No chance of a return to the dark days of the 30s? Don't kid yourself

[CHIMO]

Nice work if you can get it. The Royal Bank of Scotland has clocked up the biggest corporate loss in UK history and the bloke at the helm when the ship went down trousers a pension worth £650,000 a year. Understandably, there is concern that Sir Fred Goodwin should have no money worries for the rest of his life, but ministers have only themselves to blame. They could have sacked him last October and saved themselves a tidy sum. As it is, the furore over Goodwin's pension has helped to disguise the fact that the taxpayer is now underwriting the biggest insurance policy in UK history in the hope that indemnifying RBS against future losses will get the bank lending again.

Public fury at Goodwin and the other failed bank chiefs is inevitable, but a diversion from the big issue: that policymakers are rapidly running out of road in their attempts to pull the global economy out of its nosedive. There is little agreement on what marks the difference between a recession and a depression, but the one put forward by Stephen Lewis of Monument Securities is as good as any. A recession is where policy works; a depression is where it doesn't.

Judged in this way, there is scant cause for optimism. America is in a terrible state: factory output has nosedived, unemployment is going up by more than half a million a month and consumer confidence has collapsed. Courtesy of globalisation, the acute weakness in the world's biggest economy has had a ­domino effect on Japan, China, ­Germany, eastern Europe and every other corner of the planet.

The reason we are supposed to be cheerful is that bad as things are, at least will be no repetition of the 1930s, when egregious policy errors led to slump, protectionism and extremism. This prediction, like all the others blithely made since August 2007, looks highly suspect. Look around the world and what do you see? You see signs of deep economic distress and policy mistakes. You see emerging markets being starved of capital, because the big western economies are looking after their own domestic constituencies. And you see the first stirrings of real public anger at the way in which those responsible for the biggest economic catastrophe since the second world war appear to be getting away scot-free. No chance of a return to the 1930s? Don't kid yourself.

http://www.guardian.co.uk/commentisfree/2009/feb/26/credit-crunch-recession

[bertman]

1. Gee thanks, CHIMO. I feel all better now. Recommend anyhoo.