Grasping Gordon Brown’s government are not too worried about the situation we think. Consider it from their point of view: Anybody with savings in foreign currencies is moving their cash back into sterling right now at happy rates. (Assuming their bank has not gone bankrupt already.) People who fled Gordon’s high tax regime and those with second homes are selling up and coming back to England to ride out the storm – bringing their Euros with them. That’s a lot of extra cash flowing into Gordon inc. to be taxed and a few possible voters for him coming home. [He hopes]
Experienced hands who saw the last downturn will have learned to recognise the signs around two years ago. (It’s an Equitable Life, Henry!)
As banks fail, the lending to companies dries up and companies who were on a knife edge drop off the cliff – Woolworths and MFI for example. People lose their jobs, which means they spend less with the butcher, the baker and the candlestick maker. Retail spending goes down, more shops and industries close, and it feeds on itself this way.