By Roger Bootle
Recent signs of global economic weakness have caused me to muse on the comparison between the world economy now and during the 1930s. The similarities are spooky…
Contrary to the folk memory of a disastrous decade, in the 1930s the UK did relatively well… In the popular imagination, the slump of the 1930s was set off by the sharp falls in share prices in the Wall Street Crash of 1929. In fact, the direct effect of the Crash was probably not that great.
More important was the international banking crisis which followed the collapse of the Austrian bank, Creditanstalt, in 1931.
This time we have not had major weakness in share prices, but we have had a major asset price collapse, namely in real estate prices – in America, Spain and Ireland. As a direct result, we have certainly had a major banking crisis.