'New Recession' on the cards?...

I wrote a blog post a few weeks back about how I felt the comments around the possibility of a 'New Recession' was too pessimistic and did little to help recovery. However, with recent developments with the FSA's poor guidelines of regulation, it makes you wonder whether actually a 'New Recession' may happen. Furthermore, there are concerns around how countries such as France and Germany are actually leading us out of the recession, instead of Brown and Labour 'saving the world'...

Even with signs of improvement in the economy today with repossessions down, there are still warnings about the high level of unemployment, which passed the 2 million mark, the first time since 1997, which could see repossessions sore again. These kinds of analyses show that despite improvements, there are serious areas for concern and the complacency that is creeping back into the banking sector needs to be addressed so that we do not see 'business as usual' and the 'W' shape recession.

Mandelson and other senior cabinet ministers have shown how there is serious discontent with the way in which the FSA have responded. This has helped provide Labour with an overall good week, with the NHS and 'rations' debate. However, these concerns around the bonus culture come on a day that it has been reported RBS paid 7 million to hire a supposedly renowned banker. Totally inappropriate and disrespectful to the 70% tax shareholders.

This feud between the FSA and the government may help Mervyn King with his obvious links with the Tories; push forward their agenda for the destruction of the tripartite system, and for it to be replaced with a regulatory system where the bank has the majority of the power. An interesting article in the BBC, I believe, shows how King is subtly supportive of the Tories. He casts clear doubts on the chancellor’s predictions for growth etc, but to be honest, that is not hard to do. But to further confirm his increasing closeness to the Tories is the fact he casts doubt on the quantitative easing policy too, which many have actually been saying to have a positive impact on the economy. The BBC reporter believes that the bank are stating the need for a reduction in spending on public services, a position that is close to the Tories.

My analysis of the King/Tory relationship can be further confirmed by the following comments in the article:

In addition, the governor refused to be drawn on whether he regarded the Conservatives' plans to hand over regulatory powers to the bank as a good thing.

His silence says it all.

Overall, what I am arguing is that despite the signs of improvement in the economy, we have to be careful about the relaxed way that the FSA and other important institutions, such as the government (despite their comments of concern today), are approaching the banking system as it is starting to look all too much of a familiar situation. I thought that the unique nature of the recession would once and for all allow the banking system to be properly tackled, instead, it seems as though there is just tinkering around the edges. There really needs to be a proper regulatory system put in place, and a stricter tone with the banking system so that we can prevent a 'New Recession' from taking place...