The international economy was doing great, thank you, as of Spring 2007. It was anticipated that growth would be strong for three years in a row, averaging 3.8%, before dipping slightly to 3.6% in 2007. The UK was also doing fairly well at the same time. While salaries increased by an average of more than 5% per year between 2004 and 2007, house prices increased by an average of 22.4% from an average of £150,633 in January 2005 to £184,330 in May 2007. On the other hand, inflation was under control and only increased by an average of 3.25% over that time. In addition, the FTSE All Share Index increased by 49% between 2003 and 2007, which contributed to the general sentiment of optimism over the future. Roger was the only one who mentioned a recession or even a full-fledged crash!
Thus, when Roger gave his ominous warning, the general reaction was to laugh it off—just as we would laugh at a soothsayer who prophesied the end of the world. Yes, that would be eccentric, and it's likely to happen eventually, but not soon.
You can imagine that those of us who were there in 2007 are far less likely now than we would have been to dismiss Roger's thoughts.
Therefore, when I received his most recent economic update, which was written on June 16, I was pleasantly surprised and encouraged. Once more, he disagrees with the prevailing opinion and even criticizes those who downplay the prospects for the global economy. He claims in the opening of his essay that the media is portraying our economic picture in an irresponsible manner. His first sentence is as follows:
The Daily Telegraph had a headline last weekend that said, ""Britain's biggest-ever GDP fall wipes out 18 years of growth. This assertion is entirely false. I worry that people who are attempting to make the best decision are being fed this garbage. To be clear, our GDP was $1 trillion 18 years ago. Today, it is £2.2 trillion. Spending in April was 20% lower than it was in April of last year. Average monthly spending is £200 billion. £40 billion is 20% of that. We all know that the media has an effect on our emotions and judgment. Therefore, that Telegraph story is both irresponsible and economically illiterate."" ""
Wow! Bruising material And a week later, it is still clear that such remarks are being repeated. On June 21, Sajid Javid is cited as stating in the Sunday Times:
The GDP fell by 25% in just two months. To put that in some context, that represents 18 years of advancement being erased in just two months.""
And it comes from our former Chancellor of the Exchequer, who ought to know better than to be economically ignorant!
In his update, Roger continues by adding that, in contrast to what the media and his wife are reporting, a recession is not imminent. In fact, he predicts that the third quarter of 2020 will be significantly positive while acknowledging that the second quarter of 2020 will be significantly negative. He also believes that the UK economy could grow by 8.5% in 2021 and that the global economy will return to 2.5% growth the following year.
His claim is that there aren't the same fundamentals for a recession as there were in 1979 and 1989, when rising prices and interest rates squeezed people and businesses alike, and in 2008, when banks stopped lending. The frequent element is a lack of money on hand, which is not the case this time. Although household income has decreased, household expenditure has decreased even more. The UK government is injecting an additional £40 billion into the economy each month, so there is no shortage in this area. Due to the extra cash in the economy, Roger anticipates a mini-boom to begin in the coming months. The only factors that could prevent this from happening are media reports of company closures, a climb in the R well above 1, and stories of widespread layoffs.
Since you can read the entire article at https://www.ellisbates.com/news/june-2020-economic-update/, I won't attempt to repeat all of Roger's points here. to understand the full picture, but I believe his logic and justification are strong arguments. Personally, I wouldn't wager against him. He also completely agrees with me when he criticizes sensationalist media reporting. They must assume more accountability for the message they convey because, whether they want for them to or not, people do pay attention to them. We would all benefit from news that was more impartial and less sensational. We are all aware of the influence of ""false news,"" after all.
Data sources:
World Economic Situation and Prospects 2007, published by the United Nations (Sales No. E.07.II.C.2), accessed on June 21, 2020
On June 21, 2020, the Office of National Statistics' UK House Price Index was viewed.
Wages and Salaries Average Growth Rate, Office of National Statistics, accessed on June 21, 2020
RPI for the Office of National Statistics Every Item: Change in percentage over a year, accessed on June 21, 2020
FTSE 100 and FTSE All-Share since 1985, obtained on June 21, 2020, from swanlowpark.co.uk""" - https://www.affordablecebu.com/
