web analytics

The long game

Written By: - Date published: 3:20 pm, January 30th, 2009 - 12 comments
Categories: economy, Environment - Tags:

Last night, I heard something worrying. It was Gareth Morgan saying he can’t ‘see through’ this recession; that he can’t see the economic mechanism that will turn things around and get us growing again. He had already dismissed interest rate slashing and stimulus packages as ‘necessary but insufficent’. In the end he resorted to the ‘Hail Mary’ play of international economics: hoping the good old US consumer would start consuming evermore again and once again pull the rest of us out of recession by demanding more of our stuff.

I respect Gareth Morgan. Yes he’s a media whore and I don’t agree with everything he says but at least he’s not one of the neo-liberal dittoheads from the banks, Treasury, the Reserve Bank, and the ‘business sector’ who have been in charge and screwing things up for the last twenty years. Still, I think he’s got it wrong if he thinks a rebound in US consumer demand is going to come along to save us.

Fact is, the US consumer is the largest economic bubble out there. For 60 years, the US has sat at the heart of the world economic system. It’s currency has been the trading currency for oil and the the reserve currency of choice for other countries. Those two factors have contributed to the US dollar being hugely overvalued and interest rates in the US staying lower than they ought to for decades. On the back of this, Americans have been able to get indebted up to their eyeballs and beyond buying more and more from overseas and building up an enormous foreign debt. In return, exporters have had an artificially low currency relative to the US dollar and the billions they have made exporting consumer goods to the US have eventually found their way back to the US consumer as loans – mortgages or credit card debt.

Like any economic bubble, this is all predicated on everything continuing to go right forever. And, right now, things are going very wrong indeed. The odds are not for a US consumer-led recovery but a collapse in US consumption as personal credit dries up, breaking the bubble, sending the dollar crashing with the reverberations felt around the world. Some of the greatest financial minds in the world, led by the likes of Warren Buffet, have been warning that the US dollar bubble is unsustainable for years.

Sure the worst-case scenario may not, probably will not, play out but things have changed. We can not depend on a further inflation of the US consumer bubble to get us out of this mess. And if not that, then what?

It seems clear to me that the way out of this is a fundamental rebuilding of the global economy, the Green New Deal which UN Secretary-General Ban Ki Moon is just the latest leader to call for. It won’t be quick and it won’t be cheap but quick and cheap are the mantra of the neo-libs who have failed us. We are in a world where our economic institutions have hit a brick wall as a result of underlying resource constraints. The world cannot continue to supply us with evermore oil, food, fertiliser, water, and be a dump for our evermore of our waste and carbon emissons. We need to start building a global economy where we can become wealthier by using limited resources more effectively and cleverly rather than simply pouring ever greater quantities resources into the system and then dumping them out the other end. That will take leadership with the courage to put doing what is necessary ahead of political expendiency and with the vision for long-term planning. Unfortunately, that’s two things that the world’s leaders, and ours, sorely lack.

12 comments on “The long game ”

  1. Pat 1

    The worst case scenario is that history repeats itself again, and out of the worldwide financial meltdown rises a large scale conflict that drags in many countries. In the midst of economic turmoil and suffering it is easy for a strong warmongering leader to emerge who galvanises the disaffected masses, at a time when the world’s policeman (the US) is in a weakened state.

    Such a scenario could arise in Asia, for example. Let’s hope not.

  2. Dare I say it but Morgan is right in that things will never be the same. Humans do need to change lifestyles, there will be less material possessions, less international trade, less need to work, more time for education and community events. It does not sound that bad, but the secret will be to manage the slow down of the pace of life in such a way that lives are not disrupted and security not threatened.

    Some do seem to be hell bent on the idea that increasing consumption is the panacea to this and there is a fixation on increasing GNP.

    In the words of Robert Kennedy,

    “Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

    “Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”

  3. burt 3

    Pat

    We would;

    a) Get over our no nuclear ships policy pretty quickly AND
    b) Curse the short sighted defense spending policies from the last decade.

  4. Ag 4

    If you really want that, then you are going to have to have a revolution on a scale never seen before, involving the abandonment of ordinary US citizens and a bunch of other people losing much of their privileged position in society. It’s all very well to talk about a New Deal, but there are a great many people who will violently resist what Paul Krugman calls “the great contraction” (the equalizing of incomes) that would attend such policies, as it did last time.

  5. bill brown 5

    Yeah burt, let’s have WWIII that’ll solve all our problems.

    By the way,

    you’re a fuckwit.

    IrishBill: settle down.

