“Economists are split on what the March GDP figures will show, with forecasts ranging from 0.2 to 0.7 per cent. A reading of 0.2 per cent would be the poorest return since the December quarter of 2004.”
The new figures we are waiting on, due to be announced on Wednesday, will show that in the first quarter GDP has dropped. This is not important except to the extent that the Reserve Bank thinks it is.
Examining some differences between the recession “we had to have” and the recession we are going to have now, we see that we may be in for some paradoxical luck insofar as we could get an early impetus for the RESERVE BANK to do something (DO SOMETHING YOU DUMBASSES. CALL ME UP SO I CAN EXPLAIN THE WHOLE THING TO YOU!!!)
You see in the recession we had to have the deflationary damage, (quite apart from the damage done prior by excessive monetary growth) started unfolding a very long time before the idiotic conventional measures of recession told the monetary authorities that things were drastically awry.
DATE CASH DEPOSITS M1
The recession we had to have was officially something that happened in only 1991 and 1992. We see here however that we began our slow dive into recessionary conditions in December 1988. Where a country who had been used to double digit monetary and price inflation suddenly stopped expanding its money supply.
No matter how fast they expanded money after November 1989 it always was insufficient to reinstate adequate business investment since the expansion was always running behind two factors:
1. The prior momentum and reality of price rises, which lead to the money supply always being insufficient for the price level.
2. The growing resurgence of the DEMAND FOR MONEY FOR HOLDING.
The reason why the Reserve Banks response was insufficient was that:
1. They were then as now trying to manipulate the wrong metrics.
2. They were trying to raise interest rates in a bizzare attempt to rein in the trade deficit which their own sado-monetarism had exacerbated.
Now the thing is that the prior deregulation ( a good thing in most cases), other free enterprise measures……. in combination with with excessive monetary growth produced a barrage of huge investment plans in our businesses.
Under prior international conditions we would have started falling into recession (given that flattening of the monetary supply after being used to fast monetary growth) very early on. Probably the recessionary conditions would have been evident to the authorities by December 1989 or thereabouts. And all the big investment plans would have died in the ass in a classical Austrian breakdown.
But what happened instead is that these investment plans were carried through on the basis of international borrowing. Hence the high price of the AUD and the massive trade deficit blowouts.
Now I’m talking loosely about the year 1990. You see the finance had to come from overseas. Since in 1989 no net new loanable funds were being generated locally. During 1990, the investment boom which was still going on, was being funded overseas. The federal government was still generating these massive surpluses which were about the only locally generated savings there was.
Keating and others thought that the businessmen were acting perversely with this investment boom. He thought they had to cut it off with continuing high interest rate policies. Still I see it now that they were expanding the money supply during 1990. So they must have thought they had that side of things covered. And I’d want to go a bit easier on them then I would have prior to seeing the money growth figures.
But without looking at Gross Domestic Revenue and Productive Expenditure they would not have realized that there monetary expansion was way insufficient.
How was business going along at that point? They would have been doing it tough all through 1990. Particularly exporters. By any sensible measures the country would have been in recession already. They would have been in recession in reality if recessions were defined with regards to Gross Domestic Revenue and not the largely irrelevant measure of Gross Domestic product. But for the non-exporters at least there would have been some cost relief in terms of the high dollar reducing the price of some of the inputs they had to pay for. We would not expect them to be earning greater revenues. Quite the opposite. We would only have expected that their costs would have been somewhat under control.
What my main point is that business was doing it tough all through 1989 and 1990. Well before the recession figures showed that everything had died in the ass in 1991 and 1992.
THIS TIME WE MAY BE LUCKIER
It seems that this time the fall in GDP will come earlier in the piece and may hopefully tip off the Reserve Bank to do something (DO SOMETHING!!!! FLUSH THE PLACE WITH CASH YOU MINDLESS JERKS)
Its paradoxical because the last thing you want is for people to go into a severe recession up to their eyeballs in debt. But since we are now in recessionary conditions and every bugger is up to their eyeballs in debt it appears that retail sales are already beginning to tank. Since the bozos in the economics profession wrongly think that this is important it may tip them off to be pushing for some action.
WELL YOU CLING TO THESE FAINT HOPES WHEN EVERYTHING SEEMS HOPELESS DON’T YOU?