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Thursday, December 30, 2010

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."

Right.

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.

Really?

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.

16 Comments:

At 30/12/10 7:42 pm, Blogger Billy Mckee said...

Well said Bomber, he may have just been speaking for himselfe as the govt will rush to bail him out for any financial problems.

 
At 30/12/10 8:51 pm, Blogger sdm said...

No way this is 1929. Do u expect 25% unemployment? The economy to contract by 10%? wages to drop by 40% the facts don't line up, you are being hysterical.

 
At 30/12/10 8:55 pm, Blogger Bomber said...

Scotty, scotty, scotty - seeing as this post is a blow by blow repeat on a post you made below, PLEASE read my attack on you and everything you claim below before getting pasted in this post as well ok princess?

 
At 30/12/10 9:30 pm, Blogger sdm said...

Bomber: I agree that this is VERY serious. But its not 1929. Just because someone is sick does not mean it is dying. This is a bad recession no doubt, but it is not a depression. The figures dont add up. As emotive as you want to get, you are simply incorrect - we will not be queuing for milk and bread outside the corner dairy!.

"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."

This may be true - but it does not make it 1929. That is my point.

Shit most of what you say is correct. But to claim we will hit 25% unemployment and wages will drop 40% is nonsense.


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?

PAST tense. The credit crisis has passed to a large extent - but it has left us in recession - even double dip, but that doesnt make it 1929.

As I posted
1930 GDP -8.6%
1931 -6.4%
1932 -13%

US unemployment was 25% and wages dropped 42%.

Present time:

2007: 1.9%
2008: 0%
2009: -2.6%
2010: 3 quarters of low positive growth.

Bomber do you believe the economy will contract by nearly 30% in the next three years? Do you really think that?

We may be in recession for a while, but that does not make it 1929. BTW: I think O'Donovan is wrong too. I think the economy is fundamentally fucked. But its not 1929.

We agree on more than you think bomber. I disagree on your previous suggestion however that the government should increase its deficit - that would be a disaster.

 
At 30/12/10 10:15 pm, Blogger Fantail said...

Well put. These market-maven economists aren't there to deal with reality, much less comment on it. They're there to influence it through myth-building and propaganda.

 
At 31/12/10 7:13 am, Blogger Bomber said...

Seeing as you refuse to debate this where I posted, let me repost my attack on you scot

Scotty, Scotty, Scotty. I like the new angry Scotty, last month you were throwing a 'National's gonna win, Nah, nah, na nah na' tantrum and now it's being an apologist for the free market love you as a boss man seem addicted too, personally I think you should stick to being an apologist for Israeli aggression rather than failed free market dogma. So according to Scotty, it is NOT a crises of Capitalism, all we are seeing is, what were your hilarious choice of words Scotty? it's just a 'recession' - really? Let's test this attempt by Scotty to mimize what happened in 2007-2008 and see if it's just wishful thinking on behalf of a bossman desperate to cling to his free market assumptions. I'm going to enjoy this. As I've posted previously, the great recession IS a crises of capitalism in the exact same way 1929 was, but according to Scotty, it's a mere recession uncomparable to 1929. Really? Sadly for Scotty, I just finished reading 'Crises' by Alan Bollard, and his thoughts on the currect recession, surprisingly the Central Bank Governor doesn't seem to share Scotty's optimism. But what would Alan know? University of Chicago academic Raghuram Rajan author of "Has Financial Development Made the World Riskier" 2005 doesn't agree woth Scotty either and niether 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 Scotty, we face a simple recession. 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 Scotty says it's a mere fleshwound. 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 scotty? Alan of course himself described the crises as the largest financial shock since the Great Depression - WHAT DOES HE KNOW? Scotty says it's just a recession. He says this by twisting GDP numbers - he points to the losses that occurred and then points to the current losses while ignoring that those current losses are so low is because the State took on all that private debt while borrowing for a massive stimulus, the impacts of which have now worn off. 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 Scotty? This is a mere bump in the road.

 
At 31/12/10 7:13 am, Blogger Bomber said...

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 - an incredible response to a mere recession, why didn't they all listen to Scotty? Scotty also twists the Unemployment figure, the 25% Scotty quotes occurred in 1935-36, 5 to 6 years after the collapse, our collapse this time around was in 2008, Scotty uses unemployment figures when the Great Depression had run its course (and was eventually solved by World War Two) yet our crises is only two year old. Hilarious misrepresentation. According to Scotty, this isn't a global reshaping of the hegemonic economic ssuper structure of the Washington Concensus, oh no, this is just a garden variety recession right Scotty? 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 Scotty? 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? It's just a boring old recession according to Scott. In October 2008 we had a run on $100 notes - YAWN - it's a nothing recession, uncomparable to 1929. By the end of that month the equity markets around the world lost half their value, $30 Trillion US - as Alan points out (but what does he know?) 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 Scotty, this is just a boring old recession. Need I go on? I need. I need. Scotty ignores the fact that the IOSCO, BCBS, IASB, G-20, FSF and IMF global economic systems all went into overdrive to prevent the depression, and their efforts have merely delayed the correction. To read the bare GDP figures and come to the conclusion you have borders on delusional. Scotty you sound like that clown from Westpack who claimed NZ is on the cusp of a decade of prosperity, in fact if I just replace his name with yours, this would make a great post, screw it I will - I'd hate to waste this on just you

 
At 31/12/10 8:53 am, Blogger sdm said...

