Where’s All The Good News Gone?

Personally, I think the RBA are risking their credibility, but who’s to say they’ll remember anything they’ve said or done when good times return.  That is, if they return any time soon, of course.  We can only speculate.

Well, today The Daily Reckoning sent me the following:

The Economic Illiterati Speak

The Daily Reckoning Australia

–No news is good news. Or is it, good news is not news?

–Either way, the Reserve Bank of Australia departed from the global interest rate playbook yesterday. It left the cash-rate unchanged at a 45-year low of 3.25%.

–The “Australian economy has not experienced the sort of large contraction seen elsewhere,” wrote RBA Governor Glenn Stevens in the note that went out with the announcement. “The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers.”

–Blah blah blah.

–Okay okay. What has changed?

–Well, this is not the best news in the world for first home buyers, or for pensioners and anyone living off a fixed income. And the stock market doesn’t seem especially enthused about it either, given the early action today. The only positive reaction came from the AUD/USD. With Aussie rates fixed for another month, the yield advantage over the U.S. currency might (maybe) make the Aussie attractive to the last three risk-taking traders on the market (although given the current global state of fear, we’re not expecting a carry trade to resume any time soon).

–There was an absurd reaction though, among the economic illiterati. The RBA’s relatively reassuring assessment of Australia’s current status seemed to please most of the pundits on TV last night. “We have it bad, true,” you could imagine them saying, “but not as bad as everyone else. In fact, we have it so not bad, we’re not going to cut rates-just to show you how not bad we have it!”

— Australia’s economy held up in the fourth quarter, only just. The ABS reports that fourth-quarter GDP shrank by one-tenth of one percent. We know things weren’t so flash in China, Japan, America and nearly everywhere else on the planet.

–If Australia’s economy grows this year, it’s going to have a lot to do with the success of China’s $585 billion infrastructure stimulus plan. But that’s only if that plan works. And by works, we mean that it stimulates demand for Aussie resources.

I know my recent thread China’s Implosion Could See Re-Run Of Great Depression’ did seem a little dramatic.

SO, it’s all eyes on China to help pull us up by the bootstraps? Let’s hope their economy doesn’t implode then.  See. Some good news.

I also had the audacity to explain Why This Aint No Ordinary Recession Concern

I concluded by quoted Ross Gittins:

Punchline: as everyone from the International Monetary Fund to the US Federal Reserve chairman, Ben Bernanke, has warned, until the Americans fix their blocked banking system, no amount of fiscal stimulus or interest-rate cuts will make any difference.

Our economy will remain in trouble until they do.

And the The Daily Reckoning article concludes with:

–The bad news is that the global system of delivering credit and capital to businesses that can put it to efficient and productive use is broken. It’s a giant sucking wound on the body economic. Or, if you prefer, a mangled limb.

–Rather than amputating it, regulators and politicians are pouring more public resources into propping up the people and institutions that have failed. Whether they are doing it out of ignorance, ineptitude, collusion, or genuine conviction is irrelevant. They are effectively stealing future resources away from productive activity and using them to prop up unproductive activity for the sake of engineering GDP numbers that give the illusion of growth and normality.

So, what will happen next? I think it’s anyone’s guess.  And far from being reassurring the RBA are obviously trying to sit on reb’s fence.

Over to You

13 Responses

  1. Take a look outside your window reb

  2. Ouch! The AUSTRALIAN are off to a flying start

    We’re in recession already
    GET over it. The Australian economy is in recession right now, even if all the statistical dots are yet to be joined up. The question now is how deep and how long.

    The bad news, however, is that the business investment boom is likely to properly bust in 2009.

    And, from April, we will be hit by sharply lower export prices for coal and iron ore, which will take a big bite out of national income.

    There’s a lot of work to do to contain the recession of 2009.

  3. The ongoing struggle to fix the US financial system is bound to impact on banking and financing worldwide.

    “In his testimony, the Fed chief said that policy makers may need to expand aid to the banking system beyond the $US700 billion already approved, and take other aggressive measures even at the cost of soaring fiscal deficits.

    “Without a reasonable degree of financial stability, a sustainable recovery will not occur,” Bernanke said. “Although progress has been made on the financial front since last fall, more needs to be done.”

    The Obama administration last week unveiled a budget blueprint that included standby authority for as much as $US750 billion in new aid to the financial industry.”

