Talk of double dip-recession increases

Written By: - Date published: 9:20 am, August 2nd, 2010 - 98 comments
Categories: Economy - Tags: ,

The latest US economic data has renewed speculation that the world might dip back into recession. Half a year ago, everything appeared to be looking good with major economies rebounding strongly but that was only ever due to government stimulus spending. Like using the starter motor in your car, that stimulus spending got the engine of the world economy turning again. But you can’t drive your car on the starter motor and you can’t stimulate an economy on borrowed money forever. As government stimulus programmes wind down, the private sector is meant to be stepping up but it isn’t – the private sector is failing us again and the governments are too indebted for another big round of stimulus; like a car whose engine won’t start and with its battery run down.

The result: ebbing growth at the point in the cycle when it should be skyrocketing.

Yet the economic pundits and players still don’t seem to understand there is a fundamental problem. They talk of a double-dip recession as a bad thing but don’t get that the underlying problem is not going away. Returning to the car analogy, the problem is literally the fuel. To go faster, our world economy needs more fuel, more oil, but there’s not enough of it. If I’m not stretching things too much, we can even say it’s like the fuel tank is being emptied and the engine, to go faster, needs more petrol than can be supplied through the fuel line. When we hit that max speed, the engine splutters and we have a recession. Afterward, we can build up to that speed again but every time we do it’ll have the same result.

We’re not talking a single great recession or even a double-dip recession here. We’re talking cascading recessions with various parts of the economy failing in turn but all driven by the stalling and falling world oil production.

This is a totally different situation than mainstream economics is designed to deal with and a world that our economic and political leaders simply aren’t prepared to contemplate. Right now, they’re just scratching their heads and wondering why things aren’t fixing themselves like normal. They need to wake up, quickly, to the fundamental problem – our energy lifeline is running out.

98 comments on “Talk of double dip-recession increases ”

  1. Rob A 1

    I’ll be the last to claim any real understanding of economics but reading the first paragraph I cant help thinking that not borrowing large to poke money into various stimulus packages the Nats actually did something right.

    • Draco T Bastard 1.1

      But they did borrow large – they just put it into tax cuts for the wealthy rather than direct stimulus.

      • A Post With Me In It 1.1.1

        You are right and as I pointed out many times at the time this is the worst case scenario.

        You get some of the least stimulus/dollar compared to other methods and no real long term benefit.

        Actually I lied previously. The worst case scenario would be handing over a trillion dollars to the finance industry with no accountability….

        • Draco T Bastard 1.1.1.1

          You refer to the “stimulus” that was enacted by the USA, the Eu and other countries owned by the corporates who caused the meltdown in the first place. The stimulus that was just giving those trillions of dollars of taxpayer wealth to the already rich because they’d lost a few billion due to their own stupidity.

  2. Lanthanide 2

    To be clear, the oil supply has not yet peaked, which is effectively what Marty is alluding to in this post. We are still on a bumpy plateau.

    The price of oil is however getting quite high due to the limited supply; probably if the economy had skyrocketed oil would be up around $100+ per barrel at the moment. The problem is that the economy simply can’t get its footing with oil priced around $70-$80 like it is at the moment. Unfortunately the only thing that is going to get this price lower while still allowing economic growth (eg, not recession) is going to be some major new supplies coming on line this year, but that just isn’t likely to happen. The gulf disaster in the US is only going to make the medium-long term worse with further costs imposed on deep water fields.

    • Bored 2.1

      Questionable as to whether oil supply has peaked, going by most of the data applied to Hubberts model it has. That however is not the point. The issues are:

      1. Oil will peak shortly if it has not doen so already, so to carry on as usual will only put off the day of reckoning. And demand with the growth of China and India will exceed any supply line.

      2. Our addiction to carbon needs to stop regardless of how much we have, its killing our ecosphere. Full stop. We might use the economic crisis to right the ship rather than regressing to the iceberg course.

      • wtl 2.1.1

        I don’t see why oil production actually has to peak for problems to occur. Surely if production has not peaked, but demand is growing at a greater pace than production can increase, you will get the same problems.

        • ZB 2.1.1.1

          A US peak oil happened in the 70s! Remember, the Saudi’s used their market control to push crude prices higher.

          All that oil in the ground suddenly become worth much much more! And it all showed up on the books of businesses for the next thirty years! Businesses were burning cheap oil to make economies run faster than ever!

          Now all the cheap easy to access oil is gone, pumping out the bottom of the wells, and reaching for deeper oil, all cost more! But worse, all the pollution from a century of pollution, all the excessives of cheap oil in running down soils, water, etc and producing rubbish, are now coming onto the world’s business books!

          Businesses to now to clinch a market advantage will have to come to the market with cheaper energy solutions, cheaper means of doing business, not gimmicks with lawyer written small print, or poor service to rake in fees.
          So whoopie! The Green revolution has been capitalized.

          Growth was inextricibily linked to oil, growth will have to come more painfully from alternative energy, energy saving from remain oil (making it go further). So my guess is oil will stabilize as we push the cost up of luxury uses of oil and lower the cost of necessity uses of oil. So WTF! Why are boy racers putting plane fuel into their cars! You know the ones, they sound like small planes! Purr and splutter like light aircraft engines.

          Now a small jump in GST won’t do it, because idiots can syphon off training aircraft fuel at non-GST prices!
          So while your mums and dads all hunker down, walk the kids to school, the boy racer has the roads cleared and cheap fuel! And boy racers are only the tip of the wastage of oil. Packaging and food processing fat, sugar, salt into food. Its obscene the waste of oil, and so that’s where the ‘growth’ is coming from. Police stopping loud cars and checking for excessive wear (or parts) on engines typically of running plane fuel. Government regulating supermarket practices, forcing out highly packaged, degraded food and unhealthy foods.

          Welcome to the revolution.

  3. Bored 3

    If you link economic growth to energy use then growth ends with the end of cheaply available energy. Listen now as the technology addicts to predict bright new ways of lighting up our lifes, for the cornucopians to demand more resource allocation for unsustainable assaults on what is left of the environment.

    Watch out for the more aware observers to sum up the scenario and change their economic and political paradigms to align with physical reality. Dont expect these people to be mainstream, they wont move until its far too late for them.