  6. randal 6

    gareth morgan notwithstanding the only thing that is going to save us is the same thing that has always saved us since time immemorial and that is re-armament. no amount of policy wonking will alter the fact that we are a pimple on the arseend of the world and if we should perish then a new lot would be along shortly to fill in the blanks

  7. deemac 7

    and Gareth Morgan’s qualifications to hold forth on this topic are superior to anyone else’s how exactly? This is the guy who still isn’t sure whether global warming is real – and was daft enough to give a team of researchers open-ended funding to look into it (with researchers, the answer is always “more research is needed”).

  8. BananaLama 8

    Very interesting read, many thanks.

    The way i see it is that materialism will be coming to an abrupt end very shortly, i can’t see any other outcome, we have raped the seas, the land, the air and exterminated half of our biosphere, it just can’t go on for much longer.

    What i fear the most though is how governments and elites will react as they have a tendency to get rather violent once the apple cart starts to tip.

  9. ak 9

    …something worrying. It was Gareth Morgan saying he can’t ‘see through’ this recession

    Aye, Pierco, these craggy brows took a wee shimmy skyward at that admission too: Morgan isn’t one to hyperbolise and is generally on the button. Couple that with the general commentary and the highly uncharacteristic shoulder-shrugging from from the world “elite” at Davos and allow yourself a little frisson of anticipation that we could really be on the cusp of the big one.

    No “worries” but: take a little trip and open the mind. Hop on the Obama train to Possibility and perve at a vanguard nation of staggering inequalities now thirsting for change: a nation more educated and connected than any in history, a polyglot society seething with confidence, expectations, and a billion handguns. Cruise past their banksters’ $35,000 toilets: marvel at the trillions donated from the pockets of the poor to the kings of greed, and watch the uninsured die on the streets. See the body of the Chicago School lying in state; take in the heritage of Haight-Ashbury and drive its whole bankrupt, dessicating state. Then jump a jet to Europe: stop off in Asia and smell the mysterious rose-coloured confidence. Be moved in Africa by the 28,000 babies dying daily, then relive Paris 1968, now showing again, live! and in situ in enhanced technicolour consciousness.

    So Gareth can’t “see through” the recession? Corker. Means a whole new vista might just be waiting out there.

  10. Pascal's bookie 10

    Yeah. God knows.

    As an entertainment and solace for the masses, and healthy lesson for the liable, I’d like to see one of these placed in the lobby of any and all corporations in receipt of a bailing out. Perhaps as a penance, anyone who recieved more than, say, 10 million last year in pay could reside there for a while and passers by could give them bread. Or poke them with a stick.

  11. GM is a kiwi and in this, that is good. But the need is for more.. though constructively if you please..

    As to Warren Buffett I doubt he was the original complainant.. more likely is Soros.. tho again a good many financial folks have sounded off on the topic..

    For me though the most constructive – he’d be too modest to assent to a mention for it – would be the fellow who said “Solution..? Simple, the most viable answer to this so-called credit boom* is its bust” And getting back to what all people really and truly understand.”

    * my insertion after consultation in which on second thoughts he thought it a better word than his binge.

    Really and truly deserves that greater hope that that the good in enough people will coalescel. Optimistic if you will.

