Writing in the Telegraph, Angela Monaghan and Edmund Conway give us ten reasons to be optimistic about the economy. Considering there was so much Armageddon-speak only a few months ago, this itself is good news. They list the weaker pound helping exports at number one, with markets correcting as they do the imbalances between currencies (except in the Euro zone where one exchange rate fits all).
They point to rising equities, increased business confidence, and US banks coming off better than feared in their stress tests. Low interest and mortgage rates are another plus, creating the conditions for recovery. They are impressed by the Chinese economy’s unexpected resilience, and by the fact the both UK and US housing markets may be bottoming out. The point to the benefits of falling utility bills, and finally list the coming summer with its feel-good warm weather lifting people’s spirits.
Even if you don’t agree with all of their pointers, it’s an impressive list. The last one is important and they are right to list it. Optimism points to recovery as people begin to make plans to invest, to expand, and to plan purchases. This is one reason why Obama’s message of hope is probably more important than anything he actually does.
On the whole the authors are probably right. This was not the end of market economics, but a cyclical downturn made worse by the smoothing of previous downturns with massive credit expansion. Downturns pass, unless unwise governments turn them into depressions.
After this one the real fight starts over what lessons can be learned. France and Germany are leading the EU charge to learn the wrong ones by introducing more restrictive regulations that would leave politicians driving business decisions. The right lesson might be for governments to stop doing the things which led businesses into making wrong decisions in the first place.