Credit crunch - a historic perspective

I was reading the BBC History magazine the other day and, in particular, an article on the credit crunch of the 13th century. Yes, we had a credit crunch then! King Edward had loans from Italy to finance wars and ... well, it's complicated, but the end result was a credit crunch in England. Then, as today, there was international finance, politics and intrigue and consequences of dire proportion.

Then I picked up Management Today, and they showed very graphically the historical patterns of recession and inflation. Fascinating stuff! The article shows how inflation is followed by recession (it looks like the calmest times financially were between 1870-1910). The higher the inflation peak, the lower the recession that follows it. The chart shows a huge block of inflation from the 1940s to 1990s without the matching recession - so the pattern of previous centuries is broken. Have we been heading for this fall for a long time?

Did we not see it? Were we unaware? Where were all our economic pundits, our financial wizards? Well, to be sure some predicted this – but no one wanted to believe them.

We will probably never know the answers to exactly why this happened (though I'd love a peek at the 2099 issue of BBC History magazine - hindsight being the clearest vision).

No matter how useful historical perspective is, we live in very different times today. We have whole new technologies that did not even exist ten years ago. So, what is to come over the next few years? Will we battle through this and come out stronger, or will the many years of inflation and relative wealth be followed by years of receission? Will we see the promised ‘green shoots’? Things change much more quickly today. Richard Reeves, the author of the article in Management Today, says "while trifling by global standards, the UK's inflation outlook is very much more exciting than for years".

He gives some real insight into how the UK economy will fare and what may happen, but you'll have to get the magazine to read the full article of course.

The UK is, undoubtedly, in the midst of great flux. The Government responds in different ways - supporting banks and offering to underwrite loans so that small businesses can continue to access funding (see BBC article. ) Business Secretary Lord Mandelson said the proposals would target "genuine business needs". What are genuine business needs? Other than waving a magic wand and creating a stable global economy, there are real challenges for the Government (whoever is in power) in many areas, including training and development.

Improving the skills of the UK workforce has long been an identified business need – our skills base in the UK has been unfavourably compared with those in other European countries (see Leitch Report 2006). And skills remain an issue – the Guardian’s David Gow reports “Europe's looming skills crisis”, which indicates that Government initiatives in funding training (such as Train to Gain) are more important than ever in this time of economic crisis. Continuing to invest in our most important resource, our people, must remain a priority in these difficult times. There is a future! Fail to plan, and –