At last, some good news
If you’d just looked at the stockmarkets on Wednesday this week you might have thought that conditions in the UK had somehow deteriorated: the FTSE 100 ended the day down over 5%. But actually, Wednesday was the day when things suddenly took a turn for the better. The co-ordinated interest-rate cut from the world’s central banks was pleasing. It won’t do much good in practical terms (the problem is more about the lack of credit than the price of credit); but still, it showed that the bankers are aware of the scale of the challenge facing them and that they are actually getting together to talk about it. That’s got to be at least a minor confidence booster for the global financial system.
Much better than this, however, was the massive banking system bail-out announced by the UK government. It has already been much criticised, but on this rare occasion we aren’t joining in. Instead, we’d say that the package looks like a pretty credible response to the crisis in that it addresses not just the problems of liquidity in the system but the problems of solvency, too. Overall, the bail-out means that the odds of our entire banking system imploding are now much lower than they were on Tuesday. That’s the good news.
However, just because most of our high street banking names are now likely to survive in one form or another doesn’t mean that the UK isn’t going into a very, very nasty, and entirely unavoidable, recession.
• Read the full editor’s letter here: At last, some good news