It is Obvious

Chris Rick has got altogether too much to say

Archive for September, 2010

The holiday is over

Posted by chrisrick13 on September 2, 2010

It is obvious: when you are in a hole – stop digging.

I have been in the US on holiday.  I did not see many signs of a recession but my survey was not significant.  What I did notice was the profligate use of energy.  On at least 4 occasions we drove some long distance at times of the day and days of the week when I expected the highways to be empty.  They were not.  It reminds me of my experience driving in Northern France from Calais to the Alps and then down the side of them to get to the high Alps.  France is not a patchwork of peasant farmers each with less than an acre of land.  It is a country of large distances between cities with nothing in between bar huge fields with occasional houses.  The US is the same but even more so with plenty of room for real countryside and not just arable land.  Transport energy costs are huge.

We also spent our time running from air-conditioning in the car to air-conditioning in the house/mall/restaurant/museum.  A lot of people who cannot afford air conditioning hang around malls trying to look like shoppers.  My son pays $50 a week for an air-conditioning unit.  His energy bills are included.  For 4 months of the year it is not turned off.  There are two transition periods between cooling and serious heating.

There must be plenty of people in the US government worrying about energy.

I am watching economic data with some amusement.  Many of the figures I see indicate that there is a recovery of some sort going on pretty well worldwide.  I could exclude Ireland and Greece.  I think I could also exclude many more countries if I cared to look.  Many of the figures I see also indicate that not all is well.  I could mention a couple: unemployment and inflation.  They apply to most countries.  There are many more.

What I do see is that GDP for most countries is limping along.  It is positive but barely so and in many cases is showing that it is on a downward trend.  If you take out the effect of all the extraordinary measures that governments/central bankers have put in place then in most cases GDP is negative.  So we have the situation where the MPC in this country is sitting on its hands with inflation increasing and doing nothing about the only measure of its performance.

Here lies the problem.  How are they going to reverse these “temporary” measures.  Perhaps, more interestingly, when will they start?

It is obvious: when you are in a hole – stop digging, but how are you going to climb out to fill it in?

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