From good to bad to worse: three ways the credit crunch could end

Trying to call the outcome of the credit crunch is a fool's errand, says Simon Nixon. We all hope for a shallow downturn; the truth is it could end in doomsday, but we may have to settle for a deep recession.

There's a slightly spooky feel to the City a sense that the global financial crisis has just taken a turn for the worse. Diving share prices; interbank lending rates back to record spreads over government bonds; and bank shares trading below their rights issue prices, raising fears about their ability to raise fresh capital. Out in the real world, things look bleak, too: house prices are in freefall, Marks & Spencer has reported a huge drop in sales and the market fears several builders are in imminent danger of going bust.

When the credit crunch first appeared last summer out of a seemingly clear blue sky, most bankers stayed on the beach, assuming it would pass by September. Now no one is under any such illusion. This crisis will get worse before it gets better. The only question is how much worse? No one can honestly know the answer. It depends on far too many variables. This is a global crisis, where decisions taken in China, Russia, the Middle East and Brazil matter as much as anything US or European policymakers might do.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Simon Nixon

Simon is the chief leader writer and columnist at The Times and previous to that, he was at The Wall Street Journal for 9 years as the chief European commentator. Simon also wrote for Reuters Breakingviews as the Executive Editor earlier in his career. Simon covers personal finance topics such as property, the economy and other areas for example stockmarkets and funds.