The Magic of Markets (with a little help from its friends)

The Recession that never was may have been the downturn that we had to have.

As featured last night in the finance segment of the ABC evening news at 7 by presenter, Alan Kohler, the S&P/ASX200 in one year has returned to its previous level set prior to the collapse of Lehman Brothers in mid-September of 2008 (see the chart below produced from the ABC website).

This means that for investors in the local market, it is back to square one. Mid-March of this year is generally regarded as the turning point, when world markets rallied.

Similarly household debt financing as a share of income has gone down to the pre-boom level as at June this year (the upper lines of the following chart taken from the Australian Parliamentary Library website). Conversely, the savings ratio has gone up (the lower line of the same chart).

This comes in the same week that US Fed Chairman Ben Bernanke announced the likely end of the US recession.

Whither now the pundits who predicted the end of Western (in particular Anglo-Saxon) Capitalism?