I was reflecting on all the economic issues over the last six month, that frankly economists have either given contradictory answers to or simply admitted that they do not know the answers to.
1) Can government spend their way out of a recession or depression and back to prosperity? Isn’t unbridled spending and leveraged debt financing what got us into this mess in the first place? So, is the government trying to tell me that the disease is actually the cure, in the second round of spending? That’s like giving more alcohol to a drunk to cure his hangover.
2) Does stimulus spending really work? How come it didn’t work for over the past two decades for Japan, whose economy has been anemic at best? FDR’s New Deal didn’t actually pull the US out of the depression which lasted 11 years, It was World War II and the shift to the military economy, which got things going again. Short of starting another world war, what crisis should we be fighting? Climate Change? My bet is on global cooling and not global warming as a greater short term risk, which could push us back into a triple dip recession. What if NASA’s warnings of a solar sun spot cycle minimum and resultant decade or even century-long mini ice age (like we experienced in the 17th century) comes to pass by circa 2020-2022?
3) How much stimulus financing is enough? Well, nobody really know? The US still has 14 assets bubbles that have yet to burst.
4) How many rounds of stimulus will we need? Canada thinks it will be out of this recession by mid year 2009. Their logic? Exports are expected to improve by mid year, according to the Bank of Canada. In a synchronous global downturn, who will suddenly decide to buy Canadian exports with renewed enthusiasm? Recovery in 2009? I seriously doubt it.
5) What or who do we spend stimulus funding on? Most countries are spending money on traditional infrastructure, but what we forget is that traditional infrastructure does not produce ongoing revenue for the country or for a municipality. Traditional infrastructure such as new roads are a cost item on a national balance sheet, requiring maintenance and money from fuel taxes, unless you have a toll gate or a congestion tax like we see in London, England. A smart road would incorporate piezoelectric sensors that harvest energy by converting vibrations caused by cars and turning it into electricity that could power lights along the roadway. Intelligent sewers could be coupled with algae streams, that would digest the waste and produce useful biofuels. More natural sewage teatment systems have been proposed by biologists and engineers. " First you'd desludge it. Then you'd filter it through nonedible barrier plants and again through a tower of zebra mussels, the best filtering organism out there. After that, the water would be pristine," says Dickson Despommier at Columbia University
6) What should we be spending stimulus on? Again, governments have a dismal track record of picking new industry winners.
7) What will the recession bottom look like ? We do not know but it will be different from previous recessions / depressions for sure Why? Economist can’t explain the complexity of driving factors to predict the length and depth of the next bottom. Six months ago most of the business community were in denial that a recession was possible and were not considering contingencies or recession-related opportunity scenarios. As the Guardian newspaper is asking this morning about the annual Davos economic love-fest:" Davos is not holding a capitalist show-trial this year. Instead it wants to be the place where the rebuilding of capitalism begins. The event is attempting to slide guiltily into what the organisers call the "post-crisis world" without ever confessing to its role in the crisis....The obvious question is why, if everyone at this meeting is so smart, did almost none of them predict the scale of the crash? The few who did are this year's stars – led by economists Nouriel Roubini and Stephen Roach. And the greatest sinners have stayed away."
8) Who will be the recovery leaders and laggards? We don’t know, despite that stock analysts claim example- Industry x is always a leader or laggard. Not true. Each recession has had a different profile and economists can’t explain why or predict the next one.
9) Will gold and silver be a hedge against future devaluations of currency? Not, if everyone decides to trade in gold back in for cash like we saw in the stock market crash in 2008, when traders suddenly needed cash to cover margin calls.
10) How will the global economy deal with pending strategic material and water shortages that are forecast over the next 15-20 years? Peak materials ? Wars ? Embargoes? Rationing? Prohibition? Substitution?
"If it can't be reduced, reused, repaired, rebuilt, refurbished, refinished, resold, recycled or composted, then it should be restricted, redesigned or removed from production."
11) Are we going back to an economy predicated on unsustainable growth or can we develop a steady state, near zero growth and still be economically healthy? The 2 decade long extended L recovery in Japan could be a forwarning of what the USA faces. - the japanese economic flu.
12) What new economy and technologies will replace the one that’s currently crumbling before our eyes? The Smart Technology economy?
13) Why did Alan Greenspan warn of "irrational exuberance in 1996, but when he became the US Fed Chairman, did nothing to restrain it back into check?
Walter Derzko, Smart Economy, Toronto Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios. Related Recession Posts
Walter Derzko, Smart Economy, Toronto
Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.
Related Recession Posts
Walter Derzko -"Changing the world, one idea at a time"©
Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "
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