"We've had some success in getting the price of oil down," said Gordon Brown earlier this week. It's an oddly economically illiterate comment coming from a man currently being hailed as the saviour of the global financial system, isn't it?
Because, of course, Brown hasn't brought the price of oil down at all. Indeed, whatever he might like to think, he has no more control over what the global market fancies paying for a barrel of crude than he does over what cash-rich property vultures are prepared to pay for the Notting Hill houses of unemployed bankers. No, what has actually brought the oil price down is recession in America and the threat of recession everywhere else. Gordon Brown can claim credit for the UK's recession if he likes (that would seem to make sense it is largely his fault), but I'm not sure he can also put his hand up to Iceland's, Spain's or America's.
Still, being responsible for our recession alone should be enough for him. It's going to be a nasty one. Right now everyone seems to think that their particular business won't be hit. Take Caprice. Is she bothered by the credit crunch? She is not. "No matter what is happening outside, everyone is always going to need underwear," she told The Sunday Times. Maybe so. But that's to miss the point that they don't need as many knickers as they thought they needed in the boom years and they certainly don't need Caprice's knickers. Primark's will do. I heard much the same from a personal trainer friend this week. Training is the last thing people give up, he said. "Everyone needs exercise." Again, partly right. It's just that people don't need to pay £90 an hour to get it. And from a designer. "People don't give up little luxuries," she said. Maybe not. But they certainly change their definition of "little luxury". It isn't a semi-precious stone bracelet. It's a Boots lipstick. The point is that in a real downturn no one escapes. The vast deleveraging of our economy underway at the moment, combined with the negative wealth effect of falling house prices, means this is a real downturn.
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Unemployment may be under two million for now. But with consumption clearly under huge pressure (how else to explain the Christmas-style sales we're already seeing?),bankruptcies rising, and even the once ever-expanding public sector set to contract, it'll be three million before too long. At the same time house prices are going to keep falling, despite Brown's wittering about the UK's shortage of supply (which, by the way, is an absurd myth). With confidence in the market smashed and credit likely to remain tight for years, how can they not? We'd expect a good 20% more of a fall from here. James Ferguson argues that this recession isn't going to be as bad as the slumps of the 1930s and 1970s. But my guess is that it will be easily bad enough by the end of next year for Brown heartily to wish he had never claimed credit for it.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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