Are Westpac employees sniffing glue?
This is the Westpac chief economist Brendan O'Donovan on the NZ economy...
O'Donovan is far more upbeat: "Personally I think New Zealand could have a ripsnorter of a year and I think we could be on the cusp of a golden decade in terms of economic prosperity.
"I know that is extremely unfashionable. We only seem to be happy when we are miserable."
Ummmmm, what? Are Westpac employees sniffing glue? There seems to be a mentality amongst some that if we just put on a smile and a cheery disposition, this recession will be over and the lambs will be lying down with the lions and world peace will break out. If O'Donovan had been on the Titanic as it was sinking he'd be explaining how great the ocean views are and that now was the time to buy another ticket. he's as delusional as desperate Real Estate agents screaming there's never been a better time to buy property.
So according to O'Donovan, this is NOT a crises of Capitalism, it is in fact "the cusp of a golden decade in terms of economic prosperity."
As I've posted previously, the great recession IS a crises of capitalism in the exact same way 1929 was, but according to O'Donovan it's the cusp of economic prosperity.
Sadly for O'Donovan, I just finished reading 'Crises' by Alan Bollard, and his thoughts on the current recession. Surprisingly the Central Bank Governor doesn't seem to share O'Donovan's optimism.
University of Chicago academic Raghuram Rajan author of 'Has Financial Development Made the World Riskier' 2005 doesn't agree with O'Donovan either and neither does Gillian Tett, author of 'Fool's Gold: How the bold dream of a small tribe at JP Morgan was corrupted by Wall St and unleashed a catastrophe' 2009.
But fuck them, according to O'Donovan, it's cusp time.
Forget that (as Alan points out) that these financial instruments were misused and ended up with derivatives that wrote up a quadrillion dollars - that's $1, 000, 000, 000, 000, 000. Fuck that right, cause O'Donovan says it's a mere flesh wound.
Alan recalls a late night phone call with the chairman and deputy chairman of a giant international bank who told him this is the worst crises of their careers. But screw that right O'Donovan?
Alan of course himself described the crises as the largest financial shock since the Great Depression - WHAT DOES HE KNOW? O'Donovan says it's a cusp.
All Governments did was take on the debt of the greedy private sector, we've simply kicked the can of the correction down the road a couple of years, but screw that right O'Donovan? This is a mere bump in the road towards prosperity, the way President Hoover would keep crying out during the Great Depression, 'Prosperity is just around the corner".
What we saw from this great recession was the US Fed, the European Central Bank, the Bank of China, the Bank of England, the Swiss and the Swedes all cut their rates by 50 points on Tuesday 7th October 2008, the magnitude of what happened demanded that response, to claim that we are now on a cusp after those types of reactions misses what happened and what's left to come by such a spectacular amount, I feel the need to urge Westpac to piss test O'Donovan.
According to O'Donovan, this isn't a global reshaping of the hegemonic economic super structure of the Washington Consensus, oh no, this is the beginning of the age of Aquarius.
I like Israeli central bank Governor Jacob Frenkel who said "We've spent the last ten years talking about imbalances building around the world. We all agreed those weren't sustainable. What did you expect"? But what does he know eh O'Donovan?
Ben Bernanke in a Time interview in 2009 said, "We came very, very close to a depression. The markets were in anaphylactic shock" - what does he know?
In October 2008 we had a run on $100 notes - YAWN. By the end of that month the equity markets around the world lost half their value, $30 Trillion US - as Alan points out stock prices had dropped deeper, over a longer period BUT publicly listed companies had been a much smaller part of the economy and did not figure in most people's savings, where as nowadays the impact is across society and damages many more.
The current recession is steeper and deeper than the 1973 oil crises, the 2000 tech crash, the recessions of 1980, 1990 and 1981 yet according to our boy O'Donovan, the good times are about to roll.
I don't think for one second this recession has even played out to half time yet, and that the best case scenario is un-ending economic pain till 2018.
Mr O'Donovan is as medicatedly optimistic as our Prime Minister. Sticking ones head in the sand is not a solution.
We are in for very hard times and the most vulnerable in our society are the ones who will be asked to pay for the greed of corporate America.