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Friday, August 05, 2011

Hello double dip, here comes the second stage of the W recession

Dow Jones down 514 points, Nasdaq down 136 points, VIX up 30%, S&P down 60 points, gold and oil prices in collapse - it's a bloodbath, a god damned bloodbath.

And it's just about on time. The second part of the W recession is now on and the crimes of corporate greed that destroyed the global economy in 2007-2008 due to the madness of neoliberal, low tax, deregulated Milton Friedman free market dogma need to be remembered when John Key attempts to implement the exact same failed ideology here in NZ.

Some middle class NZers are about to not feel middle class for the first time in their life, and for the poor, that massive $2 billion deficit that Bill English intends to make with massive cuts into welfare don't really suggest much of a solution when austerity clearly doesn't work...

Years of global slump ahead - Mr Yen
In an era where forecasts by permabears have got ample attention and vindication, few are as disturbing as this: a world recession until 2018. It comes from Eisuke Sakakibara, Japan's former top currency official, known as "Mr Yen" for his ability to move markets. Because Tokyo's revolving-door politics often sends a new face to each Group of 20 meeting, he is one of the few Japanese constants in market circles. Sakakibara was a key player when Japan faced everything from the Asian crisis to Russia's default to the onset of deflation to a banking collapse that saw the demise of Yamaichi Securities. So, when an economist as well known as Sakakibara says "the world is set for a long-term structural slump reminiscent of the 1870s", when average global annual growth was about 1 per cent, I can't help but listen. The reason for the slowdown? Governments put fiscal austerity ahead of restoring stable growth.

...the austerity measures being promoted by the right wing to justify deep cuts to social welfare and public services will only serve to drive the economy into deeper recession.

As the economy continues to collapse, the splintered political spectrum will need to capture the newly awakened sleepy hobbits who will be terribly unimpressed that they will be cutting back so that the wealthy elite of NZ (John Key included) can take more.

In the screams of anguish on talkback radio at how much we are borrowing, no mention of the tax cuts that National are funding or the fact that this GST tax rise to fund a tax cut for the wealthy was supposed to 'turbo charge' the economy but didn't. All John Key has as a solution is a vulgar economic Darwinism.

The splintering of the political spectrum will now be followed by furious voters demanding change as their standard of living suddenly implodes, this is why Labour's economic plan would make much more sense than National's free market worship at a time when the free market has been revealed for the corrupt corporate manipulation it really is.

Labour is fighting this election at the kitchen table where those NZers trying to make ends meet are doing their weekly budgets. Key want's to try and fight the election at the middle management water cooler with knowing nods about how the tough decisions to cut back on social welfare need to be made.

Sadly for John Key and his free marketeers, this is a crises OF Capitalism, and we're all Keynesians now.



At 5/8/11 10:02 am, Blogger dave said...

But austerity does work for them. Economic growth means for them growth in their profits and workers paying the debt out of their falling wages and savaged social wage.
Just as Obama and Cameron are using debt to cut social spending and drive down workers social wage, Key is doing the same here.
Its the only way the parasites know how to survive a meltdown of their own system.

At 5/8/11 10:58 am, Blogger Nitrium said...

Well the US has been practising Keynesian economics since late 2008 - massive borrowing (12% of GDP for 3 years running) with no austerity whatsoever. How is that turning out for them?
The fact is Keynesian economics doesn't work for a recession derived from TOO MUCH CREDIT (as opposed to the overproduction derived recessions we normally get). Applying Keynesian economics to the current situation is like trying to pay the mortgage with a credit card. You can't solve a debt problem with more fucking debt! You do NOT need a degree in economics to understand this.
What needs to happen - and it will happen eventually, is significant debt defaults (that need to come from consumers, businesses and Govts). This will of course contract the global economy by at least 10-15% (depending on the level of our respective Ponzi economies), resulting in massive unemployment, bankrupt banks and pension funds etc, but we need to clear the system of excess debt before any real recovery can begin.

At 5/8/11 12:25 pm, Blogger apple cheeked, potato shaped girl said...

The US government has no problems paying its debts, if it did that would be a crisis. It's not the size of the loan its whether you can make the payments.

Sure they could tighten the budget a bit but perhaps it's time to take a bigger slice off the record profits being generated by big banks like JP Morgan, who took 12 Billion in direct bailouts and another 87 Billion (at least) when the Fed repaid Lehman Brothers loans.

The top 5% caused this stinking pile of crap economy, it's time they paid for it, not only through taxes but regulation.



At 5/8/11 11:31 pm, Blogger laminar_flow said...

<a href="http://dailybail.com/home/1981-film-rollover-global-financial-armageddon-sell-everythi.html> Check this out </a>


At 6/8/11 11:48 pm, Blogger Jimmy_N said...

Double dip recession in the west. Page 3 of today's Shanghai Daily was an article about how China was worried about falling to their lowest point in 7 weeks, and dedicated half a page to it. But then again, reading anything from Xinhua has to be taken with more salt than anything coming from NZ's media, but at least they are open about telling the media what they can investigate and what they can't!


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