“Green Shoots” Not Evident, And Is The Most Annoying Phrase Of Financial Crisis

“Green shoots” is an irritating phrase, giving rise as it does to endless crappily stretched metaphors. “Some see green shoots in hedges”, “Are the green shoots of growth about to be nipped in the bud, or will they be smothered by fast growing Chinese bamboo shoots?”, or this piece of cod Zen wisdom from RBS’s Stephen Hester this week: “Sometimes the first green shoots suffer from frost and are the first to die.” He so wise!

To use one of our own though, the green shoots have been today sprayed with the Agent Orange of investor pessimism, and rather than sprouting blooms of resurgent global finance, are instead creating Venus fly-traps of PAIN! Yes, the much-touted “recession is over” vibes that have been percolating through the world of finance toward the waiting masses have been kiboshed over the last week or so, with investors cashing in on the mini-boom rather than believing it’ll carry on.

Confidence has been high, particularly with financial stocks as a leaner banking sector announced fat profits, but now, as one analyst told the FT, “People are struggling to justify lofty valuations”. “The smartest players in the US stock market – the top insiders who run public companies – are not betting their own money on an economic recovery”, said another. People are now converting stocks into cash, or betting on a fall in their price.

Given the extremely schizo state of various indices recently, this doesn’t spell certain doom for recovery, but unfortunately other indicators seem to point towards the world still being buggered. Unemployment, the main inhibitor of a resurgent economy, is constantly rising, with Seeking Alpha predicting a “protracted bout of nationwide systemic double-digit unemployment” in the States; the UK is faring a bit better, with the unemployment rate declining, though unions are warning that unemployment will continue to rise until the third quarter of 2010, and that this is going to be as bad as the 80s. 

The World Bank has revised its fortune-telling on the recession from what it said in March, and not in the way we want – it’s saying that the global economy will contract 2.9%, rather than the 1.7% it said before. Global trade will drop by nearly 10%, rather than the 6.1% it previously predicted.

And Nouriel Roubini, anointed sage of the financial crisis, is warning of a double dip – a slight rebound (i.e. what’s been happening recently) followed by yet another drop in the global economy. He’s particularly worried about the piles of money that have flooded the world in the form of stimuli and bailouts contributing to rampant inflation.

I can’t help but think the 24-hour news cycle is creating weirdly microcosmic cycles within this recession – the constant information feedback seems to breed an ongoing rupture in predictions, with long-term outlooks being updated every two weeks. Add to that the always-capricious stock market and the national obsession with house prices, and its enough to make you throw your hands up in defeat at trying to suggest an end for all this. It makes you long, as Gordon Brown did at the weekend, for a day with “no news to report”; better that than the cacophonous chaos of a world scrabbling for those green shoots.

Posted by Ben Beaumont-Thomas in Hot Money | June 23, 2009 1:24PM |