Thursday, October 30, 2008

It will be all our fault

There's a recession on the way (as if we didn't know). Doesn't matter how it came into being, doesn't matter what business does and it doesn't matter, seemingly, what government does. You see, Stephen Walters, at JP Morgan, has decided it will all be our fault. It all comes down to what money we "punters" will get from the Rudd government's incontinent stimulus package and - more to the point - what we do with it:

The growing risk … is that distressed households, whose indebtedness is at an all-time high … use the windfall to repay debt or boost precautionary savings, rather than rush to the shops

I suppose if business did that it might be considered prudent?

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Anonymous Piers Boltbrechtsen said...

Well, of course! The whole crisis is all the fault of the punters, whose intemperate borrowing fueled the sub-prime meltdown, taking advantage of lenders who were only wanting to provide a public service.

Mr Walters is, however, being just a bit Chicken Little and alarmist. If the proles, er, punters use their handouts from Rudd to repay debt or even just leave it in the bank, they'll help to further ease the liquidity problem in the credit market.

It doesn't really matter what the punters do with it, the point is that it's going directly into the economy, one way or another, which is all we really need from them.

Maggie was wrrrr-ong. There is such a thing as 'society' -- when we want there to be, that is, such as in this instance where it's resurrected to inject stimulus packages into the real game: The Economy.

But it's not 'socialism', it's a fallback mechanism of The Economy. We just try not to talk about it that much.

30/10/08 8:50 AM  
Anonymous justice_via_truth said...

Good little doggie; knows her name, comes when called. Gets 'round well; s'pose her heels are too.

30/10/08 10:04 PM  
Blogger Caz said...

According to a little survey done by a newspaper last week only 19% of eligible people plan to run out and spend their windfall on Xmas presents and such. The rest will hold onto it or use it to pay ordinary household expenses.

Now, I don't believe that 81% of the target market will be that sensible in practice (in fact I think the figure is a crock of shite), but I was heartened that many aren't planning to do a pre-Xmas splurge and find they still can't pay their electricity bill or buy the kiddies school shoes in the new year.

Even if everyone ran out shopping, it would be a $10B splurge in, say December & January. Cool. Then what? Nadda.

Piers - there is no liquidity problem, there's a solvency problem.

2/11/08 11:28 AM  
Anonymous Piers Boltbrechtsen said...

Caz, it's neither purely a liquidity nor a solvency problem. Insolvency has, of course, claimed some big names recently, but the liquidity problem can affect solvency and vice versa.

So fundamentally the problem is broadly one of confidence and trust. Trust and confidence. Confidence and trust. You know I'm right.

Anyway, not being trained as an economist, I'm much more comfortable discussing such intangibles.

Basically market players don't have confidence in the system because they can't trust it to deliver the lifestyle to which they've become accustomed, poor devils.


3/11/08 9:56 PM  

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