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Doom at the top

Is it really the worst economic climate for 60 years, as the Chancellor Alistair Darling has suggested?

In 1948, a post-war Europe was about avoiding mass starvation while Britain had austerity and rationing. The US was transferring millions of dollars to Europe and Japan simply to give democracy and capitalism a fighting chance. China was joining the one-half of the planet yoked to totalitarian communism while much of the rest of the world was shaking off their colonial masters only to be replaced by brutal dictatorships. Times were definitely tough.

Also joining the doommongers, MPC policy member Professor David Blanchflower says unemployment could hit two million.

Money Marketing hopes they are both wrong. The Chancellor’s comparison is particularly unfortunate, whether is he talking about the UK or the globe.

There have been downturns associated with banking crises in the past but there are as many differences as similarities.

Our economic woes derive in part from a massive increase in commodity prices and a liquidity crisis that has become a credit crisis. It is bad news for an economy so long reliant on booming house prices and the City of London.

There are several vicious circles at work here. Pump-priming the housing and mortgage markets will be difficult when the fundamentals are so uncertain.

But whatever the challenge, it does not mean accepting our fate. A sober assessment of the difficulties we face might be required but we must set about dragging ourselves out of this.

That means the Prime Minister must act. Many in financial services will have winced every time they heard Gordon Brown utter the ludicrous claim to have ended boom and bust but he has a chance to take the right action now for the long term.

That means no more stupid stealth taxes and instead helping wealth and employment creators. It may not bring re-election but it might repair his legacy.

As for the late 1940s, for the West, it was the start of one of the most impressive periods of economic growth ever seen in history. Here’s hoping. But we can’t help thinking the downturn of 2008 is only ever going to be like the downturn of 2008.

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