Do you even read what people write? I said "I think O'Donovan is wrong too. I think the economy is fundamentally fucked"

Well given that GDP figures are what is used to determine if we are in a recession, or a depression, then it is a reasonable thing to do. You have stopped calling this a depression, which you used to do, is good. I take it you agree the economy wont drop 28%, unemployment hit 25% and wages drop 40%.

I am not minimizing this recession - I know how much $$$ we lost in it - it is the Great Recession no doubt. It is going to get worse. In particular, the overspending by the US is going to fuck us.

"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 Scotty, this is just a boring old recession"

It is steeper. But it still doesnt make it 1929. Can you not see that? Do you expect the numbers to be as bad as the 1930s? Do you expect rationing? Of course you dont. I am sure my grandparents generation would be insulted by your claim that we have it as bad as they did.

We did come close to the brink. But the credit crisis has passed - it has left a recession, but the "crisis" has largely passed. Institutions are lending, although

If the Great Depression is a Magnitude 9 earthquake, this is an 8. Its bad no doubt, but not the worst ever.

"Scotty you sound like that clown from Westpack who claimed NZ is on the cusp of a decade of prosperity"

We are not in any such cusp. I think NZ has massive problems, and we dont have the stomach to fix it. You have said you want the government to get out the credit card and borrow more - more debt will make things worse. And then we got a $20+ billion leaky building problem that will hamstring the government and councils for the next decade.

BTW: if you look at some of the Westpac lending patterns in the mid 2000s, they have no creditability. Want 110% against your apartment, Westpac would do it!!! Fuck them, clowns.

All I am saying bomber is its not 1929. We wont be queuing for food, having wages drop 40%, etc etc. But its worse than most think.....

 
At 31/12/10 9:49 am, Blogger Bomber said...

I read exactly what you wrote, you wrote...

This is not 1929. This is no where near it. That would be like comparing a thunderstorm to Katrina. 1930 GDP -8.6% 1931 -6.4% 1932 -13% US unemployment was 25% and wages dropped 42%. Present time: 2007: 1.9% 2008: 0% 2009: -2.6% 2010: 3 quarters of low positive growth. In the US the unemployment rate is 9.3% To equate this recession with the great depression is statistically flawed. The recovery may take some time. But it is not a crisis of capitalism. It is a recession. We may not recover next year. But that doesnt make it 1929.

...and yes, it is as bad as 1929, it is a crises of capitalism all we have done is kick the can down the road, as I point out, that's why your use of GDP is wrong. The global economic hegemonic super structure is in collapse as it was in 1929, attempting to wish that away by using GDP figures when you ignore the role of OSCO, BCBS, IASB, G-20, FSF and the IMF and the unprecedented co-operation to counter this collapse is ridiculous. thE CRISES IS NOT OVER, it's merely taking a pause as it did during the 1929 collapse.

And yes Scott, NZ has the ability to borrow more because Cullen paid our debt down during the good times, we are lucky yet we are wiping that luck out by following your free market dogma domestically that led to this collapse and I for one won't sit by and quietly allow the most vulnerable to be raped for your ideological dogma.

See, we don't nearly agree as much as you pretend, this is not 'just' a recession it is a crises of capitalism that has every ability of eclipsing the depression.

Despite what you claim, that the crises is over, others disagree...

The ghost towns of China: Amazing satellite images show cities meant to be home to millions lying deserted

Bailed-Out Banks Slip Toward Failure

The magical 2.2 housing ratio between median nationwide home prices and household income – Nationwide home prices still inflated by 30 percent based on 50 years of household data.

The ‘Subsidy’: How a Handful of Merrill Lynch Bankers Helped Blow Up Their Own Firm

Europe Examines Ways to Quell Its Debt Crisis

 
At 31/12/10 9:50 am, Blogger Bomber said...

sorry, that was IOSCO, not OSCO above

 
At 31/12/10 10:26 am, Blogger sdm said...

Normally people use economic indicators when discussing the economy, the most common of which is GDP. So thats why I used them.

Its worse than the depression? When do you expect food rationing to begin? When do you expect wages to drop by 40? When do you expect unemployment to hit 25%? Because thats the bench mark.

The Credit Crisis is over - the recession is not. The liquidity shortfall has largely passed - doesnt mean the recession has finished. Not by a long shot. Unfortunately your 'cure' is the equivalent of giving an alcoholic a drink....

