French Caldwell

Pundits have pointed to the development of a new normal by describing what path the economic recovery will follow.  Some expect a traditional V-shape recovery and others a double-dip W.  George Soros once called for what might best be called an inverse square root — that is a false recovery followed by a deep slide into a long trough with the long term recovery beyond most business planning horizons.  Soros has since changed his tune and is more optimistic.

This analyst, with no crystal ball, says there is a good chance they are all wrong.  For those looking for the shape of the economic recovery, just look around you now — this is it.  Last Fall, markets crashed globally, and $50,000,000,000,000 of equity was lost.  Some portion of that has been recovered in a partial recovery — maybe 35 percent or so.   This is the new normal — a crash followed by a recovery.  The fact that we don’t like this recovery as much as we did the last one is really tough luck — but this is the recovery we’ve got — this is the new normal, at least economically.

In this new normal, for the foreseeable future, markets will hover plus or minus 15% of where they are now, unemployment will be higher than what is comfortable, public debt will be outrageous, and perhaps what is most different, nationalisation of private enterprise is not out of the question.  And it will seem that high inflation is right around the corner.

The chief characteristic of the new normal is uncertainty — but economic uncertainty is not one of them — as far as the economy, WYSIWYG, it’s not great, but for policy makers it’s survivable.  Rather the uncertainty deals with other factors of globalisation like consumer and investor confidence, sustainable development, the pace of globalisation, etc.  This new normal, a period of uncertainty, will continue through the planning horizons of most businesses, at least through the first half of the next decade.  Perhaps by 2016, we’ll begin to see another period of high growth — perhaps.