Links to post

Recent Comments

Recent Posts

  • Government Northland housing investment to spark transformational change
    Over $10 million infrastructure funding to unlock housing in Whangārei The purchase of a 3.279 hectare site in Kerikeri to enable 56 new homes Northland becomes eligible for $100 million scheme for affordable rentals Multiple Northland communities will benefit from multiple Government housing investments, delivering thousands of new homes for ...
    BeehiveBy beehive.govt.nz
    10 hours ago
  • Battle of Ohaeawai remembered
    A memorial event at a key battle site in the New Zealand land wars is an important event to mark the progress in relations between Māori and the Crown as we head towards Waitangi Day, Minister for Te Arawhiti Kelvin Davis said. The Battle of Ohaeawai in June 1845 saw ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • More Police deployed to the frontline
    More Police officers are being deployed to the frontline with the graduation of 54 new constables from the Royal New Zealand Police College today. The graduation ceremony for Recruit Wing 362 at Te Rauparaha Arena in Porirua was the first official event for Stuart Nash since his reappointment as Police ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Further support for upper North Island regions hit by significant weather
    The Government is unlocking an additional $700,000 in support for regions that have been badly hit by the recent flooding and storm damage in the upper North Island. “We’re supporting the response and recovery of Auckland, Waikato, Coromandel, Northland, and Bay of Plenty regions, through activating Enhanced Taskforce Green to ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • The Princess Royal to visit New Zealand
    Prime Minister Chris Hipkins has welcomed the announcement that Her Royal Highness The Princess Royal, Princess Anne, will visit New Zealand this month. “Princess Anne is travelling to Aotearoa at the request of the NZ Army’s Royal New Zealand Corps of Signals, of which she is Colonel in Chief, to ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government and horticulture sector target $12b in exports by 2035
    A new Government and industry strategy launched today has its sights on growing the value of New Zealand’s horticultural production to $12 billion by 2035, Agriculture Minister Damien O’Connor said. “Our food and fibre exports are vital to New Zealand’s economic security. We’re focussed on long-term strategies that build on ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Cost of living support extended for families and businesses
    25 cents per litre petrol excise duty cut extended to 30 June 2023 – reducing an average 60 litre tank of petrol by $17.25 Road User Charge discount will be re-introduced and continue through until 30 June Half price public transport fares extended to the end of June 2023 saving ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • More Kiwis in work as rising wages match inflation
    The strong economy has attracted more people into the workforce, with a record number of New Zealanders in paid work and wages rising to help with cost of living pressures. “The Government’s economic plan is delivering on more better-paid jobs, growing wages and creating more opportunities for more New Zealanders,” ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government boosts fund for Auckland flooding
    The Government is providing a further $1 million to the Mayoral Relief Fund to help communities in Auckland following flooding, Minister for Emergency Management Kieran McAnulty announced today. “Cabinet today agreed that, given the severity of the event, a further $1 million contribution be made. Cabinet wishes to be proactive ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • New Cabinet focused on bread and butter issues
    The new Cabinet will be focused on core bread and butter issues like the cost of living, education, health, housing and keeping communities and businesses safe, Prime Minister Chris Hipkins has announced. “We need a greater focus on what’s in front of New Zealanders right now. The new Cabinet line ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Prime Minister to meet with PM Albanese
    Prime Minister Chris Hipkins will travel to Canberra next week for an in person meeting with Australian Prime Minister, Anthony Albanese. “The trans-Tasman relationship is New Zealand’s closest and most important, and it was crucial to me that my first overseas trip as Prime Minister was to Australia,” Chris Hipkins ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government makes first payment to Auckland Flooding fund
    The Government is providing establishment funding of $100,000 to the Mayoral Relief Fund to help communities in Auckland following flooding, Minister for Emergency Management Kieran McAnulty announced. “We moved quickly to make available this funding to support Aucklanders while the full extent of the damage is being assessed,” Kieran McAnulty ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Government steps up to assist Auckland during flooding
    As the Mayor of Auckland has announced a state of emergency, the Government, through NEMA, is able to step up support for those affected by flooding in Auckland. “I’d urge people to follow the advice of authorities and check Auckland Emergency Management for the latest information. As always, the Government ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Poroporoaki: Titewhai Te Huia Hinewhare Harawira
    Ka papā te whatitiri, Hikohiko ana te uira, wāhi rua mai ana rā runga mai o Huruiki maunga Kua hinga te māreikura o te Nota, a Titewhai Harawira Nā reira, e te kahurangi, takoto, e moe Ka mōwai koa a Whakapara, kua uhia te Tai Tokerau e te kapua pōuri ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Enhanced Task Force Green Approved following Cyclone Hale
    Carmel Sepuloni, Minister for Social Development and Employment, has activated Enhanced Taskforce Green (ETFG) in response to flooding and damaged caused by Cyclone Hale in the Tairāwhiti region. Up to $500,000 will be made available to employ job seekers to support the clean-up. We are still investigating whether other parts ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • General Election to be held on 14 October 2023
    The 2023 General Election will be held on Saturday 14 October 2023, Prime Minister Jacinda Ardern announced today. “Announcing the election date early in the year provides New Zealanders with certainty and has become the practice of this Government and the previous one, and I believe is best practice,” Jacinda ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Prime Minister Jacinda Ardern announces resignation
    Jacinda Ardern has announced she will step down as Prime Minister and Leader of the Labour Party. Her resignation will take effect on the appointment of a new Prime Minister. A caucus vote to elect a new Party Leader will occur in 3 days’ time on Sunday the 22nd of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Trade and Agriculture Minister to attend World Economic Forum and Global Forum for Food and Agricult...
    The Government is maintaining its strong trade focus in 2023 with Trade and Agriculture Minister Damien O’Connor visiting Europe this week to discuss the role of agricultural trade in climate change and food security, WTO reform and New Zealand agricultural innovation. Damien O’Connor will travel tomorrow to Switzerland to attend the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Government funding relief for flood-affected Wairarapa farmers and growers
    The Government has extended its medium-scale classification of Cyclone Hale to the Wairarapa after assessing storm damage to the eastern coastline of the region. “We’re making up to $80,000 available to the East Coast Rural Support Trust to help farmers and growers recover from the significant damage in the region,” ...
    BeehiveBy beehive.govt.nz
    3 weeks ago