    • Carol 3.1

      I saw this report on Lithium mining in South America this morning on Al Jazeera NewsHour:
      http://english.aljazeera.net/video/americas/2010/08/201081192515280922.html
      They focused on how lithium is the key ingredient for batteries of electric cars. They didn’t do any real analysis of the significance of this. But it struck me that there’s a very small amount of lithium available in the world.

      • Bored 3.1.1

        Really interesting is how nobody questioned the energy inputs required to extract the lithium (oil driven machinery) or the lifetime of the lithium (how long it lasts and how much energy it can store)? Nor was there much on the environmental impact of mining, or the downstream post useful life disposal of the lithium. The other thing to note, the lithium is not an energy source per se, it merely stores energy generated elsewhere…..its all beginning to add up to a dog of an idea.

        • Bill 3.1.1.1

          Lithium batteries might have a place when hooked up to domestic solar panels or wind…nah, forget that. All the oil inputs required to manufacture the panels and the turbines. And the further oil inputs required for the on going maintenance and eventual replacement of the panels and turbines.

          Unless we manufacture the industrial base components of an oil free energy system now.

          Or discontinue our use of market mechanisms to decide what should be produced and how production should be distributed. If we did, we could produce and distribute according to social needs and wants rather than according to crass profit motives… which would make making remaining oil go much, much further and see it being used in a far more intelligent fashion than at present.

          As ‘Bored’ suggests, economic and political leaders can and will have nothing whatsoever to do with any such move. They are completely sunk in the status quo. They have careers and reputations and power all predicated on exactly what we have right now. Which means that they are guarding the very gates we need to walk through and won’t be simply stepping aside by their own volition.

      • Lanthanide 3.1.2

        Actually from what I’ve read, if you go past the hysteria and alarmism that lithium is running out, there are actually huge known supplies of it out there, and once the price is right, they will be dug up.

        • loota 3.1.2.1

          Its not just lithium which is a concern (lithium is actually relatively common), there are a whole group of rare earth metals – uh, lanthanides – needed to manufacture power cells for vehicles.

          And my understanding is that China currently has 95% of current production capacity sown up, while mining/refining operations in other countries will take at least 10 years to ramp up.

          “China tightens strangle hold on rare earth minerals”

          http://www.telegraph.co.uk/finance/china-business/7797015/China-tightens-stranglehold-on-rare-earth-minerals.html

          Just as we are dependent on middle east oil right now, we could become totally dependent on Chinese rare earth metals for the next generation of technology.

          • Lanthanide 3.1.2.1.1

            Yes, lanthanides are a concern in terms of supply, however there were several mines in the US that were mothballed when China ramped their mines up and made the US mines unable to compete. These mines are all in the process of being started up again, so supply will still be available, however there are some elements that China has greater abundance of than other places, still.

            The thing is, though, that only very minute traces of these elements are generally needed for most common uses, so a little goes a very long way. It does mean that potentially exciting, ground-breaking technology that heavily relies on these elements is effectively impossible to bring to the mass-market, however.

        • Bored 3.1.2.2

          Who has hysteria and alarmism that lithium is running out? That is not the issue. The real isssue is EROI (energy return on investment). Its the same argument that kills most “alternative” energies and dreamed up techno fixes. That and the laws of thermodynamics. Dont get me wrong, I would dearly love to see some technical wizardry save us from energy crisis, in a manner that also does not wreck the environment. So far absolutely no joy here on a scale to meet todays demands.

          PS check Lootas link on 10.2.1.1, it will give you a better ideal about scarcity.

  4. Zaphod Beeblebrox 4

    According to your reasoning Marty, all the world needs to do would be to find a way to produce electrons more efficiently and cheaply. Then we can go on making more crap that we don’t need using that cheaper energy.

    IMO The problem to me is what we value and how much we are prepared to pay for it. Thats why carbon needs to have a cost.

  5. comedy 5

    People are nuts.

    http://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=10662894

    I must have two more LCDS for the toilet or my life will be incomplete.

    nuff said

    • pollywog 5.1

      oh to be a High Net Worth Individual eh ?

      http://jdeanicite.typepad.com/i_cite/2010/07/worlds-rich-are-hoarding-10-trillion-in-cash—the-wealth-report—wsj.html

      http://jdeanicite.typepad.com/i_cite/2010/08/economic-recovery-for-the-few.html

      you can buy as much useless shit as you want, but don’t need, and if you’re so inclined, you could help the economy heaps by buying a shitload more and giving it away to charity for that extra feel good factor of helping out the needy.

      not that they need that shit either, but hey we all want it…don’t we ? I mean, we all know thats the answer, spend and consume like there’s no tomorrow

      and when you’re done putting all that money back into the economy, shout yourself a bloody good holiday for doing your bit…you’ve earned it !

      ummm… except the only thing is, the rich aren’t buying shit either, aren’t that charitable, are hoarding their wealth and are pretty much ignorant in thinking money will save them in the long run

      oh well… as you were

      • pollywog 5.1.1

        and oh yeah…

        rather than tax these HNWI’s more, to close the inequality gap, the all knowing gov’ts of the world have instead bailed them out so they can reward themselves with greater returns and in our case, our chief financial seer, Double Dipton Blinglish, gives these fuckers a taxcut while his HNWI overlord, (or maybe he qualifies for UNHWI now, if only he knew how much he’s profited from his ‘blind trust’) ‘Smile and Wave Key’ makes it even easier for ‘the man’ to screw over the average punter …

        Nice one Bill and John, you’re ‘the man’ !!!

  6. Chlling reading and totally in line with recent events. Oil hit US $90 a barrel in 2007 and then the pack of cards that is the world’s economy fell apart. The big spend up by Governments has improved things but it seems clear that some of the world’s economies are again in trouble. Thanks to low crown debt (and Michael Cullen) NZ is in a better position to weather the storm but the fundamental problem remains, our economy is totally reliant on the continuous consumption of goods which are depleting our natural resources.

    We need to live more simply and share the wealth around.

    • Jenny 6.1

      Here! Here!

      It is about time we diverted the billions of dollars earmarked for motorway expansion in to free public transport.

