Hilton at the NMBS conference: “Recessions aren’t what they used to be”

At the last all industry conference way back in 2008, Hilton warned delegates of what was to come in terms of the credit crunch and the recession. At the time, delegates didn’t believe him. Four years on, and his message has become more positive.
“People do survive [recessions]. Recessions aren’t what they used to be,” Hilton said. “The recession of the 1970s were far worse…but we had better weather.”

Hilton dismissed the current economic concerns of the mainstream media – the Eurozone and the spending cuts – as not a cause for alarm.

Describing the Euro as: “the Deutschmark with disreputable friends,” Hilton said that the problem is that Germany is so much stronger than the other Eurozone countries that they have to borrow to keep up. He compared it to the average person trying to keep up with an Olympic athlete – the only way we could compete with a professional sportsman is to take performance enhancing drugs:

“The performance enhancing drug that [Eurozone countries] have taken on is debt.”

The money is all in Germany, said Hilton but it’s needed in the south, in countries such as Italy and Greece. So money needs to be transferred from A to B. Germany is currently putting money into Greece to keep the German banks afloat, as they hold the Greek debt. Hilton said that Germany should cut out the middleman and bail out the banks directly.

Ironically, Hilton said that the best thing for the Euro would be if Germany left it, as the remaining countries would be on a more level playing field. Breaking up the Euro would not be the disaster that people make it out to be, he said – when the USSR broke up, its singular currency was also broken up – it did not spell economic disaster. “It’s not beyond the wit of man to break up a currency union,” he said.

Moving onto debt, Hilton said that the moral argument often attached to debt – that it’s amoral to pile on debt to our children – is misleading. “Everybody in this room that pays taxes are still paying for the First World War,” he said.

Hilton recommended that the UK needs to go back to the 1930s in order to recover. Although the early 1930s were a disaster, he said, we had 3-4% growth until the start of the war.

The real engine of growth throughout the ’30s was housing. We built 300,000 houses a year, every year.

The government is also beginning to understand this, said Hilton. Vince Cable has recently made the point that infrastructure doesn’t get the economy going because it’s too slow a process. Cable said: “If you want to get the economy going, it’s got to be through housing.”

It is likely that the government will pick up on this, said Hilton. The closer we get to a general election, the more likely it is to happen.

“As the election looms, the government is starting to panic,” said Hilton. “And the more the government panics, the better it is for the industry.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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