Will the next financial crisis be as bad as the last one?

World is a different place .

Issue people don't understand is everything is benchmarked against GDP.

But something are never going to cost as much and prices has slowly come down.

Cost of telephony is extremely cheap we can make international calls for next to nothing and have free online meetings. We use email instead of mail and in so don't need a large portion of Aus post .


This is why inflation is stuck. We are becoming MORE efficient. US economy is at record low unemployment low interest rates and relatively small inflation.


One can only imagine when AI replaces tasks within banking call centres and such.

we need to start having a different model to measure prosperity and financial well being of a nation. the GDP is a Dino

 

GFC stimulus harmed economy, report says

The former Labor government’s $100 billion stimulus package during the GFC has been slammed in a scathing new Treasury-commissioned report, which argues the cash splash actually weakened the economy and damaged local industry by overvaluing the exchange rate.

The report, authored by economist Tony Makin from Griffith University, says the Rudd government's fiscal stimulus was “unnecessarily large” and “misconceived because it emphasised transfers, unproductive expenditure such as school halls and pink batts rather than tax relief and/or supply side reform”.

“In sum, fiscal stimulus was not primarily responsible for saving the Australian economy from a narrowly defined recession in the March quarter of 2009, but a combination of lower interest rates, a major exchange rate depreciation, strong foreign demand for mining exports, especially from China, and a then more flexible labour market,” the report says.

“Fiscal stimulus later weakened the economy by strengthening the exchange rate and reversing the contribution net exports made to aggregate demand.

Australia’s subsequent fiscal repair has been weaker than the US, UK, New Zealand and Europe.

The report comes after shock GDP figures this week which showed the economy contracted by 0.5 per cent in the September quarter — its first decline since March 2011 — dragging the annual rate down to 1.8 per cent.

Ten years on, voters say Labor's $52bn stimulus saved Australia from recession

Personally I think it was a mistake and we are still paying the price. If we learned nothing else from the GFC (and we didn't) it is that stimulus harms the economy in the long term.

 

as a history note - japan was a little different. At one point the imperial palace in tokyo's land value was higher than california. The whole of california. That a slightly larger bubble i would think.

Why do you think they were all getting 100 year loans.

 

So if stimulus is not the answer to collapsing demand from households and businesses how do you suggest governments prevent economies from going into Great Depression style deflationary spirals?

 

We have a financial crisis each week when the wife goes shopping .

Each one is getting progressively worse as she spends more and more .

 

Thats just one apparently very biased opinion that was heavily refuted by Treasury

Response to Professor Tony Makin’s Minerals Council of Australia Monograph – ‘Australia’s Competitiveness: Reversing the Slide’

 

It’s also contradictory.
Yes, the main boost the economy received was from China ( the result of its own massive stimulus program) but Rudd and co didn’t know at the time that that was coming.
Lots of people object to stimulus because they, it seems to me, just don’t understand it.
They think its waste when as Keynes explained while inherently wasteful due to the speed at which the money is spent it is vital in shoring up demand at a time when households and businesses are not spending.
I also think that many people in Australia objected to people other than themselves being given ‘Free money’, underserving types.
The hypocrisy of this position not clear to them when they are claiming every tax break under the sun for their investment property.

 

Are they the only two options?

 

The article quoted from a Treasury commissioned report.

The former Labor government’s $100 billion stimulus package during the GFC has been slammed in a scathing new Treasury-commissioned report, which argues the cash splash actually weakened the economy and damaged local industry by overvaluing the exchange rate.

Are you suggesting the Treasury-commissioned report, report has been heavily refuted by Treasury?

 

Essentially, yes. With rates at zero.


So you can do what Herbert Hoover did ( wait for the market to correct so that households wanted to spend and businesses wanted to invest) which led to a deflationary spiral in short order.

Similar policies also crucified the Greek and Irish economies after the 08 crash.

Or

You can prop demand through state spending on infrastructure and the like and give households and businesses time to recover.

Have you got a third way in mind?

 

Were rates at zero when the GFC hit? I don't remember them being at zero.

I guess my real question is this: how has the Australian economy performed since the GFC? How much did it cost to "save" the economy? Was it worth it? What shape is the economy in now? How vulnerable is the economy if there is an external shock? How much will it cost to "save" the economy next time? How will those actions impact the performance of the economy for the ten years after that?

The way I see the economy now is low GDP growth, low inflation, low wage growth, low interest rates. Overall it feels sluggish but on the upside is that it is stable? Whether you see this state as healthy or not is a matter of opinion I guess.

 

What I said, was if rates are at zero that’s all you have left.

That doesn’t mean you can’t use fiscal stimulus and still keep a bit in reserve in terms of monetary policy.

As for how much did it cost? Australian fiscal stimulus has cost **** all and blaming our current economic malaise on KRudd’s stimulus program makes no sense at all.

If anything it was monetary policy that did the real damage and the failure of the RBA to put the brakes on home lending.

 

Ah, ok. It sounded like you were defending the GFC stimulus on the basis they had no choice. It was either that or a depression style deflationary death spiral. I must have misunderstood your post.

 

Murdoch conceals Coalition's disastrous economic woes with #fakenews

https://www.smh.com.au/politics/fed...ing-it-counterproductive-20161228-gtirzk.html

 

What are you quoting from. That article makes no reference to the text you're posting.

 

They had a choice not to do it.

That would have been the wrong choice.

Doing what they did with the information they had at the time was absolutely the right choice.

The naysayers will say it wasn’t required but that’s very much with the benefit of hindsight.

 

Oh...it was that report....what a joke.

 

We can go to -7%.

 

Good point. It looks like I posted the wrong link.

I believe the quotes came from this article

Redirect Notice

 

That's one perspective. Another is that the actions taken prevented a recession, which are seen by some as ultimately beneficial for the economy by removing inefficiencies. Until the inefficiencies are removed, the economy will be less efficient and will continue to drag along. I feel like that's where we are now.