A new kind of normal

The worst of the crisis may be over, says Merryn Somerset Webb. But don't expect things to go back to the way they were.

Is it over? David Smith, writing inThe Sunday Times, thinks it is. The last quarterly rise in GDP has taken us "within a whisker" of ourpre-crisis peak, something that suggests we are "waking from the nightmare Britain entered seven years ago".

Consumer confidence is high. Strong rises in employment are evident. And real pay is rising: in the last three months we have the numbers for, private sector pay rose by 2%. That's a little more than inflation.

This is all true. Indeed, anyone who came to the MoneyWeek Conference last week will know that we think today's GDP might be even higher than the statistics suggest the numbers don't capture collaborative consumption and aren't good at capturing the black and grey economies.

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However, while the worst of this part of the crisis may be over, that doesn't mean we are on the way to getting back to anything like what we might have considered normal pre-crisis.

This is a new kind of normal. It is one in which most markets remain artificially boosted by quantitative easing (the US), expectations of QE (Europe), or just super-low interest rates (almost everywhere else).

It is one in which savers are expected to get consistently poorer, while debtors are helped to get a little richer; one in which rates can't rise because mortgaged households can't cope; and one in which much of the rise in employment is accounted for by self-employment and zero-hours contracts.

It is one in which most public sector debts are still at historical highs; and one in which, despite all this, there is little appetite for real falls in government spending. It is also one in which a new debate on inequality one that could fundamentally change the political environment is fast taking hold.

Anyone sentient will by now have heard of French economist Thomas Piketty and his best seller,Capital in the Twenty-First Century. They will know his basic argument that thanks to the fact that returns to capital are higher than the rise in GDP in most countries, wealth inequality is high and rising, and so must be countered with wealth taxes and super high income taxes. And they will know this argument has been adopted by pretty much every politician, columnist and bureaucrat out there.

We've been talking about this subject in the magazine and on the website for some time now and we will come back to it many more times (we don't entirely buy Piketty's story).

But for now it is worth noting that, as a result of QE and the sense of insecurity it has given so many people, the crisis has created this discussion.

That's why we hear so much about rent controls, about wealth taxes, about property taxes and about energy price controls. And why the new normal is likely to be rather less capitalist then the old normal.

Merryn Somerset Webb

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.