Scary times again in financial markets.

A little while ago I saw a chart of real UK GDP during the major recessions of the 20th century which made it all too plain that the normal pattern is double dip – only 1979-83 lacked that second downward dip, and even in that case there were pauses in recovery. That suggested the general good cheer about the recovery in recent quarters might be premature.

On top of that, there's what the central banks are doing. I'm not at all a hardline monetarist. On the contrary, my time in the Treasury in 1985-86, in the dying days of monetarism and with a role in creating new broad money aggregates to try and find one that wouldn't grow too fast, inoculated me against it. In fact, it inoculated me against macroeconomics and look what's happened in the 25 years since I stopped paying attention! However, when I look now at the massive liquidity being created, it's clear that there is – somewhere, asset markets for now – serious inflationary pressure.

And then the Irish crisis unfurled, and looking at the cross-exposures in the European and OECD banking system (good graphic in the FT, taken from BIS data – pdf file), is seems clear the financial crisis is BAAAACK!

Anyway, Ireland is an interesting case study, and a new book by Bloomberg reporter David Lynch has come to my attention – When the Luck of the Irish Ran Out. The blurb promises characters and narrative, so it sounds like a jolly read for those of us who don't know the country all that well. Its author has also recommended his top five books on financial crisis and they look like great choices. I certainly enjoyed the ones I've read.