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A long recession

December 2nd, 2008

The National Bureau of Economic Research Business Cycle Dating Committee has just announced its judgement that the current US recession began in December 2007. A year old, and the decline is just beginning to accelerate. As these forecasters quoted in the NY Times say, the recession is virtually certain to be the longest since World War II (in fact, since the 1929-33 slump), and quite possibly the deepest as well.

The only silver lining I can see is that we might not hear any more silliness about the “technical definition” of a recession being two quarters of negative growth.

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  1. conrad
    December 7th, 2008 at 06:58 | #1

    No doubt GDP isn’t a perfect measure, but if the last 20 years wasn’t a great time to be living for the average person, at what time in human history was better and why? Personally, I think education, health (and hence lifespan), and easy access to consumer goods (like food in supermarkets) are important, so I just can’t think of any.

  2. Salient Green
    December 7th, 2008 at 07:26 | #2

    Damn it all being so busy, I’ve missed all the fun.

    In Cornucopia, fusion power is one of Pandora’s box of riches which will be bestowed upon humanity, along with a-biotic oil and AGW being a myth.

  3. Ian Gould
    December 7th, 2008 at 08:06 | #3

    Funny, I think global warming is real, think a-biotic oil is nonsense and am deeply skeptical about fusion power and yet I think the idea that modern society is doomed unless we embrace some form of green Stalinism is nonsense.

  4. nanks
    December 7th, 2008 at 08:16 | #4

    One of the problems the green movement faces is its association with puritanism. This association is not necessary, I can’t see why ‘green’ shouldn’t deliver a higher standard of living, but I believe the idea that green equals grim is there for many people.

  5. December 7th, 2008 at 11:15 | #5

    Thanks, PML.

    conrad, the GDP as used by neo-liberal ideologues for the previous three decades at least is a lie.

    It has allowed them to conceal the harm that their policies caused to the world economy, the environment and the lives of ordinary people for the past three and a half decades.

    The fact that so many people, including ostensible critics of neo-liberalism, accepted the veracity of the GDP lie is one factor that allowed the gangs of murderers, torturers, putschists and thieves, who have drawn comfort and ideological inspiration from Hayek, Friedman and their acolytes, to get way with what they have in most countries on the planet in this period.

    For the full story read the bestselling “The Shock Doctrine” by Naomi Klein which should be available in nearly every book shop in the country.

    conrad wrote, “… if the last 20 years wasn’t a great time to be living for the average person, at what time in human history was better and why? Personally, I think education, health (and hence lifespan), and easy access to consumer goods (like food in supermarkets) are important, so I just can’t think of any.”

    This is, in part, beside the point.

    Any one of us could also live well for a few years by agreeing to give equity in our own homes to bankers in return for loans as, indeed, many have.

    The people who have gained the most in recent decades are those who are either running the rapacious globalised capitalist system, which is now now destroying our planet or those most useful to them.

    I think a comment in the discussion arising from the abovementioned article “Living standards and our material prosperity” shows what the rest of us have got out of this situation:

    … I find myself in the same position, enjoying much fewer benefits, lower standard of living, and so on, and less money to do it on. Through no fault of my own, I hasten to add. A quick look at the demographics show this number increasing substantively. … Too many people are being forced into 3rd world conditions (and yes, I have seen some). Am I (and I suspect others) better off than my parents 40 years ago? No. On a comparative scale I have far fewer benefits than they did then. More importantly, they agree with this.

  6. Tony G
    December 7th, 2008 at 13:34 | #6

    The GDP figures are just figures, but to say this statement* is “beside the point” is to be in denial.

    * “if the last 20 years wasn’t a great time to be living for the average person, at what time in human history was better and why? Personally, I think education, health (and hence lifespan), and easy access to consumer goods (like food in supermarkets) are important, so I just can’t think of any.”

    This statement , Implying people in the first world are being forced into 3rd world conditions, can only be described as delusional;

    “Too many people are being forced into 3rd world conditions”

    When the facts state:

    Trends in poverty over time, Living standards have improved…

    “Living standards have risen dramatically over the last decades. The proportion of the developing world’s population living in extreme economic poverty — defined as living on less than $1.25 per day (at 2005 prices, adjusted to account for the most recent differences in purchasing power across countries) — has fallen from 52 percent in 1981 to 26 percent in 2005.

