subject: Financial News And The Big Banks Are Sitting Pretty [print this page] The Bank of England expects that house prices have seen the worst and that there are enough independent signals to indicate that the economy is in a position to grow into 2010.
The temptation to look into a few months of stable-to-mildly-rising house activity and to extrapolate this into a much sought after upswing seems to have found a home with the central bankers as well.
Unfortunately the news from Continental Europe is not so sanguine. Excluding France and Germany, whole economies seem to be teetering on the brink of disaster.
Much as we like to think of Britain as an island unto itself, the fact is that we are inextricably linked to the fortunes of the rest of the globe and to Europe in particular. Not surprisingly as they are a mere 21 miles away as the crow flies.
The continued massive spending splurge of the Treasury and the BoE seems to be holding the dyke for the time being. However, the fear is that once the boy pulls his finger out of the leak the weight of accumulated debt will drag the UK economy back into the abyss.
On the other side of the Atlantic the news was equally grim with unemployment running at 10% and still increasing.
Having said that, it is not all bad news. It has been a factor of this recession that while the headline numbers and news have been truly dire they do not seem to have turned into the scale of personal disaster that defined previous downturns.
Yes, many people have lost their jobs and a certain number of homes have been repossessed but, overall, consumer spending has remained much more powerful than might have been expected.
It seems to me that, for all the statements that this is the worst economic situation since the war, it does not actually feel like it. Does no one remember the period of mass localised unemployment of the 1980s?
And there are certain areas that are doing very well. As Simon Denham of Capital Spreads recently said, On the plus side those nice guys at Goldman Sachs etc seem to be doing very well indeed but there is a grim side to this piece of information as well. The unfortunate fact is that what business that is being transacted is being done, very much, in the bankers favour.
With the virtual destruction of the investment banks in the States the survivors are able to make far bigger margins on their deals simply because the clients now have few options. They are unable to play Goldman off against Citi or Merrills or Lehman etc.
