First the good news ... we will beat this slump
There's nothing like a little economic history to make you feel better on a weekday morning, and we should be grateful for a superlative effort from the Bank of England in their latest Quarterly Bulletin.
Celebrating its 50th birthday, the bulletin invites us to take the long view: it puts the recession in the context of three centuries of ups and downs.
There's good and bad news. The bad news is the confirmation that this is a new kind of recession, or rather an older kind of recession reborn — and that's about as welcome a return as rickets.
Most of the downturns we have experienced since the Second World War were short and shallow by the standards of the 2008-09 slump. In 1974, 1979 and 1990 the country set about squeezing inflation out of the system, whether it had been domestically generated, blown in from abroad, eg via an explosion in oil prices, or a bit of both. Painful as the adjustments were, output fairly quickly got back to its trends, though employment usually lagged quite a way behind.
Apart from the weather, famine and war, the economy in the 18th and 19th centuries was driven by periodic financial crises, banking failures and the subsequent implosion of credit supply, closely followed by a collapse in the demand for loans from households and companies, and a crash in stock and property markets.
The 19th-century Bank of England's job was to try to deal with such traumas in its role as ‘lender of last resort’ to banks temporarily embarrassed by a lack of funds and panicky depositors.
Yes, that does sound familiar, doesn't it? Except that nowadays entire countries suffer ‘runs’ too. We know by now that ours is much more a ‘classical’ sort of slump, one induced by the private sector — the banks — rather than by conscious public policy. The banks are still, basically, bust.
So that's the downside, as economists say. The upside is the plentiful long-term evidence that devaluing the pound or allowing it to depreciate, as now, does usually aid recovery.
Given the 25% or so drop in the overseas value of sterling since its 2005 peaks, we might have expected to see rather more of a benefit than we have.
But some of the most recent surveys suggest that manufacturing and service exports are picking up in the face of still-difficult world conditions (as in the eurozone, where 55% of our exports go).
Some exporters have opted to take the benefit of a lower pound in the form of fatter profit margins, which is also helpful in its own way, funding investment and protecting jobs — but more traders are now starting to price competitively in foreign-currency terms and are therefore picking up more orders.
Previous export-led booms have been shorter-lived; the 1967 devaluation of sterling, the one where the Prime Minister, Harold Wilson told us it wouldn't affect the “pound in your purse or pocket”, worked for about five years before all the original advantage was lost through higher domestic inflation, by way of wage rises and an accommodative monetary policy.
The same could be said, in varying degrees, about the 1949, 1976 and 1986 episodes.
The final lesson is that war has often provided a powerful stimulus to the British economy — perhaps the most reliable of all, in Napoleonic times and later.
It was in fact only the Second World War that ended mass unemployment, pushing the jobless rate below 10% for the first time in two decades.
I told you there was mixed news