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When someone says there will be a growth pause rather than a recession ...

... what that means at best is a recession "somewhere else but not here".

I saw three such growth pauses in Australia ... the Asian Economic crisis, the introduction of the Australian VAT (named GST in Oz) and accompanying overly aggressive RBA interest rate rise, and the 11/9 synchronised global recession.

The middle growth pause ... actually "economic downturn that did not last long enough to qualify as a recession" was a recession that was short-circuited by a backing off of the RBA combined with a plunge in the Ozzie dollar that led to a boom in non-conventional exports (eg, wine, movie production).

The other two were external shocks that were offset by domestic credit booms ... in the first instance, a consumer finance credit boom as previous prudential controls on consumer credit were removed, and in the second instance, a housing boom as federal and state governments competed on who could get credit for offering first time home buyers grants.

The best prospect for the US economy at the moment is more or less the first scenario, but rather than a boom in "unconventional exports", a boom in "long languishing conventional exports" as a result of a cheaper dollar, which may drive new investment in productive capacity precisely because they have been languishing for so long.

Other than that, however, if the US slides into recession, the Chinese and other neo-mercantalist economies would have to shift their primary focus to Europe ... as well as likely increasing their secondary focus on providing products on credit to low-income raw material exporters ... and the question will be whether that will be enough to offset the US downturn.

So for y'all, you are two plausible stories removed from participating in a synchronized global downturn ... by contrast, we here in the US are only one plausible story away from a serious domestic recession.

If they both happen to be 50/50 propositions, that would mean we over here are 50/50 for a recession, while y'all are 25/75.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Dec 23rd, 2007 at 11:32:37 AM EST
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