything for certain they should quit interfering and stop confusing people with their relentless flow of forecasts. Pick-up any daily and you’ll read “Today the property market is…”, “Tomorrow retail figures will show…” or “Next year unemployment is set to…” Every gloomy line has a damaging psychological impact on worldwide growth and discourages consumers from fuelling with spending.
Moreover, the pundits are unable to agree among themselves. There is one school of thought that promotes fiscal cost-cutting and austerity and another that believes governments should spend more to stimulate . Whether these solutions represent different roads towards the same destination has yet to be tested while the two camps savage one another’s thinking.
Britain is going through a massive belt-tightening exercise – quite rightly in my opinion. Then, just when confidence began to grow in the new coalition’s strategies, the Bank of England Governor Mervyn King warns of a “choppy recovery” sending Sterling into a dive. Why does the Central Bank need to voice such concerns? What is its purpose other than to frighten off investors? Surely, such doubts should be reserved for the ear of Chancellor of the Exchequer George Osborne and no other.
It’s a similar story in the US where President Obama has opted to stimulate the economy. Not only are his opponents making political capital by accusing his administration of over-spending, just a few days ago, Federal Chairman Ben Bernanke described the economy as unusually uncertain. Even the former Fed Chief Alan Greenspan has got in on the act, warning that the US may be in for a double-dip recession – and I thought he had retired.
I’m certainly no conspiracy theorist, but I can’t help wondering whether ‘bad news’ is a deliberate tactic by bankers and the CEO’s of major conglomerates to push bulk shareholders with voting power into divesting their shares. These can then be sold on to hundreds or thousands of small investors with little power to alter policy.
In the current climate, shareholders have been thrust aside with dividends having become insignificant or non-existent in favour of banking and corporate executives, who receive millions in cash bonuses or stock options. Indeed, in many cases, shareholders have been relegated to little more than slaves to the greed of the company’s executives.
Potential investors are in urgent need of a breathing space not only from so-called ‘expert opinions’ but also from an overdose of a conflicting and vacillating market that is spewed out daily. Likewise, the leaders of the world’s wealthiest nations should concentrate on the job in hand rather than flying around attending G8, G10 and G20 summits, which serve little apart from illuminating chasms between the approaches of member countries which elicit ensuing market upheavals.
Unfortunately, the media does what it does best. TV and newspapers thrive on scaremongering. It’s always the bad stuff that hits the headlines. However, there is good news out there if you know where to find it. The Economist, for instance, recently published an article entitled “Defying gravity and history” noting “despite dire predictions of a repeat of the 1930s, trade is bouncing back”. The story further explains that, “By May this year, emerging economy members of the G20 were importing and exporting around 10 per cent more than their pre-crisis peaks”. Another story in the August 7th Economist reveals that US corporate profits “are back within a whisper of the all-time highs achieved before the downturn in late 2008”.
During this fragile recovery period irresponsible talk is not only cheap it could be devastating. Ordinary people, who are the backbone of every economy need encouragement and reassurance, to give them confidence to buy new homes, cars and appliances. Would-be investors need reasonably stable markets before they will risk their capital. And banks should stop hoarding their funds and begin lending to create new businesses and jobs.
There is a bright light at the end of this tunnel. It’s just frustrating that as soon as we glimpse a glow, the gurus and the pundits do their utmost to obscure the view.