      It is obvious that Auckland’s motorways will be obsolete by the time all the planned expansion is due to be completed.

      For the same cost as ‘completing’ Auckland’s motorway system we could supply the city with 3 thousand brand new low emission buses and run them free for 30 years 24/7.

      (The total muster of public buses for Auckland, a city of over 1 million people, is presently a miserable 800. The profit driven model accounts for the fact that presently public transport is inefficient unreliable and infrequent)

  7. Sanctuary 7

    Given that the double dipper of dipton is a dry as dust, unconventional, and unimaginative orthodox acolyte of the Herbert Hoover school of balanced budgets, was there ever any real chance his rigid neo-liberal stupidity wouldn’t plunge us back into the mother of all recessions?

  8. tc 8

    The fundamentals have changed and this gov’t has it’s head buried up it’s ideological arse and fails to grasp anything other than short term ‘repay our backers’ so called policies.

    Watched a country calendar episode on organic farming…..sustainable and 20% more for the milk and listening to the experienced farmer he came to the conclusion the old way simply wasn’t going to keep on working which makes you wonder the long term damage these other ‘modern’ farms are doing.

    We can’t own land in China yet we allow them to own it here……FFS wake up NACT as the chinese have waited patiently for this GFC and the new world order smiling and waving a chequebook…..a great opportunity for Sideshow to show some progressive leadership…..oh hang on he may have shares in them that he’s unaware of……yeah right !

    How come Sideshow’s worth can go up $5m…..I thought it was a blind seceret trust thingy? Joke’s on you NZ.

  9. Oil prices doesnt explain the US decline and China’s rise.
    Its not about oil immediately.
    Growth has shifted from the old world to the emerging markets.
    Without those emerging markets the first dip would have been the last trip. China bailed out General Motors, Apple and numerous US and other MNCs that exploit Chinese labor.
    A second dip linked to blownout budgets will push the US and EU powers to risky military adventures to gain greater access to cheap resources and labor in Asia and elsewhere.
    The US is taking on North Korea again; the EU is pushing its own brand of Iran sanctions.
    The objective is to force China to make concessions to allow the West to assert total dominance in Asia, Africa and Latin America where China has been forging its growth strategy.
    So the ‘double dip’ will be a Western PR pretext to bash China to share the benefits of its global growth.
    But this will be ulitmately futile because China has already sufficient economic and political power to create a second pole and form a counter bloc with Russia and most of the ‘developing’ world.
    In the short term, however, this increasing rivalry may push the US into increasingly destructive wars against ‘terror’.

    • loota 9.1

      Agreed Dave, when was the last time in living memory that China did something which did not suit itself and instead suited the western powers? Around the time of the Kuo Min Tang maybe?

      Many multinationals now rely on China for their productive operations, market growth and profit margins. These same multinationals have huge lobbying power in Washington.

    • pollywog 9.2

      Oil prices doesnt explain the US decline and China’s rise.

      nah it’s just the natural order reasserting itself after 200 years of euro colonial expansion.

      Before that, China and India were always the economic powerhouses and pretty soon, they will be again and the anomoly that is western capitalism will have been assimilated…

      …assuming of course the US doesn’t start a war with Russia

      • loota 9.2.1

        Hmmmm neither a war with Russia or with Iran is going to be any good for oil prices.

        • pollywog 9.2.1.1

          nah…but it’ll kill off a lot of poor people who are draining the precious resources while putting a shitload of money into the pockets of the powers that be…

          …isn’t that the natural way of things ?

  10. Chris 10

    Don’t be ridiculous the current economic mess was not caused by a fuel crisis or a fundamental lack of resources. The cause was strictly financial, a credit crunch. The lack of available credit for investment is the most important issue restraining the economies of the Western world today. The world economy will continue to grow for the foreseeable future. Technology will be the driver. Agricultural yields will continue to improve as will our exploitation of unconventional energy sources.

    This post is nothing but the ramblings of a fool based upon anecdotal evidence and instinct. Not a single fact nor figure was quoted in the original post. Overly simplistic analogies do not compensate for a deficiency in critical thinking and empirical data.

    • comedy 10.1

      Oh well if available credit is the only problem let’s all write each other promisory notes for 704 trillion dollars and get those printing presses running white hot………… yippee we’re all saved…………….. well aren’t we ?

      • pollywog 10.1.1

        Only Jesus saves. The rest of us live on credit…

        …is your karma account balanced ?

      • Chris 10.1.2

        The world also requires rebalancing, e.g. more consumption in China and Germany and less in economies like the US, Greece and indeed our humble New Zealand.

        • loota 10.1.2.1

          Hmmmm although I know what you are saying I think that Mother Earth would disagree that the world requires “more consumption”.

          Also it goes against the grain in China – and suppose to a certain extent in Germany – just to spend up for the sake of it.

          Which sorta explains why China has so much cash to lend to other countries, and why Germany is one of the most sound economies in the EU today.

    • Draco T Bastard 10.2

      As I’ve said – completely divorced from reality and Chris (and Gosman below) just provided the proof.

      Think about it like this:
      You have $1b
      You wish to build a building
      The building requires x tonnes of y materials
      There are not enough of y materials to build the building
      How much does it cost to build the building?

      The answer is: You don’t have enough as no amount of money can provide the necessary resources.

      The world is running out of available resources and oil is just the first one to go.

      • Gosman 10.2.1

        LOL!!!

        The world is far from running out of resources.

        Nice try though at constructing a useful and relevant analogy. Better luck next time.

        • loota 10.2.1.1

          Well Gosman you know the world has enough resources to last you and your need for material shite, but frakking good luck next time for your grandchildren, yeah?

          About 40 years of lead, zinc and tin left in the world. Even less to sweet FA remaining on a bunch of other stuff.

          Read and weep Mr Myopic

          http://www.infographicsblog.com/wp-content/uploads/2009/10/how-long-will-materials-last.jpg

          • mickysavage 10.2.1.1.1

            Loota that is not fair using those fancy facty things to win an argument.

            • loota 10.2.1.1.1.1

              And I have even better news ms, because that chart uses 2007 figures, you can today knock a full three years off the numbers listed of how long those materials will last.

              • Gosman

                So what is happening to all these resources that are being used up?

