The graphic below, from the Economist, gives a perfect summary of the world´s predicament. Of 34 advanced economies (EU + 7 others), 28 have a per capita GDP today that is smaller than 5 years ago. A Greek would probably say that Germany is a “vampire economy”, “feeding itself from others blood”. Australia not so, having kept its “own blood” (NGDP) flowing nicely. Mr. Bernanke, please note the US´s placement. Right there with Greece and Iceland! Please try to emulate Australia.
TALK of a Japanese style “lost decade” has abounded ever since the financial crisis took hold in 2008. The Economist has crunched the numbers and on the basis of seven indicators covering economic output, wealth and labour markets, the United States has already gone back in time some ten years. Its GDP per person, for example, was at a higher level than today back in 2005 and its main stockmarket index was higher in 1999. Of the countries considered, Greece has fared the worst. In economic terms, it is just entering the new millennium again. As a whole the rich world has been hardest hit by the financial crisis. Just six of the 34 “advanced” economies categorised by the IMF have GDP per person higher in 2011 than in 2007. Notable among them are Germany and Australia.
How would you distinguish between a panic and a depression?
What role does the rather different sectoral composition of Australia play in its positive performance? I think if one looks at things closely, one would have to credit the role of still-strong commodity prices and volumes demanded, and the consequent incredibly strong capex for Australia’s better performance rather than presuming it is all due to policy differences.
A “panic” is “short-lived. If it lasts long it´s a “depression” (even if not as “Great”.)
Australia has “survived” so many different crises that I would think “policy” and not “luck” (from a particular sectoral composition, for example) is to “blame”.
http://thefaintofheart.wordpress.com/2011/02/24/australia-does-it-better/
This is so sad. We are suffering for no reason. If you have double-digit inflation, maybe you want to suffer to cut inflation.
When you have near deflation, and still the central banks say you must suffer….
Cantillon–
China and India are growing rapidly and both are expanding their money supplies.
But hey, it’s al in the sectors, right?
And Japan has been in a perma-deflationary recession. Because they eat too much sushi, and not because of their central bank.
Mr Cole,
I am disinclined to engage much further with a man who does not respond to substantive critique. The way I was brought up, snark is not a substitute for good argumentation, and is perhaps a sign that argument fails one.
It is one of the most unreconstructed inflationist arguments I have heard for someone to say that India is growing faster primarily because of monetary policy that is too loose, rather than because of the structural reforms they have undertaken, the tremendous potential for convergence, and just plain good luck in terms of everything coming together (for example, the telecoms bubble in the US was a great blessing to India, and to other nations with similar service exports). And similarly for Australia – it’s really not monetary policy that is driving the boom.
The last thing the US needs to worry about right now is a continuance of the recent period of slow growth, any more than in a chilly April in London one should worry that summer will _never_ arrive. I would be happy to have a wager that bond yields will be very much higher on a one year horizon, reflecting this change in seasons.
Cantillon