The Global Financial Crisis Ii (index)

In early 2009 I published a summary of my writings on the Global Financial Crisis from August 2007 to March 2009: (itself following an early note on what I called the Millennium Depression: This index updates the earlier summary and its prologue remains relevant here.

The summary is to trace my thinking on the Global Financial Crisis during the period. With the benefit of hindsight I could have done better – identifying the trends sooner – but, allowing for human frailty, it is not a disappointing performance.

And yes, I wish the Global Crisis would go away, too.

[1] Given the expert audience of accountants at the One Stop Update for Accountants in the Public Sector  20 April 2009, Wellington, I thought I could deal with this central issue – the valuation of assets – in more detail than usual The Global Financial Crisis: Some Accounting Features.

[2] The conventional wisdom is so certain of the correctness of its analysis that it is never hears its critics  – even if it is continually changing its mind as reality disrupts its certainties. The centenary of the birth of a great journalist gave an excuse to recall this verity. The Curse of Cassandra: Would You Rather Be Comforted Or Told the Truth? (2 May 2009)

[3] By May 2009 we were moving from the stage of ‘what was happening?’ to ‘what does it mean?’.  Distinguishing money as a means from money as a end is an apposite start for the  religious. Paul, Timothy Money and the Economy, the ‘God Talk’ series at the  the Cathedral Church of St Peters, Hamilton Cathedral, May 3, 2009.

[4] May is budget month, my first run-up column to 2009 budget (National’s first), was preparing readers for the fiscal tightening. Difficult to get across, because the government was  spinning that every thing is hunky dory, so that they who were impacted did not notice it at first. Someone’s Going to Pay: Come Budget Day. (16 May, 2009)

[5] The second 2009 budget column: Budgets I Have Known. (30 May, 2009)

[6] A fortnight later, I felt it necessary to write a column cautioning the burgeoning optimism, expecting an early return to ‘normalcy’. (It was already a longer than usual recession). It is easy to laugh at the optimists a year later but it is worth considering their underlying desperation that caused the abandonment of common sense – a far too common phenomenon in long recessions. Don’t Dream It’s Over: When Will the Global Financial Crisis Be Behind Us? (13 June 2009)

[7], [8] While the columns were continuing the public education some of the profession was trying to think things through. Avoiding the Next Banking Crisis and Housing Booms and Busts were contributions to the concluding panel of the RBNZ Professorial Workshop on the Current Financial Crisis: Historical Perspectives and Implications for New Zealand held on 17 June, 2009. and

[9] A followup of the preceding column [6], focusing more on the New Zealand economy. Our Financial Ball & Chain: When will the New Zealand recession end? (27 June, 2009)

[10], [11] Clearly external debt was a problem. So I did a research report. Forecasting New Zealand’s Net International Investment Position. Unless one does this sort of plodding tedious work (or someone else does it, and you read their work) you dont get new insights, but stick in the rut of conventional wisdom with one’s head stuck in the sand (to mix metaphors). Notice I began this work in January 2009, letting it stew until publishing it in late June 2009. Any serious researcher has work which, for various reasons, is not published, but is drawn on and shared among colleagues. It was useful to separate out some appendix work as Foreign Liabilities Versus Assets. The conclusion of how much New Zealand was owned off shore stunned me. There had been earlier work on particular sectors – e.g. manufacturing by Dennis Rose and Bill Sutch – but this was for the economy as a whole. and

[12] On occasions a sector invites one to talk about the general economy, even though their situation is not  particularly involved. Life goes on and there are other problems which have to be addressed too. The Economic Crisis: Where Does Acc Fit In? Paper to the summit “Reviewing New Zealand’s Accident Compensation System” Wellington, 29 June, 2009. (Note this as an example of a presentation strengthened by research – in this case [10].)

[13] The next column also took up the theme of indebtedness. While offering some assurances to individual savers, it was important to get across the degree of vulnerability of the economy as a whole as a consequence of offshore borrowing. Rocky Horror Show: Could New Zealand Become A “Southern Rock”? (11 July, 2009)

[14] One might not expect a speech to the “Towards a Value Driven Public Sector Summit” (15 July, 2009, Wellington) being particularly about the consequences of the GFC. But it gave me an opportunity to set out the background to the spending squeeze that was on. Understanding the Fiscal Imperatives.

[15] There follows a couple of months in which I have nothing new to say. At any time I am working on a range of projects not all of which provide new insights relevant to the current urgent issues. But in mid September, the column returned to fiscal austerity.  Reliving the 70s Horrors: If Nothing is Done, Our Credit Rating Will Be Downgraded and Interest Rates Will Rise. (12 September, 2009.)

