Can anything good come out of recession?

I heard a German banker warn that we could see recession-like conditions for the next decade before things turn around and we should not expect things to get better any time soon…but I wonder, is it not just a cyclical thing that acts as a reset to the human condition?

I am not suggesting that any of us are enjoying the additional pressure that economic and financial constraints put on us and least of all the less well off who are unfortunately hit the hardest. What I am trying to explore is what we are going through a way for the system to reset itself?
We have all seen those “end of world” films, the most appropriate being ‘The Day After Tomorrow’ and is this not a similar situation?

For example; housing prices rose astronomically across many countries a few years back and as equity grew, more people took risk, joined the band wagon and essentially priced first time buyers out of the market. Now, with property prices leaving many in negative or reduced equity, commercial units unoccupied all over the place and a building sector on its knees the government has tried just about everything from shared equity to minuscule base rates to try and get the market moving again. But I wonder, even though property is an important component of peoples retirement, could a major shift down in prices be a good thing in the longer term? In its simplest form the property game works by first time buyers purchasing cheaper properties allowing that owner to move up the ladder and so on and so forth until you get to the retiree’s who eventually down-size, release equity and hopefully spend it.  So in essence bring the values down across the board and fingers crossed the wheels begin to turn again.

I appreciate that this is just part of the whole economic system, but it happens with stocks & shares where prices value companies at ridiculous amounts before a crash back to reality and just about any commodity where people realise they can make a quick buck. It even happens in football and other sports; Teams get promoted to the top league, spend big and speculate to bring in the top players at astronomical wages and then when it doesn’t work out and they get relegated have to cut the squad and start all over again.  There are numerous examples of this and could what is happening now just be a stern reality check to us all…we need the rough times in life to help us appreciate the good stuff.

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One response to “Can anything good come out of recession?

  1. But by the time the stock market hit its low point in March 2009, “We already had a massive crisis and collapse, so the worst of what came before was already reflected in equity prices and trader psychology,” Ritholtz said. It was time to reassess.

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