According to Garry White on Friday 16th July 2010 there was 2.5pc fall in the Dow Jones Industrial average. This meant it fell through 270 points to 10,088. The S&P 500 lost 2.9pc. All 30 firms on the Dow closed lower. The Nasdaq index which tends to monitor technological activity fell more than 3pc.
Double Dip Recession Now a Certainty
Bank of America led the slump in well-established companies having stable earnings, falling more than 9pc, after a disappointing second-quarter earnings report. Returns from General Electric and Citigroup disappointed Wall Street expectations. Shares in Google dropped 7pc after it revealed mawkish quarterly earnings. Analysts were aghast at take off in spending by Google confronted by new markets. This was a massive 22pc ascent, following the 18pc rise in the first quarter of the year.
US consumer confidence also fell. According to research from the University of Michigan, the sentiment index fell to 66.5 in July from 76 at the end of June. This makes it the lowest level since August 2009 and markedly lower than expectations that confidence would fall to 74.
The Double Dip Recession Doubted
Yet Paul Farrow, interviewing the investment guru, Anthony Bolton, found a contrary opinion. Bolton does not expect a double dip. Though he then goes on to say, “If we do get one, China is not immune, but it is moving away from the export market (which would be most affected) to domestic consumption. Most of the companies I have bought will benefit from that growth in domestic consumption.” Bolton’s confidence reveals the problem at the heart of world economics. The large movers in the Eastern economies are command economies.
No Reason to Doubt the Double Dip Recession
The Vienna School of economists such as Ludwig Von Mies argue that if wages and prices are centrally controlled then economists working for the state will unable to calculate the correct balance of supply and demand need to prevent surplus and deficiency in the economy.
The world wants to trade with countries such as India and China. Yet without a free price market, manufactured exports do not engender trust. The cause of the great economic crisis of the post millennium years lies in the need instead to trade in financial products. This led to a credit crisis which in turn brought the world to its knees.
The Double Dip Recession Lies Ahead.
The certainty that there will be another recession lies in the fact that the supply and demand calculation problem has not been resolved. The financial world is being forced into a risky balancing act. One in five British companies has cut its advertising budgets, a sign that industry is drawing in its horns. Without fiscal stimulus and a change in the attitude of countries such as Germany that should be trading, the West faces a bleak prospect of irrelevant and socially de-stabilising austerities.
The way ahead lies in manufacturing. We need creative manufacturing across the world. How long will it take for past, static superstitions to fade?
Duncan McGibbon - By contributing writer, Bath (UK) Institute Convenor and Wells Festival Prize-Winner, Duncan McGibbon
