The rest of the world

Cockatrice Farm has had pleasant sunny days lately, though we had our first severe frost on Monday.  Our remaining tomato plants are pretty unhappy, but otherwise we have weathered it well.

Our wwoofers Sean and Alice have been busy with many projects, including plumbing in our new tank off the double garage, to supply the greenhouse.  But generally things are quiet.

I might take this opportunity to muse on the Global Financial Crisis.

Australia seems to be coping fairly well.  Goulburn is bustling; I hear that some businesses went dead from about December, but most seem to be muddling by, and some are even doing well.

Sydney’s financial district took a big hit, but again many businesses are now running at capacity, though nobody’s putting any permanent staff on.  NSW is doing worse than the rest of the country, and the consensus is that the State Government is overdue for a change.

The Rudd Government at Federal level has run two stimulus packages, with lots of infrastructure spending in last night’s budget.  On one level, I’m deeply suspicious that the solution to too much borrowing is a bit more borrowing.

On the other hand, in the early 1990s I was running some government labour market programs, and the lesson there was that when older workers lose their jobs in a recession they are unlikely to work again.  If the stimulus can keep things ticking over enough for some people not to lose their jobs, it may well be worth it in the long run.  “A hair of the dog that bit you” as my Welsh aunties of blessed memory used to say.  So I’m with the Prime Minister so far.

As for the US, they haven’t had nearly enough pain for the mess they found themselves in.  I’m expecting a further crash in the stockmarket, to new lows.  Based on recent news, this prediction seems quite unlikely — there’s been a steep rise in the stockmarket.  But the pattern of other serious recessions is that you get “sucker rallies” on the way down to the bottom.  Things don’t really turn around until they are hopeless, and magazines proclaim “The Death of Equities”.  So I’m expecting further problems there, and note that US house prices haven’t stopped dropping yet.  You can’t destroy that much value without serious repercussions.

In Australia, we haven’t had a serious house price collapse.  Government subsidies for first-home buyers (in effect, subsidies for existing home sellers) will tail off over the next year, and I expect prices to drop somewhat then.  While immigration rates stay high, there will be housing shortages and prices shouldn’t collapse.

My guess is that Australia will recover in 2010, with a strong performance by the rural sector, and America will pick up a bit in 2011.

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