From Recession ends but not pain from the Herald Sun today. Except the question is, do these moron modern economists think we have even been in a recession since the definition is two consecutive quarters of negative growth? I’m afraid, to consult a modern economist about the nature of an economy or what to do about almost anything at all is an almost total waste of time. The economy is dead, millions of employees in the private sector are without jobs, and businesses across the country are closing down, but we were not officially in a recession. Economic theory was once of such great interest but has become a dead end for actually learning anything of value about the operation of an economy or the kinds of policies that would bring things back to life.
As for fixing things, I have been saying for a long time, just leave things alone and it will all come good over the next year. This is what I published at the AEIR on March 26, 2020: A Classical Economic Response to the Coronavirus Recession.
If ever there has been a downturn that cannot in any way be explained as a fall in demand it is the forced closures that have followed the coronavirus panic. The downturn is entirely structural in nature, even if, as is the usual case, the problem has been driven by government actions and decisions.
That is why when I hear discussions of the need for a stimulus I am even more than usual amazed at how beyond sense economic policy has become. What is needed, and what is largely being done, are measures to hold both capital and labour in place until the closures are brought to an end.
There are businesses that will open the moment the law allows. There are millions of jobs that will be immediately filled again the moment these businesses reopen, which will see their customers flooding back.
So what do we find on the business pages of The Oz today to go along with the massive quarterly growth in GDP.
Meanwhile, proving how out of it a modern economist is there is also this: Shock recovery in house prices unnerves the RBA.
That would be a stunning outcome for the housing market given earlier fears of a collapse in prices as the pandemic forced the economy into lockdown, fuelling forecasts of double-digit unemployment, stalled population growth, rising mortgage defaults and even potential instability in the banking system.
They would not have a clue just as their earlier forecasts make clear they had no clue then either.