24 October 2008

So, what’s it to be? Would you rather I wrote about George Osborne and the £50,000 he didn’t ask for from the richest Russian on the planet – or the gazillions of pounds, dollars, and euros that the bankers did ask for, and got?

Frankly, I think we can leave Mr Osborne alone. He’ll live to fight another day, I’m sure, a bit bruised maybe, but having at least learned a valuable lesson: that it’s not very clever to spin against a spin-meister and expect to emerge unscathed.

As for the bankers, why is it, I ask myself, that having dug deep into my pocket to lend them the £37 billion they apparently needed, I now hear the Prime Minister and the governor of the Bank of England warning that we’re about to plunge into a nasty economic recession anyway?

After all, we’re being told that – although you may not have noticed it yet – the banks are beginning to get back into the lending business again. And that’s good news, because banks that don’t lend aren’t doing what banks are designed for: looking after our money and using it to oil the wheels of commerce.

But don’t blame me if they’re not ready just yet to lend any to you, or if the terms they’re offering make your eyes water. Bankers scare easily, it seems, and they’ve just had a very nasty fright. So they’re still being very, very careful before they emerge from beneath the blankets.

Which leaves the question I started with: why the recession? Well, remember how you borrowed that extra £50,000 when you realised your home was worth twice what you paid for it? Remember how you used the cash to buy a bigger car, a humungous plasma screen TV, and installed a tasteful water feature in your redesigned back garden?

Now ask yourself this: are you ready to do it all again? What’s your home worth now, by the way? So maybe there’ll be no new car next year, no new electronic toys, and no more juicy contracts for the local builder/garden-designer/loft extender. Multiply that by the sum of your neighbours, and hey presto, there’s your recession.

And if, because you’ve all stopped spending, your local builder runs into cash-flow problems, his friendly bank manager may not be as friendly as he was last time. That essential loan to keep the business afloat for the next few months may not be forthcoming. The business may go bust. His 15 or 20 employees will be looking for jobs. They won’t be spending much, that’s for sure. And so it goes on.

But as you know, I like to look for silver linings where I can. Oil prices have plummeted – which means that you can probably fill up your car now for less than a pound per litre of unleaded. And the haulage companies that deliver the food to your local supermarket can breathe a bit easier as well. Which means food prices may stop rising.

And the pound is slipping against the dollar – which is good news for British exporters who’ve been having a rotten time over the last several months (although admittedly it’s less good news if you were planning to do your Christmas shopping in New York this year.)

Oh, and inflation is unlikely to be much of a problem now, which is good news for those on fixed incomes (like pensions, for example). Yes, the stock market is a mess, which makes your pension fund a bit unhappy – but I think we have to assume that at some point the sellers will become buyers again, and share prices will resume their upward progression.

You’re going to be reading a lot about the recession over the coming days, but take my advice: don’t let it get you down too much. Yes, it’ll be tough – especially, of course, for those who lose their jobs or their businesses. And yes, there may still be some nasty surprises waiting to jump out of some banker’s woodwork.

But if we keep our heads – and if governments and bankers keep theirs – I reckon we’ll be able to see it through. Mind you, I don’t think I’d want to be a Porsche dealer in Canary Wharf at the moment …