  4. Let’s get real. There’s no way of fixing the machine without destroying the over-accumulation of faux capital and wrapping up the declining rates of commoditised profit in the smokescreen of the immediate currency of social dividend. And late-Keynes (1936-onwards), not the early-Keynes doing the rounds because it’s convenient to adopt the immature and less critical Keynesian version of countercyclical economic governance vis-a-vis deficit-spending, would say that’s where the new systemic counterbalance should stay permanently…more interventionist (and probably larger) government prescriptively engaged in orchestrating investment, towards production and social ends and away from the fetishism of accumulation as money-end-product, out of systemic surplus when there is a surplus; not a lurching pseudo-countercyclical policy where government fades in and out when capitalism paints itself into a corner and relies on deficit spending to prop itself up. It’s actually quite telling that most of the current crop of neo-Keynesians are still only telling less than half of Keynes’ macroeconomic prescriptions for ‘reformed capitalism’ and the State’s role in oversighting and regulating investment across the entire cycle.

  5. That’s precisely what I was thinking Legion.

  6. 😆 @ Reb.

  7. Legion

    You lost me completely

  8. Legion, on March 4th, 2009 at 4:30 pm Said:

    ” that most of the current crop of neo-Keynesians are still only telling less than half of Keynes’ macroeconomic prescriptions ”

    Less than half? Care to illuminate as to the other ‘more than half’.?

    Or was Keynes theorising about discrete ‘nation- states’ that, as a concept in Keynes’ terms, no longer exist?

    One wonders what Keynes would make of the ‘global economy’ and the way it now operates or maybe not (lol)? Or indeed what Marx or Mill would make of the current ‘democracy’?

  9. Nature 5, on March 4th, 2009 at 10:34 pm

    Less than half? Care to illuminate as to the other ‘more than half’.

    Not really. Except to observe that all the pollies citing their new friend Keynes aren’t all that careful either as they fail to describe the full parameters of a Keynesian stimulus prescription and its self-liquidation, nor how such a stimulus is part of a programme intentionally operating across a full cycle, present circumstances being one half missing its antecedent.

    Or was Keynes theorising about discrete ‘nation- states’ that, as a concept in Keynes’ terms, no longer exist?

    I’m not sure that discrete nation states existed even in Keynes time, which is why he tended to write about international issues like war, and peace, and economics, and global economics.

    One wonders what Keynes would make of the ‘global economy’ and the way it now operates or maybe not (lol)? Or indeed what Marx or Mill would make of the current ‘democracy’?

    Dunno, but Soros rips off Keynes for his post-Keynesian ideas for the global economy quite a bit without necessarily acknowledging their original source. If we’re talking about Marxians and Mills and democracies, we probaly shouldn’t forget C. Wright Mill, elites circulations, and their revolving counter-counter-cyclical economic theories and prescriptions.

  10. Where’s all the good news gone? How’s this for good news?


    Australian demographics has been overhauled. We’re growing, and that’s official. Not Dead Yet.

    I seem to recall some gloomy soul from Queensland saying last year that Harvey Bay was a lost cause, full of people waiting for god, or some such. Umm, well it will be doubling in size. Now THAT’s impressive.

    I guess the gloom merchant might just say “twice the case of my former claim”. More old farts…

    Except quite a few someones will have to build all those extra homes, provide all the extra services, extra cafe’s for their afternoon lattes/chinos/vinos, etc. Those someones are unlikely to be old farts. And those someones will probably have families and kids that need schooling, etc. Cue more public works…

    There’s still signs of life in Queensland, I would venture to suggest.

  11. I also think the Federal Government will be cutting back on immigration intakes whilst large scale job cuts are expected Elise.

  12. Hasn’t this already been mooted John? Can’t find an exact link, however did find: http://www.liveinaustralia.com/liaison/2008/dec/section2.asp Quote: As a result, potential migrants to Australia are urged to process their applications before the Government makes any changes to the migration quota.

  13. Boo, John!!! Go on, try and throw a wet blanket on it.

    Immigration would have to be cut by more than 15% to change the projection. Large scale job cuts don’t necessarily stop people from relocating. It may even prompt them into a life change for the better.

    John, I reckon you ought to go sniff some sea breezes, put your toes in the sand, paddle in the water, and have a takeaway chish & fipps watching the sunset. Might brighten you up a bit…no harm in trying!

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