    Substantial improvements in social indicators have accompanied growth in average incomes. Infant mortality rates in low- and middle-income countries have fallen from 87 per 1,000 live births in 1980 to 54 in 2006. Life expectancy in these countries has risen from 60 to 66 between 1980 and 2006. .

    Adult literacy has also improved, though serious gender disparities remain. Male adult literacy (% ages 15 and over) rose from 77% to 86% in low- and middle-income countries between 1990 and 2004. While female literacy rates rose from 60% to 74%”

    Sure things could be a lot better for the bulk of humanity, but at least we are heading in the right direction, albeit at a much slower pace than most sane people would like.

    People in Australia who whinge about their economic circumstances are obviously detached from reality. If they cant identify what the poverty problem is and that “world poverty”, which unfortunately is decreasing too slowly,then they themselves are part of the problem and not the solution. No amount of tree hugging will change that.

  7. December 7th, 2008 at 14:23 | #7

    Tony G wrote, “People in Australia who whinge about their economic circumstances are obviously detached from reality.”

    Presumably Tony G would have us believe that housing unaffordability and the growing rate of housing repossessions, traffic congestion, bus and train rage, gardens withering and dying thanks to water restrictions, skyrocketing electricity and water bills, etc, etc, are figments of their imaginations.

    Even if we accept the veracity of Tony G’s social indicators. I wonder how much longer he expects it will be before those trends go sharply into reverse, given the global bio-fuel driven food shortages,the fact that the water tables beneath the Deccan upon which much of India’s agriculture depends are rapidly falling as are those in the West of the US, that world petroleum and gas reserves are dwindling, etc. etc.?

    The fact is that an enormous proportion of humankind, who used to be able to support themselves in farms now live in abject poverty in sprawling third world shanty towns as a consequence of globalisation.

    As one specific example, Mexican corn farmers had their livelihoods destroyed as Mexico was flooded with subsidized corn grown unsustainably with the use of fossil fuel based fertilisers from the US.

  8. December 7th, 2008 at 15:44 | #8

    Also, I would question the worth of any set of statistics compiled by a body such as the World Bank which has caused so much harm in recent decades to the people of the Third World on behalf of greedy corporations.

  9. Tony G
    December 7th, 2008 at 15:58 | #9

    Dagget,

    Anyone who was born in Australia or has permanent residence here is akin to have won lotto in world economic terms.

    So…whining about…

    “housing unaffordability and the growing rate of housing repossessions, traffic congestion, bus and train rage, gardens withering and dying thanks to water restrictions, skyrocketing electricity and water bills, etc, etc, are figments of their imaginations.”

    …is whinging.

  10. December 7th, 2008 at 16:14 | #10

    Has anyone else here noticed how Tony G’s argument has so quickly turned around 180 degrees?

    One moment he is spinning tales of how the World Bank, the IMF and globalisation have brought untold wealth and prosperity to the Third World in the past three decades, yet somehow, the ‘prosperity’ there is such that, by comparison, living in Australia, presumably, even as one of the low-paid workers described in Elisabeth Wynhausen’s Dirt Cheap is “akin to having won lotto in world economic terms”.

    Presumably, Tony G thinks that, until we have all reached Ethiopian standards of living, none of us have any right to complain.

  11. Ian Gould
    December 7th, 2008 at 18:41 | #11

    Nanks @104: “One of the problems the green movement faces is its association with puritanism. This association is not necessary, I can’t see why ‘green’ shouldn’t deliver a higher standard of living, but I believe the idea that green equals grim is there for many people.”

    If that was in response to my comment at 103, I don’t think a green lifestyle need be grim or puritanical.

    I do however think that attempting to create such a lifestyle by rejecting capitalism and embracing state planning is likely to ensure that life will be a lot more grim and puritanical than otherwise need be the case.

    I’m also not convinced any such attempt would work – certainly the history of actual historical and and contemporary socialist states doesn’t inspire hope.

