KATHMANDU: As a financial writer, I normally have two objectives in mind while writing. The first is furnishing the relevant information investors need to know. The second is a bit more abstract — trying to paint a mental picture of endless consequences to the discovery. With the second aspect in mind, I recently tried to think of the best analogy for the slow global economic recovery some claim we are in.
At first, this seems to be a simple conclusion. But upon closer exam-ination, it is more shaded. The word ‘recovery’ immediately conjures a few images. One is being sick and recovering slowly. Another is where one sees slow but sure progress at recovery each day. However, none of these analogies fit the economy or all medical recoveries; a crucial element is missing: uncertainty.
The uncertain nature of the global economy has provided shades of grey in determining whether currently the economy is in another recession or whether it is truly on the way to recovery.
Fast forward to the real financial scenarios and this is where the market is at the moment. The global economy survived the 2008 wreck, and by 2009-10, the bleeding had mostly stopped. Gradually things have been getting better, but we are still at risk. The market should have been on cruise control — only coming to the clinic for an occasional check up — but instead the global economy is still on life support. The extent of damage is still unknown.
To make matters worse, the economy has been injected with so much medicine or stimulus, that it is impossible to truly evaluate the condition. Once, after injuring my knee while playing football, the doctor had prescribed some painkillers for immediate relief. After taking them, I felt great and resumed playing the game. It was only the next morning — after the effects of the medicine wore off — that I realised the additional damage done. Similarly, with trillions pumped into the system, the global economy is numb. It is prematurely dancing on a broken leg, and when the medication wears off, we might find ourselves in worse shape.
(The author is the assistant manager of research and development at Mercantile Exchange Nepal. He can be contacted through firstname.lastname@example.org)