While the second law of thermodynamics is having its way with the world economy, there are up sides. Take Bill Ralston, for example. The credit crisis is media hysteria, Chicken Little material. Nothing wrong with an occasional deficit or ten. We'll get through it. Elsewhere, there are cries that tax cuts are not the thing to be doing, at least, not at the moment. The counterfactual implication is obvious. Raise taxes. Socialise Labour's loses. Mike Moore has pandered to the premise that it's not all that bad. It's not the end of capitalism. There will be no Depression in New Zealand.
The sky is not falling, but we are caught between famine and flood. It is not the end of capitalism, but a New Deal is coming. Colin Espiner calls austerity the New Black. He's in good company on the Stuff blogs, with the dark thoughts of the excellent Bruce Sheppard and the increasingly broody Bernard Hickey.
There's a fine line to had, I must admit. Prudence declares that you minimise use of the words 'bank' and 'run' in the same sentence, lest one causes a self-fulfilling prophesy to come on down. Yet shutting up and saying nothing, in the face such dangerous fluctuations in information (in this case, money), is akin to complicity in destruction. There will be destruction. McCain was right, insofar as this is the end of the beginning.
The US$700 billion bailout (or is it a US$820 billion rescue?) was just a small step. Never mind that the scale and urgency of the situation requires that most of the work is being doled out to private companies, outsourced at a rate that may be less than the usual one percent commission rate. Never mind that this multi-billion dollar niche is hopelessly compromised with conflicts of interest in the hopelessly incestuous business world.
Yes, there will be enough lawsuits and class actions to keep Boston Legal with scripts until next century. Many, like Tom DeLay, will get away with it. With a half a billion dollar salary over eight years, the former head of Lehman Brothers could afford God as his attorney. The venerable Henry Waxman did what damage he could, asking the suit, "Is that fair?" The pause elicited was worth around $100,000 alone.
Like Eichmann in Jerusalem, it will all be too little, too late. The damage is done. International markets, that bastion of pure and unadulterated flow of information, has got AIDS. All around the world, lenders are crossing their legs to avoid infection. Prospective business partners might be pure as driven snow, but the level of distrust is too high. The lenders have been chastened.
While New Zealand's banking structures are much more sound compared with the Northern Hemisphere's, we will suffer nonetheless. Whether it is through deposit insurance or tightened lending criteria or a possible downgrade of credit rating after the PREFU, transactions are going to incur higher costs. The actions business took for granted will require more effort. The river crossed in summer climes is a dangerously swollen river in these turbulent times.
New Zealand is wont to get carried away. We never really recovered from the '87 crash. Drama queens that we were, our stock market remained in a hissy fit while most markets bounced back. As Brian Easton said in that bFM interview above, NZ has taken plenty of historical precedent in hard times for shrieking for the government to fix it, fix it, fix it!
The popular mandate will become evident with landslide wins for Obama in the US and in NZ with a landslide for Key. Unshackled from long-time political hedging by careers in law and business respectively, there lies enough potential in both to present a New Deal to the public. Implicit in this, is that these administrations will be open to ideas. Out of such destruction, something new will hopefully sprout.