                I mean where are they all going exactly?

                • Gosman now you are taking the piss.

                  • Gosman

                    No I’m not.

                    The world’s stock of the vast majority resources are not being depleted. They are increasingly being utilised as more of the earth’s human population becomes wealthier.

                    It is true that some resouces change form to one which becomes difficult to re-use it, (e.g. Hydrocarbons), but it is not impossible to do so.

                    However much of the world’s store of resources are simply being stored temporarily while in use. If the world really needed those resources then it would just have to look at whether it wanted to reallocate what they are currently being used for or find an alternative.

                    Regardless of whether we temporarily run out of some useable resources it would be highly unlikely there would be mass deaths while we wait for the alternatives. The key fundamentals to human well being are food, water, and shelter and on all those parts we have ample resources and a huge potential to increase them with new technologies such as GM.

                    • So we will not have an oil shortage. All that we have to do is unburn it!

                      I feel better already! Thanks Grosman. I will now go out and consume and use up things and feel totally guilt free! Wow this is great. All that I need is more, more, more.

                      Hey that John Key is a good guy. Anyone with that much wealth must be a decent bloke.

                    • Draco T Bastard

                      The GM food still needs the nutrients to grow and then to pass on as food. Those nutrients come from oil. It’s only through our use of artificial (oil based) fertiliser that we can grow enough crops already. Then it’s only through the use of oil that those crops can get to where they’re needed. When the amount of oil available to do those two things drops below that which is required to do them then the worlds population will be going into a Malthusian Correction.

                      The really silly thing is that we’ve know this was coming since the 1960s. It’s what Garrett Hardin’s Tragedy of the Commons was all about after all. We failed to understand that then and we fail to understand that now.

                      As for used resources being a store of those resources. Well, in some respects you are correct. The point you fail to realise is that the energy needed to recycle those resources is greater than what’s required to pull them out of the Earth and without oil based energy we won’t have enough to do that except in small quantities.

                      Basically, all your doing is spouting your delusion that things can keep going as they have been for ever when it’s patently obvious that they can’t.

                    • FU

                      The left want to debate individual issues to try and reach a decision that is correct.

                      The right want to win no matter what and who cares about the debate or the logic.

                      Really poor choice comedy. The left is trying to work out how to save the planet and you want to engage in cheap shots …

                    • Herodotus

                      Mr Savage your view was not evident during the last 2 times that Lab led the govt.
                      that sis why Interst Free loans out bid Nats attempt at buying the vote of the youth.
                      I await next year to see the important issues that are fast approaching a need to address. Pensions and entitlement,Immigration, Debt, Bal of Payments, Tax (That is fair) not weighted in favour of speculators and the wealthy (Thanks to Cullen and English), respect of family and societies values. to name a few. I imagine that NZ today and Lab are not what it was when you left us at the start of WW2.

                    • comedy

                      No the left want to do the same as the right – take control of the treasury everything else is a fucking aside.

                      Perhaps if partisan hacks like yourself held both sides to account things might change in the house of shame.

          • Chris 10.2.1.1.2

            The thing about lead, zinc and tin is that they can be recycled. I also don’t trust that info graphic. There are sufficient Uranium reserves for instance to last in excess of 200 years, if you include Uranium reserves that will become economical as the price of Uranium increases

      • Chris 10.2.2

        Your post is very general Draco T Bastard. Provide me an example of a construction material that is running out soon instead of simply stating that “Y” is running out.

        Metals are renewable resources. They can be reused provided you have energy to reprocess them.

        We will not run out of energy any time soon either. The use of hydrocarbons will slowly be replaced with other sources e.g. nuclear, hydro/other renewables. Technology is the word of the day. Alternative sources of energy will become more and more cost competitive as technology moves forwards

        And before anyone says someting about nuclear power, to be opposed to nuclear power is largely to be anti sciene. Modern reactors are too well designed for a significant accident to occur. The only risk is nuclear reactors being used to produce nuclear weapons. But I’m not concerned about that happening in countries such as France, the US, the UK, Australia etc.

        • loota 10.2.2.1

          patently ignoring the data which shows that many key materials will have run out in ~40 years time, and about a third less than that if we all start consuming at the rate the US does is not gonna help you.

          We will not run out of energy any time soon either. The use of hydrocarbons will slowly be replaced with other sources e.g. nuclear, hydro/other renewables. Technology is the word of the day.

          Meh. Your new green energy tech is going to cause a massively higher rate of consumption of rare earth metals. But they’re running out as well.

          Do feel free to be the man stranded in the middle of an expansive desert with a full 5L canteen. By all means, say that you have plenty of water to keep going.

          Yeah, you do…but not so much either.

          • Chris 10.2.2.1.1

            I’m not ignoring the data, I am simplying appling critical thinking to the data as I have been trained to do and have come to the conclusion that with recyling these figures are not applicable.

        • loota 10.2.2.2

          Chris didn’t you see my post saying that zinc, lead and tin are projected to run out in ~40 years?

          You know, zinc for galvanised sheeting? Lead and tin for solder?

          • Chris 10.2.2.2.1

            Yes but I require a citation to believe that particular statement. There is a difference between an infographic and proper scientific data. I have no reason to believe that your data is reliable, I require references in peer reviewed journals or from credible instituitions.

            Lead and Zinc can be recycled. Eventually 100% of new production using lead and Zinc will be from recyled sources. Whilst useable lead and zinc deposits may be depeleted in 40 years, we can never actually run out of lead and zinc once recycling is taken into account.

            • loota 10.2.2.2.1.1

              hilst useable lead and zinc deposits may be depeleted in 40 years, we can never actually run out of lead and zinc once recycling is taken into account.

              1) Cost. Whilst it may be technically possible to continue to recycle tin, lead, zinc it will drive up the cost of the material from the relatively cheap levels of today and for some advanced applications the recycled materials may not be suitable. Upshot: consumer sacrifice in terms of products/features/availability and materials shortages at given price points.

              2) We can never run out of lead and zinc once recycling is taken into account? Again, if your recycling processes were 100% efficient, the metals already used 100% recoverable, and cost was not an object. If you cannot meet all of these conditions, then I’m not sure how you can conclude that we will never run out of tin, lead and zinc. Especially considering that over time more people will be wanting more products using these materials as world population increases.

