Here's a cool article in the SMH. The juiciest bit is here:
It would be nice if we could rule out the next Great Depression as a result of such committed actions. But the evidence on a worldwide basis is muted at best. Two economists, Barry Eichengreen and Kevin O'Rourke, have tracked the current crisis against the falls that occurred during the Great Depression. Their conclusions, updated this month, are unsettling: "World industrial production continues to track closely the 1930s fall, with no clear signs of 'green shoots' as [Bernanke] had labelled the recent signals of incipient recovery; world stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression." (See graphs, right)
The main difference, they point out, is the unprecedented policy response.
Bernanke's co-authored textbook, Macroeconomics, gives a flavour for how far we have moved from established economic practice, with governments of all stripes printing huge amounts of money to fund the spending packages.
"Heavy reliance on seignorage [printing money] usually occurs in war-torn or developing countries, in which military or social conditions dictate levels of government spending well above what the country can raise in taxes or borrow from the public." Usually. But now is not "usually".
The sheer amount of global government spending, without precedent in history, means predictability is very low. The economy takes off like a rocket? Maybe. The huge deficits used to fund the spending create - as a natural consequence - inflation? Maybe. A long, slow, grinding recession after depression is averted, akin to Japan's lost decade? Again, maybe.
While all this may seem fatalistic, it gives some context to the huge diversity of opinions about the world economy.
Central to the future is whether we have learned anything. The philosopher Herbert Spencer once observed: "The ultimate result of shielding man from the effects of folly is to people the world with fools."
To the detriment of former Federal Reserve governor Alan Greenspan's reputation, we were all fools after the Federal Reserve "saved" the US economy from the fallout of the dotcom bubble by keeping official interest rates low and alleviating the 2001 recession.
Yes indeed. So it would seem we are slap bang in the middle of an economic Depression which we've muted to a recession with gobs of public debt, that in turn will mute recovery for decades to come. Thus it seems we certainly won't be seeing the likes of recent prosperity for a good while yet. It really sucks to realise this, but there's not much you can do.
The prosperity itself was an unsustainable mirage. I don't think this reality has sunk in to the world just yet as I see the barrage of expensive Eurocars banked up in peak hour traffic. Or the insane consumerism that I see on weekends. It's as if people are in denial or they're indulging in expenditure as a way not to think about things too deeply. I'm sure people are cutting costs but you can't see it when everybody is out there in consumerland pushing trolleys like it's Christmas.
What I Did With My KRudd Money
I've spent it on dentistry. I was listening to the dentists and his assistant talking about the 90million lottery, as my jaw lay open, implements prodding around my teeth and gums. They were discussing what they might do if they won 90million dollars. My dentist said he would opt to work 6 days a week instead of 7.
"What?" I asked."You're saying you'd just keep working even with 90 million in the bank?"
"Yes," he said. "I quite like dentistry. I enjoy every moment I'm doing this. I love it, so I'd like to keep doing this."
I blurted out, "Doc, I love you man. I'm gonna keep on coming here."
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