» Monkey goes Psycho
economics, society
Something changed…
At the moment, I feel like I’m watching a painfully telegraphed horror movie where the typecast dumb blonde, in her infinite wisdom, decides to go and investigate the noise coming from the treacherous and ghoulish looking basement instead of running out of the house.
I feel like screaming at the screen in a futile attempt to stop the inevitable. In said horror film it is the gruesome death of the cannon fodder cheerleader, in the real World right now it’s the even more gruesome looking recession that we’re running straight into.
image courtesy of nymag.com
As an economist, I’m quite a sadist when it comes to the economic cycle. I hate stability, it’s all about volatility – that’s when you find out who knows what(and who was just lucky and could talk a good game) and what variables influences what and to what extent. For me, trying to flatten the boom-bust cycle is the Sisyphusian challenge of politicians.
“If I can just keep this economy rolling, they may not notice that I’m really quite a stalinistic dullard”
What I find so beautiful about the free-market is the fact that it’s a moving feast that can change quicker than you can draw a supply and demand diagram. The other thing that is so intriguing about the free-market is how it can so quickly be gripped by fear (and the dynamic between the two points). To quote loosely Michael Lewis’ Liar’s Poker “if you don’t know who the loser is in a transaction, then it’s probably you”. It is this very self doubt that has had financial markets crippled for the last 6 months – as Bank’s parcelled up toxic waste American Real Estate into complex AAA-rated products they lost a certain amount of trust for each other – whilst they have all been in the game of securisation, it was now a case of who had ended up with all the shit in this multi-billion game of pass the parcel.
Fear has a crippling effect on any market and what started in the sub-prime property World spread to securitisation which has now pretty much closed down the IPO and secondary loan markets – trying to syndicate anything other than cast-iron corporates is like trying to sell Christmas trees on Boxing Day.
Now the investors have it. They are pulling out of investment funds in their droves (crippling property funds and hedge funds in equal measure) and staying up at night worrying about the bloodbath that is the stock markets, not to mention the likely value slide the roof they’re currently staring at is going to take. My indicator for how frenzied the markets are is look at Gold and Bond prices – they are the relative safe-havens that people run to when they are gripped by fear.
There’s more…in the UK, retailers are announcing some horrendous figures for Q4, a quarter which has a disproportionate impact on their yearly performance – which shows that the consumer is starting to feel the burn, and rightly so too! The consumer has had it easy for the last couple of years – spiraling house prices and cheap and easy credit. Now the consumer is showing some signs of floundering under the effect of increased interest rates (their impact is slightly delayed) and the drying up of easy and cheap credit. It’s time for downgrading and battening down the hatches, but my money is on the UK consumer being stubborn as a mule and thus leading to a record level of bankruptcies and house repossessions in 2008.
Then there’s inflation…I still think that there’s something wrong with the way we measure inflation, I just don’t think that it really captures what’s going on (maybe it’s just London that’s seems to be facing weekly price hikes on certain goods). I’m pretty sure the Tesco near me is printing new price tags every weekend. Anyone who’s an EDF customer will have just got a weasel of a letter saying that they are putting prices up. Final thing on inflation, I’ve been watching property rents via Gumtree over the last 9 months and they have gone insane. This is because buy-to-let landlords are passing on their increased costs of debt to the tenants, tenants will thus have less disposable income and so the downward cycle goes. Due to the weakening corporate, retail and financial services industry performance, increased wage demands are going to fall on deaf ears and redundancies are likely to become de rigeur. The impacts on charity in a downturn have already been touched upon in an article on this website by Chairman Meow.
I’ve just heard a little bit of news from out in the field from Kingmug (he’s catching some waves down in Devon) and he says that people are going fucking crazy down there because they are so scared about property prices. He says it’s almost like a scene out of an apocalyptic 80s movie – albeit I find it hard to believe that this panic has spread to the surfing community, it’s not really in-keeping with the vibe.
My advice, save the pennies as it’s going to be a bumpy old ride. You could do what I’m gonna do and just move to China. That’s the beauty of globalisation, if one market gets fucked up, you can just move to another.
Tags: economics
Crazy indeed down here, but there’s also still a lot of new builds and development going on around the place. Although Croyde only has development for 18 new houses in the next decade, it feels like a lot of older houses will be becoming flats soon (including, distressingly, the Mai Tai Tiki lounge, which has seen many entertaining scenes).
Anyway, the panic down here isn’t disproportionate from what any tourism funded town goes through in Jan, I think. Lurching from summer to summer without knowing what to expect has to make people a bit over sensitive to the news.
Yeah from experience there’s nothing like the sight of boarded-up shops and deserted beaches out of your rain-lashed window to bring about a bit of winter seaside blues!
“Summer’ll be here before we know it!”