So over a few beers my friends and I had a discussion about whether or not we were in a really bad recession. Agree or disagree?
First, lets all agree that NZ is really in a recession and that more importantly there is more bad news to come because the previous govt. has not been totally honest about the finances of the country.
That being said, the world economy looks pretty bad right now but that does not mean that we are going to experience major doom and gloom.
During our discussion the nefarious “they” made more than one appearance. I find “them” to be so irritating I decided to take the table to ask and actually reference who they were quoting. Well suddenly it became very clear that actually all the people at the table were quoting similar references and had not bothered to check facts. Ahem … neither had I.
Regardless I vowed to visit the World Bank in the morning and follow up on my assertion that even though economists get it wrong 3 out of 3 times, having their view on the subject would be worth it. As a result I downloaded their Global Prospects 2009 to have a look at what they had to say.
Below are some excerpts:
This year’s Global Economic Prospects finds the global economy at a crossroads, transitioning from a sustained period of very strong developing country–led growth to one of substantial uncertainty as a financial crisis rooted in high-income countries has shaken financial
markets worldwide. Commodity markets too are at a crossroads with the very high prices of 2007 and early 2008 having fallen by
more than half in many instances.
(i.e. the s**t has hit the fan)
“… since September 2008, the intensification of the banking crisis, the collapse of several global financial players, and the sharp increase
in emerging market bod spreads have dramatically altered the outlook for developing countries”
(i.e. we’re all panicking)
… while countercyclical policy may help reduce the short-term costs of the slowdown, care must be exercised to react prudently so as
not to endanger longer-term fiscal sustainability and growth prospects. For as serious as the coming slowdown may be, developing-country growth is expected to recover after the crisis is over.
(i.e. we hope that cooler heads will prevail)
On this basis while the situation is bad, we collectively are still able to influence the outcome provided there is some restraint put on the “sky is falling” mentality that has crept into reporting.
So yes we are all going to experience pain, we will need to motivate ourselves to get out of this mess and it can be done.
Unless you are a car company or a retailer – in which case times are indeed very tough and lets hope that Q3, Q4 of 2009 bring much needed confidence.