    Similarly I’m not a fan of unrestrained markets as propsoed by Andrew and Tony.

    I favor a mixed economy and social democracy with government providing essential social services and intervening in the economy where necessary.

  12. Ian Gould
    December 7th, 2008 at 18:52 | #12

    Regarding living standards – I’ll refer people to the Human Development Reports produced by the United Nations Development Report.

    http://hdr.undp.org/en/

    http://hdr.undp.org/external/flash/hdi_trends/

    GDP is a pretty poor measure of quality of life – which is unsurprising because that isn’t what it was designed for.

    But life expectancy and educational achievement has been rising pretty consistently in the developing world since the HDI data started to be collected in 1975.

  13. nanks
    December 7th, 2008 at 19:11 | #13

    #111 Ian, I was responding to your comment on “green Stalinism”. I tend to associate control with puritanism hence the link onto excessive centralised planning. Like you I favour a mixed system. Limiting power, regardless of where that power resides, seems important.

    #112 A nice quote from that site – “As Aristotle said in ancient Greece, “Wealth is evidently not the good we are seeking, for it is merely useful for the sake of something else.”

  14. Tony G
    December 7th, 2008 at 19:52 | #14

    Daggett,

    One of us can not see the forest for the trees.

    (1)how do you relate US$1.25 per day the estimate for the international poverty line, to being “untold wealth and prosperity to the Third World”?

    (2)how can you justify that someone on the dole in Australia getting AUD$40 a day, the minimum for sitting on their arse with rent assistance, is badly off in world terms and they have “a right to complain” about it?

  15. Tony G
    December 7th, 2008 at 19:57 | #15

    Re Ian@111

    ” government providing essential social services and intervening in the economy where necessary.”

    Is that the same as this?

    “We believe;

    in the inalienable rights and freedoms of all people; we work towards a lean government that minimises interference in our daily lives and maximises individual and private-sector initiative;

    in government that nurtures and encourages its citizens through initiative, rather than putting limits on people through the punishing disincentive of burdensome taxes and the stifling structures of Labor’s corporate state and bureaucratic red tape;

    in those most basic freedoms of parliamentary democracy – the freedom of thought, worship, speech and association;

    in a just and humane society in which the importance of the family and the role of law and justice are maintained;

    in equal opportunity and tolerance for all Australians; and the encouragement and the facilitation of wealth so that all may enjoy the highest possible standards of living, health, education and social justice;

    that, wherever possible, government should not compete with an efficient private sector, and that businesses and individuals – not government – are the true creators of wealth and employment;

    in the Australian Constitution;

    in preserving Australia’s natural beauty and environment for future generations; and

    that our nation has a constructive role to play in maintaining world peace and democracy through alliance with other free nations.”

  16. Tony G
  17. Ian Gould
    December 7th, 2008 at 22:05 | #17

    re 115 – No, Tony, it is not.

  18. December 8th, 2008 at 02:14 | #18

    Tony G,

    I support adequate social welfare payments being paid to every citizen of this country who is unable to obtain a job with decent pay and conditions because I believe everyone in this country is entitled to a dignified life.

    I can see that you don’t and that you resent ordinary people in this country being able to enjoy standards of living substantially better than those of people living in abject poverty in Ethiopia.

    No doubt you apply completely different standards to corporate high flyers, land speculators and other overpaid bludgers.

  19. Tony G
    December 8th, 2008 at 09:13 | #19

    “because I believe everyone in this country is entitled to a dignified life.”

    That is the fundamental difference between you and I, because I believe everyone in this WORLD is entitled to a dignified life and that this world and its environment is more than capable of providing it, if only the will and actions of man would be allow to do it.

    “I can see that YOU don’t and that YOU resent ordinary people”

    “No doubt you apply completely different standards to” ordinary people in different countries.

    Like the many other misguided ‘so called environmentalists’, you are not willing to work with the environment to get the most out of it, this would benefit a large part of our environment, humanity.