[16] In October I wrote what seemed to be a modest column; many treated the conclusion as obvious  – which it was when I finally set it out. In fact, it represented a major step forward progressing something I had been pondering on for a quarter of a century: How to explain the relationship between the exchange rate and the macroeconomy? How did the capital and current external accounts interact? Why did the New Zealand economy persistently experience an over valued exchange rate? Treating foreign borrowing as an alternative source of foreign exchange to export earnings – in the short term anyway – is a powerful idea. While so many agreed with me, neither they – nor, in truth, I – have yet got our heads around the implications. of this ‘obvious’ insight. Boom Time Rats: Our Glut of Overseas Borrowing is Like A Disease Eating Away At the Economy. (24 October, 2009)

[17] I am now writing about every second column on the state of the macroeconomy. I had come, as firmly as one can about the economic future, to the view that New Zealand (and much of the rich world) were in a longish period of flat output (a recession). It was not the conventional wisdom – still is not in much of New Zealand – so I gingerly put forward the case. The Shape of Things to Come: Economic Recovery Means Government Spending Restraints and Higher Taxes. (21 November, 2009)

[18] Inside the Listener economics columnist is an essayist, which would like to write on wider topics but feels constrained because there is so little coherent writing on the economy. So he  tends to write lighter columns over Christmas and the holidays. The topic of the much loved The Wind in the Willows was attractive once I learned of the dislike of Kenneth Graham, secretary of the Bank of England, had of stockbrokers. It became irresistible once I saw its parallels with  current circumstances. Not to mention of being able to conclude the year with one of my favourite aphorisms. Watch Out for Weasels: Children’s Classic the Wind in the Willows is Also A Fable for Adults. (9 January, 2010)

[19] And so the 2010 year began; it was time to be even more definite about a longish recession.  An L-ish Future? Our Economy is Suffering From Some Severe Imbalances That Are Hindering An Upswing. (6 February, 2010)

[20] By March there was a new threat; sovereign debt crises which New Zealand was anxious to avoid (which, of course, why I had been writing about foreign debt during the previous year). If Pigs Would Only Fly: it May Be All Greek to Some, But New Zealand Risks Getting Caught in the Storm. (3 April, 2010)

Note to myself; a topic to be returned to. We are learning much from the Euro group crisis.

[21] I used the pre-budget column to discuss the sovereign debt crisis in local terms. Icebergs Ahead: What the Government’s Strategy is Likely to Be for the Upcoming Budget. (15 May, 2010)

[22] A column based on the Reinhardt and Rogoff research. Its title reflects the view of many of the offshore economists whom I have found insightful. My conclusion, however, may differ. You cannot sustain a fiscal expansion sufficient to deal with a depression or long recession.  Second Great Contraction? There is Good Reason to Think the Global Financial Crisis Will Last A Few Years Longer. (10 July, 2010)

[23] Invitations to speak on the Global Financial Crisis were less frequent. However the Wairarapa Branch of the NZIIA, invited me to speak on July 21 2010 about my trip to China (reported in five Listener economic columns) which gave me an opportunity to discuss some international macroeconomic developments, and also to set out for a lay audience some of the underlying analysis. China and the Global Financial Crisis.

[24] What the columns do not convey is that a lot of my research activity at the time was writing a history of New Zealand from an economic perspective. For various reasons I put an extract on our great banking crisis on the web, just before the collapse of South Canterbury Finance.  New Zealand’s Great Banking Crisis.

[25] The New Zealand Home Health Association invited me to speak about the macroeconomy to their National Conference on the 2 September 2010. Quite a challenge since their specific interests were not particularly in this area, and their general interests meant I had to explain some of the detailed analysis at a level for the general public. It is quite difficult to explain the notion of the step down of the growth track (Reinhardt and Rogoff) which generates the long period of economic stagnation. Because I have explored earlier examples it is quite intuitive for me (something to be elaborated in a yet unpublished column).Public Spending and Home Health Services.

[26] I sometimes get queries about how certain events (in this case a mid September question about the two Canterbury ‘earthquakes’) interacts with the economy. Difficult to answer, but stimulating  – although probably not quite right. The Canterbury Earthquake and the South Canterbury Meltdown.

[27] Crisis: One Central Bank Governor and the Global Financial Collapse is a remarkable book, and I was pleased to be able to review it in the Listener. There will be second review (longer and addressing different points) later. (See also Reserve Bank to the Rescue: the Crew Worked Extremely Hard to Keep the Good Ship New Zealand Afloat. (18 September, 2010)

While the above is the published list to the end of September 2010, there were also four further pieces I have written in the period which are awaiting publication. Check the Macroeconomics and Money category for them.