Or so say economists at Infometrics (a organisation I am involved with 😛 ).
Why should we expect another recession over the first half of 2009 – especially when we are coming out of a drought!
Well one justification could be that households are highly indebted, and the price of that debt is going up – so now households will want to pay some of it off. When households are paying off debt they can’t consume – a factor that will reduce economic activity.
Discuss 😛
It appears that National intends to do just that following this election – providing grants to individuals who lose there job beyond the unemployment benefit, but only for “during the recession”, and only “needs based”.
This is probably one of the most ridiculous ways anyone could try to deal with the current recession – although I guess increasing taxes, slashing spending (especially on the supply side), and then hiding it under the PM’s pillow would we a little sillier.
Lets think about this grant a little – what is National trying to say? Do they think the unemployment benefit is too low? That is supported by this quote:
The support plan was designed to help them remain confident and carry them over until they got another job.
If so, why don’t they just increase it, instead of fluffing around with “grant schemes”. Or do they believe that unemployed people will be worse off during the recession than not in the recession – because that doesn’t make much sense to me. I thought the cost to households in the recession stemmed from unemployment and lower real wages – being “unemployed” is just as bad in any state.
If National actually wants unemployment benefits to be partially time limited – then introduce that scheme, instead of some fluffing grant. Either they are introducing that policy, or they are trying (unsuccesfully) to sound like they are dealing with the financial crisis.
Overall, what the hell are the parties doing – is any party actually going to try to do what is best for the country in the face of this external shock … didn’t think so 🙁
Lionel Robbins (*):
Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses
This is the fundamental definition of economics that I adher to when I write here. In all honesty this is not the sole definition of what people “see” economics as – however, it THE definition of what I would term “economic science”.
This definition fits neatly with the theoretical and applied versions of micoeconomics – however, without appropriate “microfoundations” it is hard to decide whether marcroeconomics sticks to this definition of what economics is – is macroeconomics raising the TRUE trade-off between scarce resources in the entire economy?
Ultimately, Milton Friedman felt we make macroeconomics consistent with this view (and useful) bu focusing on predictive accuracy – like many economic models, this made sense once you converged to your result, but not out of equilibrium 😛
The claim that representative-agent models provide micro-foundations succeeds only when we steadfastly avoid the fact that reporesentative-agent models are just as aggregative as old-fashioned Keynesian macroeconometric models
Kevin Hoover is a professor at Duke University. I put down this quote as I believe that the modern day process of macroeconomics is likely to come under scrutiny following recent global events – and Dr Hoover’s writing has convinced me that the representative agent model isn’t really the same as reductionism/micro-foundations.
Microeconomics is beautiful descriptive discipline, macroeconomics needs to either find ways to apply it, or use a different holistic method to explain what it is doing – doing something that is (possibly) half and half might not cut it in the end.
So investors are “rushing” to finance companies to invest money. One of my economist friends just told me he tried to invest money in a finance company, just to be told that they were “over-subscribed”.
I have two concerns stemming from this:
I suspect that Bank’s decision to charge a premium based on the quality of investments will have some impact – however, is the premium high enough to solve these problems? I guess we will know once we see the new set of deposit rates that finance companies come out with.