Be careful what we wish for …

The global recession is presenting a new dilemma for the first world which will have significant impacts long after growth has returned. We saw in recent years that the price of oil rose sharply as the demand of energy from emerging nations skyrocketed. While we clearly have a short-term incentive at least for China to redirect its economic energies into domestic growth to give our export sectors a boost there will be implications of this that we might not have bargained for. Do we really want an extra 1 billion or more people to be as rich as us? It is a case of being careful what you wish for …

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The gloom gets gloomier – national accounts!

The long-awaited National Account data was released today by the ABS and shows that the Australian economy is now sliding along the zero line. The headline result was that the measure of overall economic activity, Gross Domestic Product (GDP) decreased by 0.5 per cent in the December quarter. This is the first negative result since December 2000. So one more negative quarter and we will all cry recession. For the 12 months December 2008, the economy grew by the very modest 0.3 per cent but this was driven by agriculture. Non-farm GDP did not grow at all over that same period. What are the signs for employment and what is the government doing? Here are some of my thoughts …

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Deficit spending 101 – Part 3

This is Part 3 in Deficits 101, which is a series I am writing to help explain why we should not fear deficits. In this blog we consider the impacts on fiscal deficits on the banking system to dispel the recurring myths that deficits increase the borrowing requirements of government and that they drive interest rates up. The two arguments are related. The important conclusions are: (a) deficits introduce dynamics which put downward pressure on interest rates; and (b) debt issuance by government does not “finance” its spending. Rather debt is issued to support monetary policy which is expressed as the desire by the RBA to maintain a target interest rate.

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2 more trees

This weekend I planted two more trees as part of my little bit to save the world! A lovely Hakea and a Grevillea. I also added more vertical growing space for vegetables.
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Peter Green playing again

Peter Green was the best electric guitar player of all time (that’s my view anyway) and I loved his sound and phrasing. His Gibson Les Paul (1959 model) was accidentally modified (he put the magnets back in upside down) and he discovered in the middle position he got an out-of-phase tone that honked so strongly that the mod remained. Unfortunately he took too much acid and had a disposition to mental illness and spent most of time since the 1970s in various states of ill health occasionally re-appearing to play again. Never regaining the dominance of the 1960s though. But once again he is playing again and this time he is sounding better.

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