Don’t Dream It’s Over…
Economists are bouncing up and down with glee saying that the recession is over. I view all of this buoyancy with a great deal of skepticism, not it the least because few economists seemed to be able to predict the derivatives disaster that brought us to this pass. It would be nice if they are right, but the MacDoctor observes that the words “dead”, “cat” and “bounce” could be applicable here.
One of the hallmarks of the depression was that people kept thinking it was all over – and then things took a turn for the worst again. I am no economist, as I have repeatedly said, but it does not seem to me that the amount of correction that has taken place so far is anywhere near as large as the amount of imbalance that needed to be corrected. This is purely a subjective gut feel, but this just feels like the eye of the storm brought to you courtesy of Obama-nomics, Gordo-splurge and Ruddistribution.
And talking about these stimulus packages, much of the spending will cease at the end of next year and the rest will slow to a mere trickle at the end of 2011. At this time, the cat may give one final, plaintive miaow before plummeting into the depths. MacDoctor will be greatly amused if New Zealand weathers the second recession well, because we did not empty the coffers on the first occasion. Sadly, I think I will not be all that amused.
Regardless of my Jeremiah ramblings, Mr Obama seems to have forgotten that someone, somewhere is going to have to pay for the massive debt he has built up. Someone will have to pay for healthcare for all. Someone will have to pay for the baby boomers pensions (forget the 401(k)s if there is a second recession). So regardless of the outcome of the recession(s), the next generation will be earning less than the previous because they will be paying substantially higher taxes.
Now that’s a recession – maybe not in economic terms, but certainly in the eyes of the man in the street.
Which brings me to my final amateur economist point. All the markers in the world will not help you pick the end of the recession. Until the average New Zealand starts to open the storm shutters on their household budget, the recession will not be over, regardless of the economic indicators.
And that time still seems a very long way off.
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- Did you see the one about . . . « Homepaddock — [...] Don’t dream it’s over - Macdoctor’s sure it isn’t apropos of which Not PC posts Hurrah! we’re round the ...
Sep 22 09 1:13 pm
The trick is that news reports filter out a lot of stuff in these forecasts (such as the margins of error and caveats attached to the forecasts).
In terms of the GFC, it’s pretty hard modelling toxic debt when the FI’s aren’t exactly putting this out in the public domain. But there were certainly plenty of warning shots fired from Cental Banks and other economic commentators. The state of our current account in NZ went into a steady blow-out from about 2003. Repeated warnings about this vulnerability were ignored by all-and-sundry.
In terms of the recession being over, the brutal reality is that all of these forecasts actually just state, that the relevant economies have stopped shrinking. That’s why the recession is “over”. Problem is that most economies are smaller and poorer than they were 12-18 months ago. It’s still not the time for a party.
It’s hard to see Western economies growing at the rate they managed in the 1990s and early 2000s now. I suspect a much slower growth path as personal wealth slowly and gradually gets built up. Unless we blow it all on another housing boom.
Chthoniid´s last blog ..Why do tigers get poached?
It’s not time for a party? – Gee, you’re no fun…
Sep 22 09 3:20 pm
I’m glad to see I’m not alone on this. I get mad stares when I say that we have not seen the worst of this.
These stares are often accompanied by rabid (and I mean literal foam around the mouth) arguments that house prices can only go up from here and that New Zealand economy is built around property booms and that the brits are going to buy up all the (now cheap) property in auckland and this will lead to us all sipping pina coladas in Fiji. Or something to that extent.
There is, contrary to economists, no rationality in markets after all.
Sep 22 09 5:39 pm
This is just the real estae ‘industry’ and various economists trying to talk the economy up.
We ain’t seen nothin’ yet.
kg´s last blog ..Obama fund-raiser ‘in $335 million fraud’
Sep 22 09 11:03 pm
How anyone can believe it is all better now is beyond this grumpy old bugger. The toxic \assets\ are still out there and until they are accounted for, the system cannot begin to heal itself.
Economists are no better than witch doctors shaking chicken claws on to the ground. Associated with the glee club of \financial market\ reporters and we have a happy happy all is well love in. At least that is what we are led to believe.
Sep 24 09 10:10 am
Funny thing is that most economics reports I’ve read, come with a lot of warnings about the nature and strength of the turn around.
Nonetheless, one area where economics has played an important role in the GFC is in terms of banking regulation. In NZ (and to a large extent Australia), banking regs have been designed by economically-literate people. We have a robust and profitable banking sector. In the US, the banking system has arisen out of competing political interests. Only in the US do you get FI’s created solely to lend money on one asset (housing) and special incentives to risky borrowers. This is simply inconsistent with the economic theories of banking.
Chthoniid´s last blog ..Why do tigers get poached?
Sep 24 09 12:29 pm
Nice use of the comma in your title, MacDoctor.
Kudos.
Ta. And thanks for the link…
Sep 24 09 2:52 pm
The real problem is that NZ’s economy is nowhere near in shape to compete with the rest of the the world. We know (from previous recessions and depressions) that NZ needs to get up to 20% unemployment for a real “clean-out”. We’re nowhere near there. There are MORE worthless public “servants” employed than there were are year ago. The benefits are HIGHER. The taxes are HIGHER.
NZ businesses returned less profits overseas than for the last 10 years – and the stupid MSM reported this as if it was a GOOD THING
Labour spent the last 10 years destroying NZ’s economy. Key hasn’t even started fixing things yet! It will take a long long time before we get out of this!