This channel predicts there will be a recession by the end of 2023. This is a short piece covering bank collapses, the UK budget and economic theories. 

3 major banks have recently collapsed, drawing parallels with 2008. Silvergate Bank, on the 8th March. Silicon Valley Bank on the 10th. And Signature Bank on the 12th. The US, UK and EU regulators state these banks were special cases, unlikely to be repeated, but this is what they would say, as after all their role is to reassure and stabilize. The fact is more banks and companies are likely to collapse in the coming months. Credit Suisse today alone, Wednesday 15th March, has lost a massive 20% of its stock- value and looks very unstable, with Saudi backers refusing to invest any more capital. These collapses, I predict, will snowball into a financial crisis albeit less severe than that of 2008.

The UK Conservative Chancellor the Exchequer Jeremy Hunt released his Spring Budget today which was generally sensible and should be praised for its moderation. However it is simply outside the power of any one government to stop the boom and bust cycle of capitalism. It points out government success in combating inflation, with only 2.9% predicted by the OBR by December. It also keeps the Energy Price Guarantee at £2500 till June, saving hard-working British families millions, sets up Great British Nuclear, keeps the freeze on fuel duty, and granting a package of measures designed to get long-term sick, universal credit claimants, older workers and parents with children under 3 back to work. Time will tell how effective it is.

The main reason I believe a recession will happen this year is because of critically low consumer confidence and overleveraged businesses. The British economist John Maynard Keynes explained that the business cycle of peaks and troughs was largely down to people’s ‘animal spirits’ and right now those spirits have much to be bleak about. Ukraine, the cost of living crisis, China and the trigger for a crisis of confidence could well be Silicon Valley Bank. Furthermore, the US economist Hyman Minsky, popular since the financial crisis, stated that after crashes capitalism starts cautious, but then as time passes it becomes more daring, and eventually reckless and engages in speculation which results in another crash. The process is driven by complacency mixed with greed. The speculation is crypto and the crash should be soon. 

Now I would like to say that my prediction, like all economic predictions, should be treated with caution. Other than the commonsense idea that economics deals with people, and people are inherently unpredictable, there are weightier intellectual arguments. Nicholas Taleb argues that the events that really shape our world are Black Swans, unforeseeable, catastrophic happenings that are then retrospectively written about. And US economist John Muth with his theory of Rational Expectations says people’s expectations about the future determines whether, say, the price of a product will rise, or whether the whole economy will remain healthy. Maybe people will continue to be optimistic despite the overleveraged, financialised nature of our current economy. In which case a recession may not happen for some years. 

One thing is for sure, caution in all things is an essential conservative trait that people and governments would do well to adopt.