Column : A few green shoots

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: It is a very delicate moment in economic diagnostics. Is the crisis at a turning point? Is the patient about to recover or is it all a mirage? During the 1991-93 crisis, Norman Lamont, the chancellor of exchequer for UK got a bad reputation by talking up ‘the green shoots of recovery’ . That sort of talking up is always risky but enough has happened recently to give us a pause.

There have been two interlinked problems since around late 2007. The more dramatic has been the collapse of the financial markets. Starting with the drop in house price growth and difficulties with the subprime mortgages, we had Northern Rock going broke in September 2007. Later the problem moved to America and by September 2008 we already had Bear Stearns taken over by JP Morgan and then Lehman Brothers went. AIG had to be rescued as also Fannie Mae and Freddie Mac. Merrill Lynch, Goldman Sachs and Citibank. There had to be a huge bail out and ordinary citizens of UK and USA got used to the notion of toxic assets.

The other crisis was the drop in employment and output growth. This crisis became big during 2008 and has continued across the world. This is what caused many people to talk of the crisis as the worst in a hundred years and the end of liberal capitalism etc. G20 met in November 2008 and again in April 2009 and it seemed like the whole world was geared up to fight this unprecedented crisis.

But just lately it looks like there may be positive news on the financial front though not yet on the output front. Goldman Sachs has come through with the news that their latest profit figures for the first quarter of 2009 give them the confidence to return the $10 billion they took from the US government. In UK Barclays has declined any help and passed all the tress tests and HSBC has been able to recapitalise itself without government help. More good news has just come from JP Morgan for its first quarter results and from Wells Fargo which survived the meltdown by taking on some banks