Francois Hollonde, French PM, said '|We're over the worst' this time last year.
Looking back at the Great Depression of the 1930's, one would expect the worst to be over by 2014. Whilst mistakes were made in tackling the Depression, and there were earlier attempts to jump start the US economy, it wasn't until 1934, 5 years from the Wall Street Crash, that GDP began a sustained climb upwards.
However, economic commentators identify the abolition of the Gold Standard, which prevented governments from inflating the money supply by printing money, as the key event that allowed governments to start vast capital projects.
Just as in the 1930's, everyone started off with trying to balance their budgets (governments rarely succeed in doing this!). But as grow stalls, more are convinced that something needs to be done to stimulate growth, and this requires abandoning austerity policies.
The answer is to print more money. This not only provides money for capital projects, it lower the price of the nations currency, which is just what you need to discourage imports and encourage exports. Inflation is a problem, but in a depression, orices are usually falling, so a dose of inflation doesn't have too much of a long term effect. And of course inflation gradually erodes all those huge debts that piled up during the crash.
World leaders won't tell you this of course. Mysteriously, they manage to have massive funds for capital spending, whilst targeting a reduction in the budget deficit. I say targeting, because no government has met it's targets for 2012, projections are always too optimistic.
So will it be onwards and upwards after 2014? Well, there was a temporary dip in 1937, but as WW2 loomed, governments went all out on preparing for war. This lead to a boom in the GDP and the return of full employment.
Today, the situation in Syria has the potential to start a World War. No wonder Obama is so reluctant to commit himself to helping the Syrian Rebels. It's as if a game of chess is being played out in the Middle East, rebel pawns attacking Syrian bishops, backed up by Hezbollah rooks and Iranian knights. All capable of taking out the Israeli knight, with the Russian queen threatening to intervene in the distance. Trying to avoid the conflict are the Turkish pawn, French bishops and the US queen.
So expect a period of recovery as economic policies change, but be ready for the bumps in the road!
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Well 2014 was the year when Britain started recovering! But we are dependent on other economies, which are not doing as well as they should, so expect a few bumps along the way
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