            • loota 10.2.2.2.1.2

              Yes but I require a citation to believe that particular statement. There is a difference between an infographic and proper scientific data. I have no reason to believe that your data is reliable, I require references in peer reviewed journals or from credible instituitions.

              There’s the infographic associated with Yale University that I posted the link to. OK it is not the same as peer reviewed journal or deep industry analytical sources.

              What do you have.

              • Chris

                Yes prices will rise. No we will not run out of tin. It will take centuries for zinc lost to inefficiencies etc. to accumulate significantly enough to have an effect. Higher prices is a mechanism for rationing. As prices rise more will be invested in R&D for alternatives to any rare metals that become prohibitively expensive.

                As long as innovation is possible, the end of world economic growth is not here.

                • felix

                  Higher prices is a mechanism for rationing

                  Higher prices – regardless of what you use them as a mechanism for – are a result of running out of shit.

                  Essentially all you’re saying (whether you realise it or not) is that it doesn’t actually matter that we’re running out of shit because we won’t be able to afford it anyway.

              • Herodotus

                So where does the energy come from to recycle/
                also there is a great deal of these resources burried within landfills that are not viable to reclaim. Also whre these are burried 1st world countries are too precious for dirty recycling. We already send tons over to Asia or disused consumer products as computers, cell phones etc. So if we have to revert to a less consumer based economy and Asia recycles the minerals what do they get used in. We will have to accept a lower std of living and the associated costs that go with this. So where do we get the funds to buy all these products more debt is not the answer.
                Perhaps revert to a feudal system, we already have an elite class this will jut formalise their standing.
                Re W recession, countries have fired their one silver bullet, there is no more trump cards to play, we will have to suffer the repercussions that were not faced and solved 2 years ago

    • john 10.3

      The financial system creates money by extending interest bearing loans.The interest charge is dependent on a growing economy: money increases because the economy grows. The economy’s growth is dependent on the growing supply of cheap fuel.Once cheap fuel disappears as in 2008 when oil went up to $148 a barrel the economy’s growth stalls and goes into recession and the ability to pay interest bearing loans is frustrated and credit dries up other than Government stimulus because payment of interest becomes a bad risk in a stagnant economy.The World economy’s growth is primarily dependent on cheap fuel,no cheap fuel no growth.Modern Technology is courtesy of cheap fuel. The post is accurate and not foolish by any means.

      • Chris 10.3.1

        The financial system enables investment. Investment allows for increased production. A growing economy is not neccessary for the interest on these loans to be serviced, only that on a micro level the firms involved are able to invest in such a way that the return on the investment.

        Technological innovation will continue. Neccesity is the mother of invention. There is nothing in the physical laws of the universe to suggest that our economies cannot continue to grow for centuries to come. There are many sources of energy yet to be properly exploited, e.g. tidal power. And fusion. Perhaps in a century or so fusion will have been perfected.

        And there is more to it then just exploiting new energy sources. Our current energy expenditure could be far more efficient. There are huge transmission losses in the US energy grids due to out of date infrastructure. More investment there with current technology would permit growth without an increase in energy production.

        • loota 10.3.1.1

          The financial system enables investment (1). Investment allows for increased production (2). A growing economy is not neccessary for the interest on these loans to be serviced, only that on a micro level the firms involved are able to invest in such a way that the return on the investment (3).

          (1) Only a small part of the financial system enables investment. The rest is playing games and waging bets.

          (2) i.e. DEBT allows for increased production. Sometimes. Other times it simply increases consumption with zero increase in a country’s productive capacity.

          (3) Just explain to me how all these ‘micro level firms’ are able to generate a return on investment and pay back more money than they took to start with if the economy isn’t growing? Because I think its not possible. If an economy stops growing sufficiently for a time you can expect many of the entities which are in debt to not be able to service their debts and go under/go bankrupt/enter liquidation, be forced into mortgagee sales, etc.

          Interestingly enough that’s exactly what has been happening.

  11. Gosman 11

    “We need to live more simply and share the wealth around.”

    Is this going to be the new mantra of the left then?

    I can’t wait for the election campaign if it is then.

    LOL!

  12. Gosman 12

    How about this for an election poster then?

    A picture of a San family from Southern Africa gathered around an open fire on the bushveld sharing their meal.

    The caption below reads –

    “Labour – Our vision for New Zealand’s future”

    LOL!

    • Gosman 12.1

      BTW Labour in that caption can be replaced by The Greens or Socialist Unity or whatever wacky lefty group your want.

    • Puddleglum 12.2

      Good game Gosman.

      How about this for a National election poster?

      A picture of a modern day New Zealand family, the father looking to be on the verge of anger shouting at his wife, holding his latest employment agreement; the wife reaching (again) for the prozac as is the eldest daughter; the youngest son with eyes blankly fixed on an xbox trying desparately to escape the stressed out family, life and world he finds himself in. Outside the window, another ‘neighbour’ of six months moving on, another adolescent pissed out of his brain leaning into the gutter.

      Underneath, a graph showing a line increasing over decades but now turbocharging itself into the upper-right corner – y-axis labelled stress levels and family and social breakdown.

      The caption? “National – We aspire to MUCH more of the same! It’s a price worth paying!”

      • Puddleglum 12.2.1

        Or how about this?

        Same picture, new caption.

        “Vote National – Vote GROWTH: Our only priority!”

        Or

        “Vote National – and do it hard: For all of US!”

  13. Gosman 13

    Or how about this?

    A picture of a bunch of medieval serfs working away in the fields with the caption –

    “Really the only problem with the Dark ages was the feudal system – Vote Labour”

    • Gosman 13.1

      I forgot to mention the Serfs would all be smiling. I mean they are Labour Serfs after all 😉

      • mickysavage 13.1.1

        Gosman

        You seem to be having a conversation with yourself. I would get that checked out if I was you.

        • Gosman 13.1.1.1

          Awwwww mickey. That’s not very nice way to react to someone who was commending you on your wonderful idea.

          I’m just trying to help you with election slogans you and your lefty mates can use to push your views.

