The Bankwatch

Tracking the consumer evolution of financial services

Getting back to normal economic growth | we have it all wrong!

These two headlines tonight following the bank bailout and the auto bailout serve to validate my new view.  We are not going back to where we were.  Yet all activities of the governments’ to date are premised on the notion that after this hickup we will return to 1-2% annual growth in GDP reasonable interest rates, and increasing home prices.

Who believes that now?  Where is the pragmatic thinking that plans for GDP at a fraction of what it was in 2007 ?  Where are the scenario plans for GDP at 75% and 50% of 2007 levels.  Such plans would draw confidence amongst people.  We are in the midst of a multi year shift in value and while the government stimuli will have an impact, that impact is not well understood in terms of immediate economic change nor future inflationary impact.

Obama team plans biggest boost in history to save American economy | Guardian

Barack Obama’s administration in waiting signalled yesterday that it was preparing the biggest economic stimulus in US history to avert mass unemployment in a stuttering economy that could face the toughest recession in half a century.

Japan Exports Plunge Record 27% as Recession Deepens | Bloomberg

Dec. 22 (Bloomberg) — Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens.  Exports fell 26.7 percent from a year earlier,

Written by Colin Henderson

December 21, 2008 at 21:57

Posted in Uncategorized

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  1. […] a comment » Something that has been niggling at me here and here is the law of unintended consequences.  The people architecting the financial stimuli […]

  2. […] The flaw is this. Neither paradigm is correct, and both are short-sighted. This is the end of business as usual. […]

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