  20. gerard
    December 8th, 2008 at 21:47 | #20

    tony G’s #115 shows why so many people with traditional Liberal values abandoned John Workchoices Howard at the last election, leaving only the mental and moral midgets to support a party that had long since sold out whatever half-decent principals it had ever had.

  21. December 9th, 2008 at 01:14 | #21

    Tony G. wrote:

    … I believe everyone in this WORLD is entitled to a dignified life

    I consider this humbug.

    Your resentment of supposedly ‘privileged’ people in the First World seems only directed at unemployed and the working poor who, it seems, just don’t appreciate just how good they have got it, whilst you have nothing to say about the rich.

  22. December 9th, 2008 at 21:48 | #22

    All,
    I go away for a few days and Tony G (and others) have all the fun. Oh well.
    I note that SG has suddenly gone all quiet about the difference between opinion and fact – surely he cannot just be avoiding the question? Nooo, surely not.
    SG,
    You seem to have a fixation with nuclear power – either fission or fusion. While I think you are entitled to develop either of these, I will probably not be putting my money into either any time soon, although fission may work if the waste problem can be dealt with. Some solutions seem possible, but you seem very keen to mention it at the drop of a hat. Go for it!

  23. Alanna
    December 9th, 2008 at 22:05 | #23

    #110 Daggett

    Wait not to much longer and my bet is we may see the US turn protectionist first. A lot of grumpy citizens and a lot of jobs gone or going to China. Their trade deficit is massively unsustainable. NAFTA bickers with the EU. Already the co operation of the US with the WTO is sliding and WTO is reduced to discussing climate change and other matters instead of free trade initiatives. DOHA suspended. The IMF is coming under fire for the harshness of its loan conditions and some apalling financial management in the Asian crisis and…why am I starting to see pay for this data buttons on their websites?

    Funding problems?

  24. carbonsink
    December 10th, 2008 at 07:24 | #24

    Ian Gould:

    It seems Glenn Stevens is not in denial about China: Tough times for China, says Reserve

    CHINESE growth is slowing more dramatically than is commonly understood, the governor of the Reserve Bank, Glenn Stevens, said in a speech last night…

    He said the Chinese economy, whose health is increasingly important to Australia, had been hit hard by falling exports to big economies.

    “But more than that seems to have been occurring,” Mr Stevens said.

    “I am not sure that many economic forecasters have fully appreciated this yet. There is every chance that the rate of growth in China’s GDP is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009.”

    The Times: China’s GDP set for first fall in seven years

    Net exports accounted for almost 3.0 percentage points of last year’s 11.9 percent gross domestic product (GDP) growth.

  25. Ian Gould
    December 10th, 2008 at 09:50 | #25

    From the Stevens’ article: “There is every chance that the rate of growth in China’s GDP is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009.” ”

    Show me where I ever denied this was the case.

    My point is that so long as the Chinese economy continues to grow, Chinese demand for Australian raw material is likely to continue to grow.

    We’re going to see further declines in prices but volumes are likely to continue to rise.

    From the Times article:

    “Imports are declining not just because of lack of domestic demand. As much as half enter China for processing, but as export demand drops then the imports needed for this cheap assembly work bolting together bits and pieces from the rest of Asia is also declining. ”

    Which is the point I was making earlier.

  26. Tony G
    December 10th, 2008 at 13:55 | #26

    Daggett said;

    “Your resentment of supposedly ‘privileged’ people in the First World seems only directed at unemployed and the working poor who, it seems, just don’t appreciate just how good they have got it, whilst you have nothing to say about the rich.”

    I can see how someone in your position (bourgeoisie middle class) might view the “unemployed and the working poor” in Australia as hard done by. You might also view someone with 30 times your own income as “rich”.

    Can you contemplate how someone in a third world country living on the poverty line of close to a dollar a day, might view someone on 30 times that income (Australian dole bludger) as “rich”? Considering this Australian gets free health care and cheap 21st century accommodation with a lot of the mod cons thrown in, its a no brainer.

    In relative terms both are worse off, but someone on the poverty line in a third world country is much worse off than a dole bludger in Australia, in real terms.

