Recession? The end of Free market capitalism? Run for the Hills!!!!!!!!!!!!!

Having blogged quite a bit earlier this year on the sub prime issues, we have stayed away from doing so purely because it has been impossible to keep up with the various banks collapsing, being taken over, nationalised etc. We also predicted the recession was part of a cycle… this has been proved to be an optimistic view.

At time of writing the US congress’ bailout bill has yet to be adopted (defeated when put to the vote), the european nations are burying their heads in the sand and the markets are in turmoil. So is it time to start stockpiling food and living in your cellar?

Well, no, not really. What the past few days have shown us is that governments do not actually subscribe to the ‘free market’ theory as so famously championed by Greenspan. When it comes to the crunch (and to vote losing economic hardship!) governments will intervene on the markets to prop up failing institutions. Is this right?

Well yes and no. Yes if ordinary consumers’ property and savings are in danger. No if the bank has speculated purely to accumulate wealth for itself. Call us old fashioned but we feel the purpose of a bank is to finance the economy, not to make themselves rich to the detriment of the rest of the economy. Some of the greed that has been exhibited has been quite astounding. But hindsight is a wonderful thing.

Where to now? We think the economic situation will not bottom out until the summer of 2009, and then will begin to show growth for the last quarter of the year. It will be a tough period for many, but if this means a return to the parsimonius and non debt-reliant outlook of previous generations then this can only be a healthy development.

Good luck everybody!