The painless nature of the downturn looks all the more remarkable when it is considered

The painless nature of the downturn looks all the more remarkable when it is considered that it is not just the boom sectors of technology, telecommunications and media which are deep in recession. The events of 11 September poleaxed the airlines and insurance industries on top. Meanwhile, large parts of the investment banking industry are in a state of near paralysis Enronitis has only added to the misery. Both the size and number of high-profile insolvencies are far worse in this downturn than in the recession of the early 1990s.A business collapse on this scale would normally be reflected in very serious repercussions across the length and breadth of the wider economy. The reason it hasn’t is that policymakers have been able to sustain buoyant consumer confidence through sharp reductions in interest rates and a big expansion in credit. It has been a quite remarkable conjuring trick, again only made possible because inflation is at historically low levels The jury is still out on whether it is going to succeed.

So far it has, and encouragingly, there are now clear signs in the UK economy that business confidence and investment is beginning to pick up again. Policymakers may have succeeded in bringing about a Houdini-like escape for the wider economy which is quite without precedent in the history of the last two centuries.Unfortunately, the outlook for the technology and telecommunications sectors scarcely looks any better now than it was six months ago. In most big technological revolutions, the timespan between the peak of anticipation, which in this country roughly coincided with the launch of techMARK, down into the trough of despair and then back to where it was at the peak again, is about 10 years There is no reason this one should be any different. The extent of the losses suffered in the downturn might suggest even longer.Housing is golden The gold bugs are back with a vengeance. Actually they have been there throughout the bear market of the last two years, but it is only recently that anyone noticed them. So far this year, the price of gold has risen about 16 per cent. While the stock market has bombed, gold has soared, rising by some 20 per cent over the last three years.

Gold seems to have reconfirmed its reputation as a reliable store of value in troubled times.According to the World Gold Council, demand for gold jewellry fell by 15 per cent in the first quarter of this year, but this was more than compensated for by a 36 per cent surge in demand from private investors, particularly the Japanese. Why the renewed interest? As the world’s oldest currency, gold has always held a certain primeval draw, but these days it is increasingly shunned by nations as a currency reserve, while as an investment it suffers from the key drawback of not paying any income. Indeed, gold actually carries a faintly negative interest rate because of the security costs of holding it.No, the reason why gold is suddenly fashionable again is the same as that which is driving everyone into the property market. When you cannot trust anything else, investing in safe as houses bricks and mortar looks an increasingly attractive option. In Japan and elsewhere in the Far East, gold holds the added attraction of being a comparatively risk free and liquid alternative to sticking your money into an insolvent banking system, where you might end up losing the lot. With the dollar on the wane, poorly performing US assets have lost their allure, bonds have gone as far as they are ever likely to, and don’t even mention the stock market.The trouble with gold is that it is in essence just a gambling chip equally likely to become a bubble if enough people start to believe in it as the dot s. The Bank of England won’t admit it, but large parts of the UK housing market are already in the latter stages of a bubble.