    Of course I “have nothing to say about the rich”, because I, like ‘ALL AUSTRALIANS’ are rich relative to the bulk of humanity. In Australian terms I am “working poor”, but I do not begrudge anybody better off than myself. In life there are always many better off or worse off than yourself. (Although a large proportion of humanity is worse off than Australians)

    It is a slippery pole the ‘politics of envy’; labelling people and attacking them, because they are ‘perceived’ to have more, yet in this world it is very difficult to find many if any, willing to have less so others not so fortunate can have more.

  27. carbonsink
    December 10th, 2008 at 19:12 | #27

    I see Ian, still firmly in denial then.

    Net exports are now negative, so that’s 3% off the growth number already. Then consider the collapse in real estate prices and the Chinese stockmarket and you’re looking at a growth number closer to 4% than 8%.

    Meanwhile Chinese electricity consumption actually fell last month, Chinese power companies are bleeding money, and according to this, its all because heavy industry has slowed down dramatically:

    “The current drop in electricity demand is almost entirely an industry story,” said Trevor Houser, a principal at the Rhodium Group in Washington. “It’s a poor indicator of macroeconomic performance.”

    Last month’s electricity production figures confirm that Chinese heavy industry is in deep trouble. But electricity consumption by households and services sector enterpises has hardly faltered.

    The big five energy-consuming industries – steel, chemical, cement, aluminium and paper – account for 40 per cent of total Chinese power consumption but only employ 1 per cent of the Chinese population. The good news is that China is merely undergoing a traumatic shift away from high-polluting, low-employment heavy industry rather than a collapse of the overall economy (complicated by slowing growth in Chinese exports).

    The bad news is that the fate of Australian mining companies and perhaps the Australian economy is tied to Chinese heavy industry

  28. carbonsink
    December 11th, 2008 at 08:37 | #28

    Alan Kohler is not in denial about China: China cracks

    It is the final shoe to drop for global recession and spells the end of the super-cycle. There must now be serious doubt about whether the crash in commodity prices since July is a short-term correction.

    For Australia this is an unmitigated disaster. It virtually ensures that we will spend much of next year in recession.

    Oh, and Chinese electricity consumption dropped 7% YOY in November:

    An official of the China Electricity Council revealed last Friday that output of those power plants under the administration of the central government slumped 7% year on year in November, and that the power industry is doomed to losses this year.

    Still in denial?

  29. carbonsink
  30. December 11th, 2008 at 13:47 | #30

    Tony G.,

    Your attempt to further fan the flames of resentment at supposedly privileged ‘dole bludgers’ whilst claiming not to begrudge those more wealthy than yourself is instructive.

    So what is your definition of ‘working poor’ whose mantle you now want to don?

    Are you telling us that you work as a cleaner? a delivery driver? a construction project traffic controller who has to stand in the sun breathing toxic petrol and diesel fumes for at least 8 hours of every working day?

    The true politics of envy are from the elites who resented having to share any of this country’s wealth with this county’s workers and the middle classes. That is why white collar jobs have been off-shored to slave wage economy and training opportunities that used to be available to working class kids to gain skilled occupations with paid apprenticeships working for Telstra or other Government utilities have been taken away.

    Tony G wrote:

    “Can you contemplate how someone in a third world country living on the poverty line of close to a dollar a day, might view someone on 30 times that income (Australian dole bludger) as ‘rich’?”

    I can see what I posted above about the World Bank’s idiotic measure of wealth in the world has gone completely over your head.

    I will quote from it again:

    “… according to the common understanding of what can be bought in the US for $1 a day, the people that fall under this definition ought all to be dead. …”

    Only an economist with no capacity to understand the physical word would accept that the unemployed in Australia are 30 times more wealthy than those in the Third World.

    If you literally cut the incomes of the unemployed by 30, how many would be left alive after two days or a week?

    Simple commonsense would show that statistic to be nonsense, but it’s a convenient lie to peddle so that the greedy elites that you worship and serve can continue steal more of the wealth of the rest of the community for themselves.

    Obviously most Third World are significantly worse off than even Australia’s unemployed and working poor and that should be of great concern to all of us, but the difference is nowhere near what you would have people think it is.

