HSBC boss warns of a SECOND global economic downturn

By
Sam Fleming
Last updated at 9:12 AM on 06th October 2009

The head of Britain's biggest bank has warned we could soon be heading into a second recession.
Michael Geoghegan of HSBC said he had delayed expansion plans because he fears the upturn could be short lived.

The chief executive said the economy could follow a W-shaped
trajectory, with the rebound going into reverse and growth retreating
into the red.
The HSBC headquarters at Canary Wharf. The bank has shelved expansion plans amid fears the global economic recession is not over
'Is this a V recovery or a W?' he said in an interview
with the Financial Times. 'It's the latter.' Mr Geoghegan's words carry weight because of the global reach
of his bank and its track record on identifying economic turning
points.
In February 2007, HSBC was one of the first financial giants
to warn of the impact of the sub-prime crisis in the U.S., when it
wrote off 6.5billion. The intervention will fuel the debate between
Labour and the Conservatives over when to slash public spending and
hike taxes.
David Cameron has vowed to take early action to rein in
mounting deficits, warning they represent a 'clear and present danger'
to the economy.
However Gordon Brown and Alistair Darling claim the Tories' plans could worsen job losses and derail recovery.

Warning: HSBC chief executive Michael GeogheganMr Geoghegan's words come after the International Monetary Fund
warned Britain faces a 'jobless recovery' because of the tattered state
of its financial sector.
'The financial crisis has hit the banking sector particularly
hard in the United Kingdom, which typically is associated with a slow
recovery,' it said.
Unemployment already stands at 7.9 per cent - with 2.5million
people out of work. The IMF said the longer-term outlook for Britain
may be bleaker than in other parts of Europe, because of the
disappearance of 'exaggerated profits' in the crippled financial
sector.
HSBC's equally bleak outlook is particularly disappointing given recent signs of a tentative recovery in Britain.

The service sector, which constitutes three quarters of the
economy, recorded its strongest growth since the Northern Rock crisis
of September 2007, according to the Chartered Institute of Purchasing
and Supply yesterday. On top of this, the FTSE has rallied nearly 40
per cent since its March lows, and house prices have recovered to
levels recorded at the end of 2008.However, Mr Geoghegan fears recent gains in share prices
and property values are based on thin transaction volumes and are not
supported by the underlying economic fundamentals.

On top of this, the 'fiscal stimulus' efforts around the world
will begin to peter out next year as governments begin to tackle their
deficits and curb spending. Over the weekend, ministers from the G7 nations meeting in
Istanbul warned against complacency, arguing that economic prospects
remain fragile. The services sector recorded a reading of 55.3 on the business activity index in the month, according to
the purchasing and supply report. This represents an increase from the
54.1 seen in August and brings the average over the third quarter to
54.2. Both monthly and quarterly figures are the best performance in
two years. Economists welcomed the better than expected purchasing survey
results but warned that uncertainties remained over the pace of
recovery.

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Because everyone has started borrowing again living beyond their means. Bank lending is spiralling. Greed is back in fashion.........welcome to the cuckoo nest.
- damien trollope, oxford, 06/10/2009 09:54

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Because everyone has started borrowing again living beyond their means. Bank lending is spiralling. Greed is back in fashion.........welcome to the cuckoo nest.
- damien trollope, oxford, 06/10/2009 09:54

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When the toxic debt was reported banks withheld dividend and piled up reserves and refused to loan on mortgages, a typical greed reaction. But I guess they have not revealed the full amount of toxic debt,. and will earlier next year. reveal this to clean up their balance sheets creating a further round of deoression. When banks make a mess they want to grab it all back within one financial period and that is the cause of depression. The Bank of England base rate is there to help the banks and the public is not benefitting one iota.
- Dave, Worsley, Manchester, 06/10/2009 08:45

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DOOM-MONGERS.
You love all this misery, dont you?
- Tom, Cheadle Staffs UK, 06/10/2009 08:22

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The next item of Public Expenditure that needs to be reined in is our membership and contributions to th EC-that gravy train created by politicians who wish to enlarge their employment prospects when they wish to leave national politics behind. They then can spend their latter years in non-jobs with hugely inflated salaries and expenses and pensions.
Who pays for all this?
The mugs who slave away week after week just to pay their own bills and taxes.
- Peter McManus, London, England, 06/10/2009 03:53

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Liebour have borrowed a fantastic amount of money on that it will be repaid back in the good times that will 'definatly' follow shortly. Is there a law that states that economies return to their former positions after recessions? What would happen if the good/easy times were not to follow. Would we have a nightmare for the next generation?
- Clive, Burton on Trent, 06/10/2009 03:17

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