The London and NY SE share prices both dropped steeply yesterday as if on cue after reading my FW posting of yesterday! Last night the business editor of BBC TV was saying that the LSE traders were totally flummoxed by what is going on and in a state of panic at times. They've never experienced anything like it. He said that few of them can remember the last time there was a recession (1972 onwards). Those traders who can remember have long retired to their country houses.
My two reactions to that were: 1. I can't remember much about everyday life in those days either! More specifically, the recession finished off my environmental magazine, "Towards Survival". I'd built it up over about three years and it had several thousand subscribers in 14 countries, but I was still subsidising it out of my full-time salary in industry and when paper and mailing costs went up four times within about 18 months this was beyond my financial abilities to keep going. It was this event that launched me into politics and I joined the Liberal Party. Because of my reputation in the environmental movement I went to the top pretty quickly. Within a year I was on the Midland Executive, and a year later was on the National Executive. There I found myself sitting with highly-ambitious young and middle-aged men of about my own age, and there I discovered the fact that few of them were really interested in ideas and policies that might be good for the country but rather in their own careers. As well as feeling naive within this world of practical politics, I felt something akin to disgust and after about four meetings I resigned from the NE and the Party. 2. My second reaction was to look up charts of share prices over a long period. The US S&P 500 going back to the 1870s and adjusted for inflation shows that the average Price/Earnings ratio of share has been about 12 (rather than the 14 or 15 that's usually mentioned). It's now around 35. In the '70s recession the P/E was averaging about 8 for almost a decade. It's a shock to realise this. I cannot see how there's any way of avoiding a recession. There's been the most absurd stock market phenomenon of one bubble followed by second one since the late 80s. Share tipsters, mutual funds and so on have had a wonderful time for the last 10/12 years and have managed to persuade scores of millions of ordinary people to "invest" in shares during this mad episode -- appealing, of course, to the natural greed of most of us. If this large number now decide that it's time to stop consuming so much and try and repay their credit card debts then the deflation which is already apparent in both producer and consumer prices will intensify and unemployment will surely mount. In the coming year or two, America's Fed and the Bank of England might find themselves pushing their interest rates down to almost zero (as now in Japan) in a vain attempt to get the economy moving. Keith Hudson ---------------------------------------------------------------------------- ------------ Keith Hudson, General Editor, Handlo Music, http://www.handlo.com 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