          Perhaps you could give it a try? 😉

        • mcflock 13.1.1.2

          let him prattle away – he’s found his most appreciative audience to date…

      • just saying 13.1.2

        http://www.youtube.com/watch?v=37QUUwp9xIs

        An appropriate theme song for National at the next election – Beasely Street – Live The Dream!

        “BEASLEY STREET”

        FAR FROM CRAZY PAVEMENTS

        …THE TASTE OF SILVER SPOONS

        A CLINICAL ARRANGEMENT

        …ON A DIRTY AFTERNOON

        WHERE THE FECAL GERMS OF MR. FREUD

        …ARE RENDERED OBSOLETE

        THE LEGAL TERM IS NULL AND VOID

        IN THE CASE OF… BEASLEY STREET

        IN THE CHEAP SEATS WHERE MURDER BREEDS

        SOMEBODY IS OUT OF BREATH

        SLEEP IS A LUXURY THEY DON’T NEED

        …A SNEAK PREVIEW OF DEATH

        BELLADONNA IS YOUR FLOWER

        MANSLAUGHTER YOUR MEAT

        SPEND A YEAR IN A COUPLE OF HOURS

        ON THE EDGE OF BEASLEY STREET

        WHERE THE ACTION ISN’T

        THAT’S WHERE IT IS

        STATE YOUR POSITION

        VACANCIES EXIST

        IN AN X-CERTIFICATE EXERCISE

        EX-SERVICEMEN EXCRETE

        KEITH JOSEPH SMILES AND A BABY DIES

        IN A BOX ON BEASLEY STREET

        FROM THE BOARDING HOUSES AND THE BEDSITS FULL OF

        …ACCIDENTS AND FLEAS

        SOMEBODY GETS IT

        WHERE THE MISSING PERSONS FREEZE

        WEARING DEAD MEN’S OVERCOATS

        YOU CAN’T SEE THEIR FEET

        A RIFF JOINT SHUTS – OPENS UP

        RIGHT DOWN ON BEASLEY STREET

        CARS COLLIDE, COLOURS CLASH

        DISASTER MOVIE STUFF

        FOR A MAN WITH THE FU MANCHU MOUSTACHE

        REVENGE IS NOT ENOUGH

        THERE’S A DEAD CANARY ON A SWIVEL SEAT

        THERE’S A RAINBOW IN THE ROAD

        MEANWHILE ON BEASLEY STREET

        SILENCE IS THE CODE

        HOT BENEATH THE COLLAR

        …AN INSPECTOR CALLS

        WHERE THE PERISHING STINK OF SQUALOR

        …IMPREGNATES THE WALLS

        THE RATS HAVE ALL GOT RICKETS

        THEY SPIT THROUGH BROKEN TEETH

        THE NAME OF THE GAME IS NOT CRICKET

        CAUGHT OUT ON …BEASLEY STREET

        THE HIPSTER AND HIS HIRED HAT

        DRIVE A BORROWED CAR

        YELLOW SOCKS AND A PINK CREVAT

        NOTHING LA-DI-DAH

        O-A-P

        MOTHER-TO-BE

        WATCH THE THREE-PIECE SUITE

        WHEN SHITSTOPPER DRAINS

        AND CROCODILE SKIS

        ARE SEEN ON …BEASLEY STREET

        THE KINGDOM OF THE BLIND

        …A ONE-EYED MAN IS KING

        BEAUTY PROBLEMS ARE REDEFINED

        …THE DOORBELLS DO NOT RING

        A LIGHT BULB BURST LIKE A BLISTER

        THE ONLY FORM OF HEAT

        WHERE A FELLOW SELLS HIS SISTER

        …DOWN THE RIVER ON BEASLEY STREET

        THE BOYS ARE ON THE WAGON

        THE GIRLS ARE ON THE SHELF

        THEIR COMMON PROBLEM IS

        …THAT THEY’RE NOT SOMEONE ELSE

        THE DIRT BLOWS OUT

        THE DUST BLOWS IN

        YOU CAN’T KEEP IT NEAT

        IT’S A FULLY FURNISHED DUSTBIN

        …SIXTEEN BEASLEY STREET

        VINCE THE AGEING SAVAGE

        BETRAYS NO KIND OF LIFE

        …BUT THE SMELL OF YESTERDAY’S CABBAGE

        AND THE GHOST OF LAST YEAR’S WIFE

        THROUGH A CONSTANT HAZE

        OF DEODORANT SPRAYS

        HE SAYS …RETREAT

        ALSATIANS DOG THE DIRTY DAYS

        DOWN THE MIDDLE OF BEASLEY STREET

        PEOPLE TURN TO POISON

        QUICK AS LAGER TURNS TO PISS

        SWEETHEARTS ARE PHYSICALLY SICK

        EVERY TIME THEY KISS

        IT’S A SOCIOLOGIST’S PARADISE

        EACH DAY REPEATS

        UNEASY, CHEASY, GREASY, QUEASY

        …BEASTLY, BEASLEY STREET

        EYES DEAD AS VICIOUS FISH

        LOOK AROUND FOR LAUGHS

        IF I COULD HAVE JUST ONE WISH

        I WOULD BE A PHOTOGRAPH

        ON A PERMANENT MONDAY MORNING

        GET LOST OR FALL ASLEEP

        WHEN THE YELLOW CATS ARE YAWNING

        AROUND THE BACK OF BEASLEY STREET

        LYRICS © JOHN COOPER CLARKE

  14. gingercrush 14

    I disagree. The world-wide recession was caused by debt, the problem remains debt. Those countries that are doing well rely far less on debt and will prosper because they don’t have debt. The countries that continue to do badly are those that continue to have debt problems. In New Zealand, government debt needs to be controlled but our fundamental problem is personal debt. That debt needs to unwind over time and its that debt that will continue holding us back. Something Labour ignored throughout its time in office as they saw that debt increase, saw house prices inflate and the whole economy inflate above the settings Labour made when they gained office in 1999. The uncontrolled tightening of inflation and the markedly increase debt carried by all New Zealanders always made the self-induced 2008 recession a reality. Most of the problems this country has are a direct cause of the Helen Clark-led government of 1999-2008.

