What a week. Barack Obama waiting for “W” to exit the Whitehouse and a 1.5% reduction in interest rates!! The first has never happened before and the second gives the UK our lowest interest rate (3%) since before the aforementioned Mr Obama was born.
Given the depth of the economic mire that we appear to have talked ourselves into it is going to take something historic to drag us out.
Could these events be the catalyst that ensures this slowdown/ recession/ downturn (take your pick) is severe but short?
Barack can’t rescue the world economy on his own but the history changing nature of his election and his vision/ charisma create an opportunity to alter the mood in the USA. He might be the figure that leads the American economy, it’s financial institutions (what’s left of them), corporations and citizens down a less self destructive path. If America is in a good mood and spending plenty the world economy tends to benefit.
The interest rate cut, the largest for 15 years, may not solve everything immediately but at least our central bank is eventually taking a leaf out of the Fed’s playbook and doing something dramatic. Confidence will take time to return to the banks but they can’t say they aren’t being helped…£multi billion loans from the government and slashed interest rates must surely help them cosy up to each other again…
So will these two events combine to turn the tide of doom and gloom? Will it be a short, sharp shock or a long, drawn out affair? What is going to happen?
