At 09:48 17/10/01 -0400, Ed Weick wrote: (EW) >>>> I thought I would post the following "more bad news" article from this morning's Globe and Mail business section. While the article mentions that the American economy was in decline before the events of September 11th, what happened that day and the consequent nervousness of American consumers, producers and investors appears to have been quite significant in its effects. >>>>
I agree. As far as I'm aware, Wall Street (and London Stock Market) share prices have largely recovered from the effects of the airstrikes of 11 September -- apart from the more serious effects on (already weak) airlines, hotels and the tourist industry generally which will undoubtedly last longer. I even read an article in which a journalist described the event as 'trivial' in economic terms. (Strictly speaking, that may be so, but it was a most unfortunate use of the word in that context, and I hope someone slapped him [and his editor] very hard for letting that slip through.) But strange consequences have followed -- such as the one which suddenly affected my music publishing business. Normally, 70% of my sales go to American choirs (roughly 50:50 as between church and secular choirs) and 30% to the rest of the world. Since 11 September, my Internet sales have halved and American sales are now only 30% of total sales. I can only think that the shock has been so considerable that it has affected almost everything that Americans would normally be doing and thinking at the present time. And, as Ed writes . . . <<<< A front page article in the G&M deals with how irrational Americans (and, I'm sure, others) have become since September 11th, buying gas masks, antibiotics, and rubber gloves to make themselves feel they have some control over their personal situations, when the reality is that such actions make no difference whatsoever. What this suggests is that the more uncertain a situation is, the less rational the response becomes. It also suggests that when, in times of uncertain outcomes, people lose control over events that affect their lives, they will do everything they can to develop and maintain an illusion of control. IMHO, we can expect consumers to sit tight for quite some time, gas masks, antibiotics and rubber gloves at hand, and not want to spend money on things not needed for day to day survival. Given the large and growing uncertainty abroad in the US, and the factors feeding this uncertainty, it may be a long time before there is an economic recovery unless of course there is a major stimulus from the defence and security sectors. >>>> . . . the anthrax outbreak (30-odd people have now tested positive according to the radio news I heard a few minutes ago) will have, if anything, even greater and more widespread effects. And all this is to be laid upon on the stock markets in which, even after declining for 18 months past, shares prices are still wildly overpriced. This has been laid on with a trowel in today's Financial Times. The front page headline reads "George predicts 3-year downturn". (George is Sir Edward George, the Governor of the Bank of England.) I can't recall such a blunt statement from the Bank of England before. Indeed, in normal times he would have been publicly disciplined by the Prime Minister for speaking out like this. Inside the FT, one of the main articles by Martin Wolf, normally a fairly restrained financial journalist, has statements such as: "The conclusion [is] that the market has been -- and still is -- hugely expensive . . ". His conclusion is based upon the fact that the price/earnings ratio of shares over the long term has always been about 14 (that is, with a real return of about 7%), whereas yesterday the average p/e was about 23 (having been 33 in April 2000). Thus, there's a long way to go yet -- even if shares don't undershoot 14 -- before shares stabilise. It's my view (from random reading of company reports in recent months) that this will be a supplier-led recession after many years of business complacency, so that no matter how much money Bush or George pump into their respective economies in order to stimulate consumer spending, the recession will continue willy-nilly. (And once again, as mentioned in my previous posting this morning, all this monetary pump-priming will affect the value of money and other things in unmeasurable ways which will take years to work their way through to unknown consequences.) Ed wrote above: "[people] will do everything they can to develop and maintain an illusion of control" in such times. Yes, indeed. I'll make one guess, based on what I've read about the Great Depression of the 30s. This is that a great variety of weird religious and psychic sects will blossom in the next few years consisting of anxious people looking for certainty in a world in which the "authorities" appear to be unable to control. Keith Hudson ___________________________________________________________________ Keith Hudson, General Editor, Calus <http://www.calus.org> 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