    Peak Oil, commodity price inflation, and global warming may well be issues for the future but they are not the issues that caused the world-wide recession and they’re not the problem facing most of the world at the moment. That problem is debt.

    Where peak oil, commodity price inflation and global warming (though its not global warming by itself its the fact the environment has reached a growth limit) become a problem is when the global community attempts to remove debt at the same time as facing those problems. Those that can manage that better such as China which doesn’t have the debt levels as the US does and while it is a cause of environmental damage and commodity price inflation its also spending numerous amount of capital on Green issues and will factor in future world economy practices by preventing commodity price inflation. Something we’re seeing in New Zealand with dairy prices. China will be a huge factor here because they want to spend their money here to prevent the gross inflation of dairy prices.

    The United States and Europe have huge problems with debt levels. And while some are working on less impact on environment issues and peak oil. Its not enough and they’re seeing their share of world resources fall as Asia and Latin America grow theirs.

    New Zealand tends to be in-between, we have the debt problems of Europe (personal not government), we’re not doing nearly enough when it comes to combating peak oil, environmental limitations etc but we’re situated in Asia and will benefit as China, Asia and Latin-America continue to grow.

    • Bored 14.1

      Ging, some cogent arguments here, but some comments….

      The world-wide recession was caused by debt…. you are right, debt is one manifestation of putting off todays costs on the assumption you can pay tomorrow. Thats what providers of credit assume is going to happen when they offer the money. While I am not 100 percent sure that oil peaking caused this crash it does have an ongoing implication in that it is the basis of any current solutions to debt, (i.e not enough oil not enough production no debt repayment).

      China which doesn’t have the debt levels as the US…..The United States and Europe have huge problems with debt levels….so who has the problem? The person owing or the person owning the debt? This may be the source of considerable trouble.

    • lprent 14.2

      gc: The one point that you miss in the whole of that comment is the mechanism by which the government is capable of controlling private debt.

      Quite simply the legal levers to do that don’t exist. The political will by the electorate hasn’t been that interested in putting effective curbs on that for a few decades. That was why the 5th Labour government was able to constrain government debt, but not private debt. It would require wide-ranging changes to the Reserve Bank Act as a minimum.

      What would you want to change?

      Rough translation – it is easy to be a critic, but a hell of a lot harder to be a doer.

      • loota 14.2.1

        thing is, the Right always tends to show the left how to go about it: just do it.

        Roger Douglas for instance. Shock and awe, just get it done, dislocations be damned. No one would have thought that in a single year he could pull off the **** he did as MoF.

        OK not a great role model but you can see how swiftly and decisively the Right can move when they enter power.

    • Pascal's bookie 14.3

      “The United States and Europe have huge problems with debt levels.”

      Could you expand on this please? eg, the ten year bond rate for US treasuries is currently just under 3 percent. How does that fit into this problem?

      The bond markets don’t see a problem with US government debt.

      And in any case, the debt the US is blowing out is due primarily to the Bush tax cuts, take a look at this graph:

      http://www.tnr.com/blog/jonathan-chait/75128/the-stigmatization-bush-blaming

      take a look at how much of the debt is due to the stimulus package and the bank bailouts, which people have been encouraged to think are the same thing, they are not.

    • Zaphod Beeblebrox 14.4

      You’re assuming the economic policies of Nat and Labour are different! As far as I can see both don’t seem to care that much about private debt (thats why we don’t have a Capital Gains Tax) and think building kilometres of motorways is the panacea to economic growth.

  15. Gosman 15

    How about this one?

    “Vote for the simple life, Vote for simple people, Vote for Labour”

    You could even have a picture of some rural hillbilly looking people to emphasise the simplistic nature of the whole thing.

    • Bored 15.1

      Gos, will you please pose for the photo? The small print under your image saying “Nact Bigot” wont be needed, people will know instinctively what you are.

      And somebody might take you seriously aswell. who knows, anything is possible?

      • Gosman 15.1.1

        Hey, if you need a model for this left wing campaign for a simple life I’m more than willing to oblige. I think it would be kind of cool to be the poster boy for the leftist plan to return us all to Year Zero. The face of the campaign that sealed the electoral fate of the left for generations to come – what could get any better than that.

        • Bored 15.1.1.1

          Jeez Gos, you are a glutton for punishment. By the time of the poster the “right” (and the traditional “left”) will have so totally f***ked over the environment etc that you will be a winning poster boy. Imagine then having to spend the following years being lauded by lefties where ever you go, endlessly stood beers and having to spend time with people you dont like. Poor bugger. I am sure you will secretly enjoy it though, after all you spend enough time over here.

  16. TightyRighty 16

    boy, good thing steve pierson retired, otherwise we’d have of those famous “differences of opinion” at the standard about how awesome stimulus is. And i seem to remember at the time that anyone who didn’t like stimulus as a way to promote the economy was a revisionist neo-lib. coming over to the dark side marty?

  17. johnbrash 17

    Fancy namby pamby economic words and recissions aren’t what is important. What is important is hard working kiwis

    • TightyRighty 17.1

      words like growth, money, debt, finance. all very fancy. not as fancy as recissions though. must be a very exclusive club who get to use that word. a very namby pamby way of pronouncing it too.

  18. Doug 18

    I think I can argue that oil is partially responsible for the U.S.’s decline. Since the 1960s the U.S. has been increasingly reliant on imported oil to power its economy and lifestyle. This has meant that:

    1 Like most oil importing countries it must fund this cost by exportingWhen it could no longer cover this cost it started to borrow to keep up the flow (I know this effect has partially been offset by making the $US the complusory oil currency).

    2 Dependent on imported oil it has played a huge role in dictating U.S. foreign and military policy especially since the 1970s. This policy has resulted in costs in lives and money draining the U.S. coffers.

    3 China is comparatively a low user of oil on a per capita basis. It’s domestic economy is also less reliant on having access to cheap oil (This is changing, but I ask you could you live in most places in the US without access to a car i.e. to shop?) In addition the U.S. (and west’s) food production and supply system is totally reliant on cheap oil. China’s agriculture still, to a greater extent, relies on inputs of physical labour, and compost.

    China’s economic model at its heart is to become like the west. However, it does not realise that this model was dependent on cheap, high quality sources of eenrgy, and is now past its use by date.

