Dead cat bounces?
The comments by IMF head Dominique Strauss-Kahn in the FT today are worth reflecting on. Clearly he does not believe that interest rate cuts will restore calm and stability to the nervous world economy. He suggests that fiscal stimuli are needed.
The trouble is that in Britain this is impossible. We have a huge and growing budgetary deficit, an all time high trade imbalance and rising record national debt interest payments.
Our frugal Presbyterian chancellor never saved for a rainy day, so making any recovery that much more difficult. Meanwhile world stock markets remain very volatile, with surges (dead cat bounces) and retreats.
We simply cannot spend our way out of troubles, unlike when the dotcom bubble burst, so let us hope that others will do so, which will help us.
Spend, spend, spend is the legacy of Gordon Brown as chancellor with prudence but a distant memory.