There will be a lot of new millionaires made this year

They will be the people who choose exactly the right moment to start spending money, to expand existing businesses and to start new ones, and to start buying property and shares again instead of selling them.

The difficulty – and this is where these people really will earn their money – is selecting precisely the right moment.

Reading the signs takes particular skill, because the signs are so contradictory. The markets are improving, there is little talk now of a banking crash, and economists say the worst of the recession could be over this year – but at the same time, the list of business failures and job losses gets grimmer by the day, especially since it includes more and more names which most people thought were recession-proof.

Every bit of good news is followed by some bad news – and vice versa.

The key to making sense of all this is to understand that we are dealing not with one economic crisis but with three. Although the three impact on each other, each has its own causes and effects – and, most importantly, its own timescale.

1   The Banking Crash. This is the crisis of confidence in the banking sector that threatened to destroy liquidity last year. The coming of the long overdue recession – see below – was only the spark that ignited the huge pile of dynamite that had been built up over many years by greedy bankers adopting short-sighted lending policies. The panic measures taken last autumn to prevent a total collapse of the financial system were flawed and crude but, credit where credit is due, no pun intended, they stabilised the situation: the patient is still very sick but, for the moment at least, he is out of immediate danger.

2   The Actual Recession. The official definition of a recession is two successive quarters of “negative growth” – what everyone who is not an official would call “contraction”. Whatever idiot politicians might say, the economy is cyclical. A slowdown was long overdue but was delayed – and made worse – by governments in the USA and the UK borrowing in order to spend. Our podcasts have always predicted recession would come – but there is no reason why it should not pass fairly quickly. Recession, in the technical sense, ought to pass soon, but...

3   The Hangover. Even after the recession ends according to the official definition, the practical consequences will be with us for a long time to come. Experience shows that the worst insolvencies and job losses often come after the technical end of the recession, because most companies fight to the end, even after they have ceased to be viable. Many of these businesses and jobs are gone for good – at least in their old locations. Countries like the USA and the UK face additional long-term problems because their governments were panicked into running up huge deficits to fund ill-considered short-term “stimulus” packages. These did little good, even in the short-term, especially since the worst of the banking crisis was over by then, but the money must still be found to pay for them. At best, recovery will be a long, slow, painful process.

So there are three key recovery points: one might have passed last year, one might be passed late this year or early next year, but the third may be many years in the future.