    • loota 18.1

      I think China’s large scale investments in green energy tech indicate that they have considered the issue.

    • Zaphod Beeblebrox 18.2

      I think Obama would agree with you. Unfortunately for him (and the U.S people) congess is clueless.

  19. vto 19

    So has this winter that has just passed been the darkest time for NZ’s economy? Or will it be next winter?

    My 2c says that if ‘markets’ around the world do not implode before Christmas then the darkest day has passed. If they do implode then all bets are off …. So I am betting on implosion or other demolition (October is always a good month for destruction).

  20. john 20

    John’s sending Paula Bennett to the Eisenhower Foundation to learn pointers on corporate responsibility,like how to destroy the Gulf of Mexico?, she’ll learn a lot from war criminal general Colin Powell ,including privatize,privatize,privatize-No to Commie Socialism. Nact slavishly copy the mega disaster of American Neo-liberalism-they want it here.If the free market is so f…..g successful why is the US economy collapsing then!? It’s really serious over there-we don’t want there ideological garbage here please. refer link:
    http://thetruthwins.com/archives/40-bizarre-statistics-that-reveal-the-horrifying-truth-about-the-collapse-of-the-u-s-economy

  21. Kleefer 21

    If you think the collapse of the US economy is due to the ‘free market’ then you are either misinformed, lying or just plain insane. The bust was caused by Alan Greenspan’s reckless lowering of the interest rate during the early-to-mid 2000s and the corresponding explosion in the supply of money, money that inflated bubbles (mostly housing but also some stock bubbles) not only in the US but around the world, including New Zealand.

    The artificially low interest rates and inflation of the money supply also made it easier for the US government to finance its increasingly heavy debt which grew rapidly during the Bush years and has accelerated its growth since the bailouts and stimulus stupidity starting happening. The US sovereign debt issue is likely to play a big part in the next financial crisis.

    The author of this piece seems to understand the dangers of too much stimulus, without realising that any government “stimulus” is too much. Stimulus is never a good idea in good times or bad because throwing money around or printing new money doesn’t create any new resources but gives a lucky few something for nothing.

    It is a tragedy that people who genuinely care about the poor (yes I do believe most writers on this site do) are too economically ignorant to realise that the inflationary Keynesian policies they advocate actually harm the poor by reducing the value of the cash they hold while making the rich richer through asset price inflation.

    A gold standard would do more than almost anything else to help the poor but this would prevent the big government you all seem to love from going on spending binges with printed money.

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    BeehiveBy beehive.govt.nz
    4 days ago
  • Chief of Army thanked for his service
    Defence Minister Judith Collins has thanked the Chief of Army, Major General John Boswell, DSD, for his service as he leaves the Army after 40 years. “I would like to thank Major General Boswell for his contribution to the Army and the wider New Zealand Defence Force, undertaking many different ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Minister to meet Australian counterparts and Manufacturing Industry Leaders
    25 March 2024 Minister to meet Australian counterparts and Manufacturing Industry Leaders Small Business, Manufacturing, Commerce and Consumer Affairs Minister Andrew Bayly will travel to Australia for a series of bi-lateral meetings and manufacturing visits. During the visit, Minister Bayly will meet with his Australian counterparts, Senator Tim Ayres, Ed ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Government commits nearly $3 million for period products in schools
    Government commits almost $3 million for period products in schools The Coalition Government has committed $2.9 million to ensure intermediate and secondary schools continue providing period products to those who need them, Minister of Education Erica Stanford announced today. “This is an issue of dignity and ensuring young women don’t ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Speech – Making it easier to build.
    Good morning, it’s great to be here.   First, I would like to acknowledge the New Zealand Institute of Building Surveyors and thank you for the opportunity to be here this morning.  I would like to use this opportunity to outline the Government’s ambitious plan and what we hope to ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Pacific youth to shine from boost to Polyfest
    Minister for Pacific Peoples Dr Shane Reti has announced the Government’s commitment to the Auckland Secondary Schools Māori and Pacific Islands Cultural Festival, more commonly known as Polyfest. “The Ministry for Pacific Peoples is a longtime supporter of Polyfest and, as it celebrates 49 years in 2024, I’m proud to ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • 2024 Ngarimu VC and 28th (Māori) Battalion Memorial Scholarships announced
    ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to Breast Cancer Foundation – Insights Conference
    Before moving onto the substance of today’s address, I want to recognise the very significant and ongoing contribution the Breast Cancer Foundation makes to support the lives of New Zealand women and their families living with breast cancer. I very much enjoy working with you. I also want to recognise ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Kiwi research soars to International Space Station
    New Zealand has notched up a first with the launch of University of Canterbury research to the International Space Station, Science, Innovation and Technology and Space Minister Judith Collins says. The hardware, developed by Dr Sarah Kessans, is designed to operate autonomously in orbit, allowing scientists on Earth to study ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to the New Zealand Planning Institute
    Introduction Thank you for inviting me to speak with you today and I’m sorry I can’t be there in person. Yesterday I started in Wellington for Breakfast TV, spoke to a property conference in Auckland, and finished the day speaking to local government in Christchurch, so it would have been ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Support for Northland emergency response centre
    The Coalition Government is contributing more than $1 million to support the establishment of an emergency multi-agency coordination centre in Northland. Emergency Management and Recovery Minister Mark Mitchell announced the contribution today during a visit of the Whangārei site where the facility will be constructed.  “Northland has faced a number ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Celebrating 20 years of Whakaata Māori
    New Zealanders have enjoyed a broader range of voices telling the story of Aotearoa thanks to the creation of Whakaata Māori 20 years ago, says Māori Development Minister Tama Potaka. The minister spoke at a celebration marking the national indigenous media organisation’s 20th anniversary at their studio in Auckland on ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Some commercial fishery catch limits increased
    Commercial catch limits for some fisheries have been increased following a review showing stocks are healthy and abundant, Ocean and Fisheries Minister Shane Jones says. The changes, along with some other catch limit changes and management settings, begin coming into effect from 1 April 2024. "Regular biannual reviews of fish ...
    BeehiveBy beehive.govt.nz
    1 week ago

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