 
At 31/12/10 10:44 am, Blogger Bomber said...

You keep missing the point on purpose:

1: The GDP figures are misleading as the response this time around was much more co-ordinated (we didn't have IOSCO, BCBS, IASB, G-20, FSF and the IMF did we Scott?) but their weak response has served to merely push off the inevitable correction.

2: This is a crises of confidence EXACTLY LIKE 1929 because in both cases the hegemonic economic super structure is in collapse. The super structure wasn't in question in previous recessions. Your words are that this is just another recession, I argue it simply is not.

3: You are attempting to take a snapshot of this crises and compare it with the full blown Depression to conclude it is a mere recession.

4: You avoid the fact that NZ has the ability to borrow more because of Cullen paying down the debt, that's what good governments do, pay the debt down in the good times and borrow when we need it.

Now we need it. I love how this Government can borrow to pay for your tax cuts but can't borrow to help the most vulnerable who had no hand in creating this collapse in the first place.

The Great Recession is a crises of capitalism exactly like 1929. Best case scenario is high unemployment and low growth for a decade, worst case scenario will be a depression.

Your denial is beneath you.

 
At 31/12/10 10:59 am, Blogger sdm said...

1 & 2. Mechanisms have been put in place to prevent the economic collapse we saw in the 1930s. Those institutions you mentioned have and will prevent the collapse of capitalism. But it will be painful.

3. It is a recession by definition. Thats the economic definition - its not a depression. When you did 6th form economics did they not teach you the difference?

4. I think that governments should live within its means. I dont like passing debt onto my children. The last government instituted a number of measures that were bribes, and are simply unaffordable. This government hasnt the balls to fix it


We may have low growth for a decade - thats still growth and therefore by definition a recovery.

 
At 31/12/10 1:54 pm, Blogger Bomber said...

1 & 2. Mechanisms have been put in place to prevent the economic collapse we saw in the 1930s. Those institutions you mentioned have and will prevent the collapse of capitalism. But it will be painful.
No, the slack regulation due to neoliberal policies that created a 40 year bubble that has gone pop shows that the lesssons on regulation WERE NOT LEANED and the desperate scrambling that occured is an attempt to overt the inevitable. We need to go back to regulated capitalism not the bullshit free market dogma you espouse.

3. It is a recession by definition. Thats the economic definition - its not a depression. When you did 6th form economics did they not teach you the difference?
I've repeated my criticisms of your bullshit attempt to sweep this under the carpet as some - what were your original words before being challenged again scotty?

This is not 1929. This is no where near it. That would be like comparing a thunderstorm to Katrina. 1930 GDP -8.6% 1931 -6.4% 1932 -13% US unemployment was 25% and wages dropped 42%. Present time: 2007: 1.9% 2008: 0% 2009: -2.6% 2010: 3 quarters of low positive growth. In the US the unemployment rate is 9.3% To equate this recession with the great depression is statistically flawed. The recovery may take some time. But it is not a crisis of capitalism. It is a recession. We may not recover next year. But that doesnt make it 1929

And those criticisms are that unprecedented global actions by institutions you didn't mention worked to simply slow this correction and that by using GDP you are masking the enormity of what has occured, I argue that this is merely the beginning and that any number of trigger events next year could lurch the economy into depression.

4. I think that governments should live within its means. I dont like passing debt onto my children. The last government instituted a number of measures that were bribes, and are simply unaffordable. This government hasnt the balls to fix it
LOL - yeah, free market austerity measures are what's called for, PLEASE be John Key's advisor, it will make things a lot easier.

Your desire to leave the vulnerable by the roadside for a collapse they had no hand in says more about you than it does about me chum.

We may have low growth for a decade - thats still growth and therefore by definition a recovery.
You sound like Hoover 'prosperity is just around the corner'. This crises of capitalism is like 1929 because the hegemonic economic superstructure is at risk, your inability to comprehend that and claim it's simply a bump in the road is a fascinating insight into the mind of the bossman who really thinks it's business as usual.

 
At 3/1/11 7:33 pm, Blogger Chris Prudence said...

The main goal of a liberal education accordingly is personal autonomy, or the individual who chooses.But the context for HOMO-ECONOMICUS (all human behaviour is only understood in terms of self-interest and that we are therefore rational utility maximisers) or the theoretical and methodological function of the concept of autonomy is one of property rights, government stategies of laissez-faire, and arguments like Mills harm principle for a minimal state and for support for policies of low taxation.So, while autonomy is supposed to be the basis of freedom, it is also the basis for the competitive market order.Autonomy in its truest sense requires that individuals basic needs be fulfilled, including the provision of food, shelter, clothing and something else that only exists outside the individual: affection and self-esteem.Clearly that would see our support for personal autonomy as the goal for a liberal education as excluding support for a welfare state!

 
At 3/1/11 7:34 pm, Blogger Chris Prudence said...

I.E NO WHANAU ORA!

 

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