Duelling Fools: Is The UK Economy Recovering?

Stuart Watson

By

Stuart Watson

Published in Investing on 7 July 2009

It's the return of Duelling Fools. Harvey Jones and Bruce Jackson lock horns over whether we're seeing green shoots or brown twigs.

There are two sides to every story. Here at The Motley Fool we encourage people to keep an open mind about any financial question before deciding for themselves what the best course of action is for their own particular circumstance.

This was the thinking behind Duelling Fools, a feature we ran on this website many years ago. 

The idea is simple -- two Fools describe the 'bull' and 'bear' case for a hot topic of the day and then we ask you out there in Fooldom which argument you agree with. The winning writer is showered with glory for evermore while the loser hangs their head in shame for at least two or even three minutes. It's serious stuff. 

Today sees the return of Duelling Fools and, for our first clash, we've chosen "Is The UK Economy Recovering?" 

We all know that the UK had one of its worst ever quarters in January to March of this year. On the 24th of this month, the second-quarter GDP figures will be released, giving us a better idea of our economic destiny...

The bull case

Harvey Jones fights for the economic bulls. Read his argument here.

The bear case

Bruce Jackson is all doom and gloom. Read his views here.

Cast your vote!

Vote here -- once you've read both pieces of course (no cheating!)  

 

Next week we'll bring you the final result and we'll have a brand new duel for you to agonise over. By the way, you need to be a registered Fool user to vote but it only takes a minute to sign up. 

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

Grobbendonk 08 Jul 2009 , 3:24pm

Both sides pick out some interesting facts to support their cases, but I had to come down on Bruce's side in the end.

This is driven by perceptions obviously, but I'm seeing people out of work all over the place, and simply not finding new work. Rates and salaries are being slashed and disposable income is generally falling thanks to that and increasing taxation.

Walk around any town centre to see all the empty shops not being filled, or, if they are, filled with "money shops" (i.e. extortionate loans for desperate people), charity shops, betting shops, beauty salons and cheapo-tat stores.

Until disposable incomes start to go up and unemployment down, we're not going anywhere.

janeprcie 08 Jul 2009 , 3:26pm

Have to agree with Grobbendonk (and Bruce, of course). Nothing to add really, they have said it
all!

supersol42 08 Jul 2009 , 4:43pm

This is a depression, not merely a recession.

ckm4328 08 Jul 2009 , 4:52pm

I think I agree with Bruce. I think we are heading for a W shape recession.

I think the next few months will be a leveling out and perhaps even a little rise and then unemployment will trigger another drop.

I really don't agree on the 35% house price drop. People in UK irrationally love property too much.

laehc 08 Jul 2009 , 7:51pm

About the 35% house price drop, I'm no expert but I think there's incentives to own houses which are market distorting. For instance if you put money towards buying a house you can still claim benifit if unemployed, but not if you put the money into shares, or most other investments.

malchill 08 Jul 2009 , 8:37pm

Post recession has a long way to go.If you look at what the economy was built on before the recession it was financial sector,banking and property and not manufacturing.Service industry was being dragged along by these succesful sectors and the profits they were making and the taxes they were paying.
Now it will be some time before the banking sector will be back into anything like a reasonable profit and it will be carrying forward its losses it made through the recession for years and the same with financial services and the building and property areas.It is unlikely that they will ever get back to their best ever days of the early decade of this century.
This will put a huge hole into tax revenues for years so that even when growth restarts it wont mend the the gap in the government spending ends,that will take years.
In the meantime public services will have to be cut considerably so while we have a fall out of unemployment mainly in the private sector at the moment in the next decade the public sector will also be badly effected so unemployment and all that represents,more repossessions,higher welfare payments from central government,lower taxes and less spending power for the consumer will continue for years.
You can try to talk up the economy but you cant avoid these facts...
The recession may in time past but the good times will not return for years.

regards malc

RiverAsUsual 09 Jul 2009 , 12:39am

I don't need to read either case. When we ARE recoverying from this we WILL (almost) certainly KNOW it!

Blips here and there mean virtually nothing.

4 months of ascending growth will be the 'SIGN' for which everyone is waiting.

Pointless speculating serves for nothing, like thinking bingo is a game of skill!

elaineellensteed 13 Jul 2009 , 1:32pm

The mini green shoots appeared due to quantative easing or in plain English printing money Now all that money has been used up, we are heading for a more serious recession
Gordon Brown will try to hold any recesion off, just until the next election after that we will really see the problems The ggovernment are buying timeso as not to lose votes

Fingered 14 Jul 2009 , 1:45am

Hi Elainellenstead, in many,many senses you are aboslutely, totally right.... here's my take with a subtle twist:

Many countries, not just the UK, where a central bank system exists, along side "Fiat" paper currencies, they have debt ( credit ) pools that are contracting. The USA has the biggest pool, denominated in US dollars of course. UK not far behind denominated in Sterling.


To reflate those pools, (imagine lakes of the stuff) the Interest rate cuts were used as "buckets of water" as weapons
to refill them......These are likely to stay low for quite a while.

Then the central banks got " serious" and resorted to QE and swopped their pop-guns of Interest rate cuts for the bazookas of QE from their armouries...
.....akin to using a water-tankers now to re-fill the debt pools.

What the QE printing press IS NOT doing is to flood the economy with crispy new tenners
for Joe Public to borrow. He's basically a stressed out bunny, scared for his job etc etc and ain't just that too inclined to borrow anymore.
Moreover the high street banks re-rated Joe's risk rating and are less inclined to lend to him
anyway in case he defaults.

What the QE printing press is doing IS to vaporise toxic assetts from financial instutions and placing the toxicity onto soverign treasureis' balance books...Pooouf! Magic! What toxic assetts?
Disappeared! So no crispy tenners in fact printed per se.........a balance sheet swap exersise funded via government bonds vehicules.

This I suspect will encumber our poor children, and our poor childrens' children to the the tune of billions for a long time.


Irrespective of left / right political pursuasion, all governments have conspired and will continue to conspire to perform in the same fashion, greasing the skids of financial institutions who fund the political parties via lobbying for their inididual needs to ensure 2acceptable2 laws and regulations are both measured and bridled accordingly.
As to which party , left or right, whoever has the mis-fortune of riding this roller-coaster down to the bottom....

.......well the political incumbants at that time are likely to take the severe public backlash of wrath for being inept and get booted out. ..That bottom is not quite yet in my view. If conservatives get in next......they are on the roller coaster journey down in my view.

Fingered 14 Jul 2009 , 2:17am

Ooops, how silly of me - I meant trillions not billions...... Who cares? what's a few naughts amongst friends!

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