Recession Or Depression?

There can be no doubt that the current world wide economic crisis has been a cause of mental depression to many people, especially bankers, financiers & World leaders as well as ordinary citizens. So far, there has been no real sign that the crisis has progressed from a recession to a depression in economic terms. Indeed there are some slight signs of recovery already beginning to emerge in the US. India, one of the 2 new powerhouse economies of the 21st century, is still holding up strongly. India’s relatively healthy state rests firmly in its powerful banking regulations that have staved off the orgy of financial excesses that has undermined the European & American economies.

China is struggling to avert disaster. In its case there has been a massive drop in exports leading to heavy unemployment in its manufacturing industries. The Chinese political system is already systemically weak & subject to internal pressures which could easily boil over if unemployment became too high. However, China is now also an immensely rich nation (riches earned on the lives & exploitation of its workers) & is in a good position to “buy off” restive workers by stimulating the economy. They have already done one major stimulus package and stand ready to do another stimulus if the political cauldron starts bubbling too fiercely.

At this stage the odds on falling into another Great Depression look reasonably low. While the G20 Nations at their meeting in London were by no means unified in how to approach the economic crisis, all were in agreement on a number of issues such as the new banking rules needed, to suggest there is a strong underpinning for global action. The World’s stock markets appear to have hit rock bottom & seem to be now climbing slowly. I hazard a guess that those who didn’t buy when the DOW hit around the 6000, will likely be regretting it. New home sales are up from a very low point in the USA, & the foreclosure rate is set to drop as action by President Obama’s administration is now allowing many home owners to renegotiate their problem loans. It will take at least 9 months (based on figures available) to reduce the number of foreclosed homes to a level where residential real estate prices will begin to stabilise. But, at least there is light at the end of the tunnel. By then, there will be some sort of solution, no matter how expensive, to the insolvent banks problem in the USA. Once that is sorted out, the indicators, including consumer confidence, suggest the worst will be over and both the USA & the World economy will start on an upward path again.

As far as Australia is concerned, our nation is a bit player & traditionally gets pneumonia when America sneezes. This time, there is ample evidence that the worst it will be for us this time is a head cold. Two things have saved Australia from most of the problems damaging the American economy. Firstly we have much stronger banking rules here which have kept our banks from engaging in the most dangerous financial activities. Secondly, loan activity is also well regulated & has prevented the use of ARM mortgages which are one of the major causes of foreclosures & bank insolvency in the USA.

Of course Australia is feeling the pinch, but, in comparison to many other nations, we are still basically a healthy economy & better positioned than many other economies to recover quickly. Much praise should go to both the major political groupings in this country for their foresight in maintaining strong financial regulation.

Bankers, Interest Rates & Pitchforks

In a meeting with recalcitrant / insolvent bankers at the White House, President Obama baldly stated:

“All that stands between you and the pitchforks is my administration”.

Bankers here in Australia may find the pitchforks coming out too unless they play their role in the economic recovery and pass on all the Reserve Bank interest rate reductions.

Zig Says Put Identification On Your Dog

Just recently our cats suddenly went into panic mode when they saw something through the glass doors in the evening. Daddy looked outside to see a large dog staring in. I saw him too & went ballistic! Daddy went out & told the dog to go away. A couple of hours later, we found him sitting right on our front door step begging to get in & be fed.

Pity of course ruled & while he was refused admission, he was given a generous meal. He was also checked & seemed a delightful animal wearing no more than a choker chain with no identification. After further thought it was decided to put him in our dog and cat proof secure yard over night. This meant I had to be put on the lead to visit the front yard when I wanted my early morning trip out. A new adventure! Just as well no one was around to see Daddy in his nightshirt as I led him up the garden path!!

When we woke up, we called a friend who came in & washed the smelly dog so that he could be put in a car to take him up to the vet to see if he was microchipped. No! He wasn’t. Signs were put up around North Tamborine.

Within a few hours the phone rang & we had the joy of reuniting him with his distressed owner. If the owner had put identification & a registration tag on him, we could have phoned her as soon as he arrived and got him back to his home that night.