  31. Tony G
    December 11th, 2008 at 16:48 | #31

    Daggett,

    It looks like we are finding some common ground;

    “Obviously most Third World are significantly worse off than even Australia’s unemployed and working poor and that should be of great concern to all of us, but the difference is nowhere near what you would have people think it is.”

    From experience I can tell you the income line between the working poor and a dole bludger is very thin and in some cases non existent. (EMTR debate is something best left for another day) I can quite adequately survive at that income level, although I choose to work as opposed to receiving it non-gratis.

    Dr Sachs quote above alludes to “extreme poverty means that house holds cannot meet basic needs”.

    IMHO, in Australia basic needs in the bulk of cases are met, in the third world there are a lot of needs not being met.

    “The true politics of envy are from the elites who resented having to share any of this country’s wealth”

    I concur with you that it is “elites who resented having to share any of this country’s wealth”, but unfortunately it is a case of the ‘elites’ (residents) in the first world exploiting the “workers” in the third world. Also, by hoarding the worlds wealth within their countries and not sharing it with their underprivileged third world cousins, they are compounding the problem and exploiting them further.

  32. Ian Gould
    December 11th, 2008 at 17:43 | #32

    “Only an economist with no capacity to understand the physical word would accept that the unemployed in Australia are 30 times more wealthy than those in the Third World.

    If you literally cut the incomes of the unemployed by 30, how many would be left alive after two days or a week?”

    They’d be alive – sleeping rough and eatign out of rubbish bins as their counterparts do ion the developed world.

    Only a smug arrogant pampered westerner with no idea of how tough people have it in the developing world would write such shameful nonsense.

    I’ve lived on the dollar, I have friends who do so right this minute.

    I can assure you that while it’s unpleasant and humiliating it’s far, far better than being one of the one billion people on the planet in imminent danger of starvation.

    Poor people in Australia worry about giving their kids nutritious meals and presents for Christmas. Poor people in Africa worry about whether, if they eat the last of the porridge, their child will die of starvation – but on the other hand if they give it to the child they may be too weak to walk into town tomorrow to look for work.

  33. Ian Gould
    December 11th, 2008 at 17:47 | #33

    “Still in denial?”

    Still dancing with glee as the glorious day of revolution approaches?

    Breathlessly posting every link you can find which appears to support your position – seemingly without reading much less comprehending them – is not a substitute for a reasoned argument.

  34. carbonsink
    December 11th, 2008 at 18:16 | #34

    Breathlessly posting every link you can find which appears to support your position

    Appears?! What planet are you on?

    Ok, here we go again: FT: Prudent Asia is unlikely to bail out the west

    Yet, if you were to conclude that Asian consumers, flush with government handouts, are about to spend the world out of trouble, you are in for a disappointment. For a start, outside Japan, Asian economies simply lack the scale to act as global locomotive. Stephen Roach of Morgan Stanley shows a bar chart in which Chinese and Indian consumption are barely visible alongside the towering demand of the US and Europe.

  35. Ian Gould
    December 11th, 2008 at 21:45 | #35

    Carbonsink, I’m disinclined to be further abused by you so I’ll restrict my comments for the moment to one of your semi-random spray of links.

    So let’s take a look at Chinese energy demand:

    1. Demand in late 2007 was unusually high because of construction work associated with the Beijing Olympics.

    2. Large parts of Chinese industry shut down in the lead-up to the Chinese New Year. It’s essentially the only extended holiday in the Chinese calendar and millions of Chinese take leave to travel to their home villages. As a lunar festival, the date of Chinese New Year shifts about from year to year. The 2009 Chinese New Year falls unusually early.

    3. China’s weather was unseasonally hot in November, cutting power demand.

    But all that’s nonsense, the Capitalist Dragon is slain and the dawn of socialism is at hand.

    You’ll be liquidating Kulaks in no time.

  36. December 11th, 2008 at 22:13 | #36

    ‘”…If you literally cut the incomes of the unemployed by 30, how many would be left alive after two days or a week?” They’d be alive – sleeping rough and eatign out of rubbish bins as their counterparts do ion the developed world’.

