Good news on economic front

[Jovial Monk]

From poor old Lefty:

Yeah, I agree that really we are in recession. But by crikey, we are doing better than almost everyone else in the world.

Government spending works. It has underpinned jobs in the retail sector (inc wholesale, transport and storage). And it has given us a trade boost as well.

Poor old Allbull and Shrek just don't seem happy at the relatively good news - can't imagine why

[Leftofcentresalterego]

Yes, woe is me. The pariah of the forum

But unlike Allbull and Shrek, I have a couple of things to be happy about:

1. our economic performance in the face of the worst financial crisis since the depression.
2. the maroons beat the blues and,
3. my chocolate stout is coming on more quickly than I expected. I couldn't smell or taste the chocolate at first, but now it's really coming to the fore.

Question for JM: I really badly want to brew another chocolate stout this weekend but my small fermenter already has a brew in it. I have a 60 litre fermenter spare - can I make a 23 litre brew in this without risking infection due to the size of the headspace?

[JW Frogen]

The consumption spending incurs a cost of higher interest on government debt and or a deflated currency in the future, so it is like a suger high, big economic rush, latter the fall. Still, if the government's spending on infrastructure, the second part of the stimulus, actually adds real value to the economies productivity, value that offsets the debt incured for consumption spending, then I will state that the balance of short term spending to relieve pain at future cost was warrented.

[Jovial Monk]

What Attabull juicily calls 'cash splashes' have been little more than pension increases and tax cuts brought forward and made once-only. All good--if there is a really long recovery the debt might become an issue but still plenty middle class welfare to be removed so even that wouldn't be a disaster (except for the poor fluffy bunnies unemployed for a long time.)

[Leftofcentresalterego]

Except that the debt is not being used to pay for consumption spending - they have simply issued fiat for that purpose. The debt has nothing to do with fiscal policy and everything to do with monetary policy - a $ for $ debt must be issued when running a defict to ensure that the central bank can hit it's interest rate target. What makes you think it could be deflationary?

[JW Frogen]

Lefty, you want your cake and eat it too.

They have incurred a debt, even they admit it. They just say it is justifiable. Fiat spending without acknowledgement of debt destroys the value of any currency.

I get it, you don't want to get it. You just want a spoon full of suger to pretend reality does not have to go down.

[Leftofcentresalterego]

Froges, the longer we have held an entrenched belief, the harder it is to come terms with the fact that it is incorrect (in such an event). I was once a red rag waving, hammer and sicle clanging communist. Even after 1990, it took me a while to accept that Soviet-style communism sucks badly (I remain a socialist).

The bulk of the deficit is the result of the downturn, not additional government spending. That is a fact. The automatic stabalisers would have had us in deficit no matter which mob were running the country. Any attempt to balance the budget now would drive us more deeply into recession. Do you see any country out there currently attempting to balance it's budget?

By constantly asserting that any increase in the money supply will automatically devalue the currency, you are not showing much faith in the market to respond to the prospect of increased profits. Why would a small increase of a couple of percent not stimulate firms to increase output? We have just witnessed retail turnover increase at a time when it should have been crashing. Increased money supply from increased goverernment spending = increased deposits in commercial banks = increased spending = increased output. But of course, some of this will also be soaked up in savings.

Tell me how, if the supply of liquidity does not steadily increase, how we can keep purchasing more and more with less and less? Other than to run down private savings and rack up private debt, which cannot go on forever. How can we forever grow on the exact same amount of the medium of exchange? I can't see how growth in the modern economy is possible without deficit spending somewhere along the line. Tell me how Australian governments managed to keep their economies in permanent (small) deficit for decades without runaway inflation?

The ideas of how our economy functions that are being repeated in the mainstream media are OLD. They hark back to 1970 or further. Several huge changes have occurred since. The Bretton Woods system was dismantled in 1971 and later on Keating floated our dollar. Rules that applied to the economy as it is conceptualised and presented to us, ceased applying years ago. We need to understand that.

[Sappho]

There are bubbles in the bond market Lefty... big bubbles that the threat of inflation or real inflation can pop!

[Jovial Monk]

Swan and Rudd yesterday were careful to say the business people and consumers were resilient and played a big part in the achieved figure--no hubris. They were also careful not to overdo the crowing (they WERE entitled to do some) because other countries did go backwards in the March quarter and no one is saying danger of a recession is over.

I believe we ARE in recession, but we need to define what we mean by recession

1. there is the so-called 'technical recession' marked by two quarters of negative growth. I don't subscribe to this

2. I am not an economist (may have studied it a bit more than most here back in '77 or so) but I think a good definition of a recession is a sustained period where growth is not enough to absorb all new entrants to the workforce.

By definiton 2. we are in recession and have been for a year.

Non farm production provided a welcome lift to GDP, farm exports are going gang busters and are a real bright spot and the good rains in SE Australia should mean this continues. Iron ore is back in demand to a small extent and at prices about 1/3 of those in the mining boom. Overseas students are also still here in huge numbers, hopefully the rising Aussie and those racist dingbats don't start drying up this source of national income.

[JW Frogen]

Groan.

This thread is one reason I drink.

Well, an excuse anyway.