US Indicators Mean Crisis Not Yet Over

PARIS-The world economy is far from exiting the global financial crisis and three elements point to further weakness – the still very fragile state of US housing, a worrying contraction in money supply and a mountain of bad loans still to be worked through by the banking system, the Urban Land Institute conference heard last week.

Ian Shepherdson, from High Frequency Economics, told the conference in Paris that the crisis was a super-cyclical event not seen since the 1930s, and damage to the world’s banking system will take years to work through. The earliest trend growth may resume is 2012 or 2013. “Working out that catastrophe is going to take years,” he said. “It will be worse than many past crises because the banks are in such bad shape.” Overall global bank losses since 2007 are around $1.1tr.

Shepherdson’s remarks came in contrast to the general tone of the conference, where 68% of real estate specialists expressed the view in an electronic vote that investment should pick up this year. While some 44% predicted a W-shaped crisis – a further dip before sustainable improvement sets in – another 36% favoured a U shape – with a relatively smooth and quick recovery.