    Oh, no, they wouldn’t, at any rate not many of them for very long. Thinking they would is a fallacy of composition.

  37. Ian Gould
    December 12th, 2008 at 00:41 | #37

    I will confess that prior to your use of the term I was unfamiliar with the term “fallacy of composition”.

    Having familiarised myself with its meaning, its relevance to the discussion remains unclear to me.

  38. Tony G
    December 12th, 2008 at 04:58 | #38

    Saying “they wouldn’t” could be a Hasty generalisation. The will to survive is a strong one.

    “fallacy of composition”.

    Abstract labels won’t make it possible to predict what would happen under those extreme circumstances.

  39. carbonsink
    December 12th, 2008 at 07:18 | #39

    Ian Gould @ 135:

    Yeah right mate, its the weather, and the Chinese New Year. It couldn’t possibly be that all of China’s export markets have simultaneously entered the steepest downturn in 50 years.

    I am no anti-capitalist, so I don’t know where that came from. The Chinese form of capitalism, of saving and investing in productive capacity, is in many ways preferable to the (recent) US form of capitalism. i.e. Debt fueled consumerism, an oversized financial sector, and investment in unproductive assets.

  40. rog
    December 12th, 2008 at 07:38 | #40

    The Beijing Olympics only affected Beijing and the construction activity would have been offset by industry shut down pre Olypmics. Nationally electricity has been down for 2 months and is matched by a fall in exports.

  41. carbonsink
    December 12th, 2008 at 09:48 | #41

    Careful rog, according to Mr Gould, if you think the Chinese economy is slowing, you’re an anti-capitalist…

    WSJ: Slowdown In China Gets Worse, Increasing Global Woes

    China’s economy is slowing particularly sharply because the export decline is combining with slackening domestic demand. Housing sales have dropped and prices are declining in most major cities. New construction has dried up, which saps demand for steel, cement and copper.

    Consumers are holding off on other big purchases: Car sales dropped 10.3% from a year earlier in November, the third monthly decline this year

    The Chinese are behaving like everybody else is in tough times. They’re cutting back spending, saving more and paying down debt. Its the Asian way.

  42. December 12th, 2008 at 10:25 | #42

    IG, if they all had their incomes reduced thirty-fold, they couldn’t all survive in the manner you describe. Your observation would only be correct if they all still had the access to dumpster diving etc. after they all started that an individual would if he alone were faced with that.

  43. observa
    December 12th, 2008 at 10:32 | #43

    One thing we do know for sure is the Rudd Govt are now crystal clear about where our economy is heading with the following move-

    Businesses with an annual turnover under $2 million will be allowed to postpone 20 per cent of their next Pay As You Go (PAYG) tax instalment – due in January and February – until they make their annual return.

    The measure – to be announced by the Government today – aims to offset tax liabilities, incurred during a time of higher growth, but paid when small business turnover is in decline because of the economic slowdown.

  44. carbonsink
    December 13th, 2008 at 09:55 | #44

    Michael Stutchbury is not in denial: Our China crisis

    This China crash challenges the national conceit that, while the global financial crisis is producing the deepest worldwide economic downturn since the 1930s, Australia will be spared the worst of it. Sure our banks are holding up, in part because Australia’s resources boom meant they didn’t have to get exotic to turn big profits over the past half decade. But now our blessed strength in mineral resources is turning into a Lucky Country curse. For Australia, the transmission of the US-sourced global financial crisis is being amplified via China through a sharp fall in commodity export prices, the exchange rate and national income.

    “We have gone from the phase where China was protecting us to the phase where China is dragging us down,” says Access Economics director Chris Richardson.

    In time, Australia’s China crash will force some needed national soul searching. What is Australia left with after half a decade of the mother of all commodity export booms? How much of this temporary bonanza have we invested in the future? How much have we put aside for a rainy day? What should we do if the China growth machine picks up again? What if it doesn’t?

    The answers won’t be pretty. In the meantime, two successive quarters of declining output of goods and services won’t be the worst of it. “We do forecast a recession for Australia,” Richardson says.

    “It is now inevitable.”

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