The US economy has now been in recession for seventeen months (since December 2007), and throughout that time the authorities have been taking drastic and radical actions to try to get the economy moving again. Today I want to focus on how we will know if the recession is coming to an end. What might the "green shoots" of recovery actually look like, and equally importantly what will they NOT look like?

The US Federal Reserve tonight announced a further significant step in its ongoing battle against the recession and credit crunch, as it stated that it would inject a total of $1,150bn into the banking system, by buying government and government agency bonds. Even in an economy the size of the US, $1,150bn (that's $1,150,000,000,000.00) is clearly a lot of money, and roughly trebles the amount of money that the Fed is to inject into the system in this way. It also moved to directly finance the US government's (very large!) deficit this year, for the first time.

In another week of announcements, the Bank of England and European Central Bank yesterday cut their key interest rates by 0.5%, taking both euro and UK interest rates to record lows.  There's an extent to which all this is almost getting boring at this stage.  Another week, another multi-billion Dollar or euro rescue package, or unprecedented interest rate cut.  But the Bank of England also moved into completely new territory by announcing that it will 'print money', to the tune of £15obn over the next few months. 

Will the next ten years be a Lost Decade? Does the experience of Japan in the 1990s tell us that we will not see the economy recover for many years to come? Actually, no it does not. There are very substantial differences between Japan in the 1990s and the current economic situation, and several reasons to believe that while this economic downturn will continue to be severe, it will not last a decade.

In the last couple of weeks, we have seen some of the worst economic statistics seen for decades in several major world economies. Growth was exceptionally weak in the US, the euro zone, the UK, Japan and China. But markets showed very little reaction - they were the dog that DIDN'T bark - and this may have told us something very useful. Have we reached the point at which economic sentiment is so awful that it doesn't matter much how bad the 'offical' numbers say things are?

The investment world is changing fast, in so many ways that's it hard to keep up. But one of the most interesting changes is the extent to which environmentally-friendly investing is becoming not only popular, but profitable! Alternative Energy, Water and Climate Change strategies have significantly outperformed global equities in recent years as the investment opportunities generated by the long-term issues related to climate change and resource pressures have expanded across regions, industries and economies, although 2008 saw a set-back to this trend. 

The European Central Bank today announced that it was not cutting its key interest rate. This did not come as a surprise, but my favourite quote of the day was definitely when Trichet said that the ECB "is not in the same universe as other central banks". How true! It still worries about inflation and wage risks, when other central banks are far more worried about depresssion, banking collapse, and deflation.

The Taoiseach has made a special announcement to the Dail this afternoon in which he announced the detail of the plans to reduce this year's government deficit by €2bn.  The bulk of the money will come from collecting a levy from public sector workers, so that they pay a much higher amount towards the cost of their pensions, and pay rises due to civil servants later this year have been cancelled.  The government also announced that further fiscal 'adjustments' will be required, of €4bn next year and in 2011, €3.5bn in 2012 and €3bn in 2013.

The Taoiseach has made a special announcement to the Dail this afternoon in which he announced the detail of the plans to reduce this year's government deficit by €2bn.  The bulk of the money will come from collecting a levy from public sector workers, so that they pay a much higher amount towards the cost of their pensions, and pay rises due to civil servants later this year have been cancelled.  The government also announced that further fiscal 'adjustments' will be required, of €4bn next year and in 2011, €3.5bn in 2012 and €3bn in 2013.