Remember these lyrics from the Beatles’ ‘Hello, Goodbye’ hit?
“You say yes, I say no
You say stop and I say go, go, go
…
I say high, you say low
You say why, and I say I don't know”
This seems to be the familiar refrain from financial markets this side of the New Year. Some are certain that equity and commodity markets will continue to trend up, up and away. Others … not so sure.
Looking back at 2009, it was smooth sailing compared to what we’re going go through this year. Ahah! There’s your answer. It’s always so, so very clear looking back in the rear view mirror.
At the start of last year, the consensus said stop but for the few brave souls who ‘went, went, went’, they’ve been rewarded – very handsomely with only a few sprouting of green shoots to get them by.
It’s happening again! Careful, careful: China’s stepping on the economic brakes. Greece and the other PIGS of the Eurozone are at risk of defaulting on their debts. American recovery is not assured because it still has to find employment for the more than 8 million workers who lost their jobs during the recession.
And just to make it a little bit exciting (harder?) for everybody, taxpayers are agitating against their respective governments’ profligacy and that which comes along with it, ballooning debt and deficits.
Fortunately, bond vigilantes are still busily punishing Greece and Portugal and Spain, etc. sending the yields on their government bonds higher. Then they’ll come for the others.
But for the life of me, I can’t think of any other way I would have handled the global financial crisis if my name were Ben Bernanke instead of Ben Ong.
Just look around you. Were it not for the stimulus measures – fiscal and monetary – and government guarantees, etc., the world, as we know it, would have changed to the world of the 1930s. The pain would be deeper and longer.
Financial markets now complain about the rise in the US unemployment rate to 10 per cent. Try a 25 per cent US jobless rate without stimulus – the height reached during the Great Depression from less than 4 per cent before the world became depressed.
It’s easy to say stop spending and start worrying about the future. But will there be any future to worry about if economies and markets collapse in the present?
Could anyone have done better? Readers are invited to share their ideas on how they would have tackled the GFC better. Any takers?
