With the economy in freefall faster than a plane into in the Hudson, applications for Masters courses are expected to hit record levels. The discouraged worker effect is being acted out right on our doorsteps. Redundancies are expected to hit 90,000 in London alone this year and many of these people will drop out of the labour force, re-enter education or simply wait out the recession. Unfortunately, such a strategy can only make things worse, as the decrease in output must surely hit growth and cause inflation to stagnate.
The woes continue with the news that the top 3 banks, Citigroup, Merrill Lynch and Bank of America had 3 month losses of £17 bn . Even JP Morgan who has managed to stay high and dry so far is faltering, announcing a 76% drop in fourth quarter net income. JP employees are now reeling at the news that jobs cuts are expected to amount to a third of the 6000 London workforce. As these workers default on their mortgages despite minuscule rates, and credit card bills go unpaid, expect many more problems in the banking sector.
To try and put all this in perspective, imagine if just a year ago as we were sat in class, the lecturer had said that banks could fail on a weekly basis, that interest rates could be tiny and real interest rates negative, we would have thought them mad. It makes you wonder, when it comes to the economy, does anyone apart from George Soros really know what they're talking about? Franklin
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