George Magnus, green shoot weed-whacker

“Recession’s end“, Bloomberg commentators included in their headlines on Wednesday night, while others noted that inventory reductions indicate that the economy is nearing a bottom. Green shoots, green shoots, green shoots, blah blah blah.

UBS’s senior economic adviser George Magnus is here to put an end to all this talk of plants, taking aim via his weed-whacking financial commentary this morning on banks, capital and what’s really needed to fix the financial system. Here are some excerpts:

This paper is about why it is such a slog to fix the financial system, and why we can’t really entertain ideas about economic recovery, other than short cyclical hiccoughs, aka green shoots, until it is fixed. The plot hasn’t changed since we first heralded Minsky’s financial instability as the template for this crisis, but the story evolves and the numbers change. So we will examine below where we are in terms of financial stability, and, using the just published IMF Global Financial Stability Report, highlight the key numbers that matter when it comes to three overarching, but incomplete, tasks: full re-capitalisation of banks, the swapping of debt-for-equity as part of a major debt restructuring, and the isolation of bad assets.