I have been trading in the same style of business since 1967. In my own experience, and coupled with conversations with other business owners around Australia, this is the worst recession for fifty years. More severe than 1982, the previous worst of my experience. This is a real doozy.
There is no sense of any sort of a recovery. Quite the reverse, a number of factors indicate that the economy is about to nose-dive. Two generations have known nothing but ever-increasing prosperity. They are about to have their eyes opened to the worst ramifications of a credit bust.
Why is it not more obvious to more people? The evidence of shuttered businesses in in plain sight now. No one expects the media to realise what is happening to mere working people, but surely the federal and state governments should have twigged that something is deeply amiss by now? They do not appear to have done so and I think that the answer to why that is, is twofold.
First, the welfare state covers far more circumstances than it did thirty years ago. Not many people ‘fall through the cracks’ anymore – they are too fat from gorging on Take Aways paid for with their super-sized welfare cheque. The fact that no one is visibly starving has disguised the severity of the malaise.
The second reason is that government statistics are designed to put a gloss on economic performance. They are now so skewed and misleading that governments themselves are being fooled. The economists who pour over them are reduced to the efficacy of tealeaf readers, or arbiters of the entrails.
Gross Domestic Product (GDP) is the leading indicator; it would be more properly called a misleading indictor. It was brought into being during the Great Depression in the US and proclaimed as the ultimate economic indicator. It is nothing of the sort. Going up or going down it could be good or it could be bad, or even and more likely, completely irrelevant.
GDP measures the amount of dollars spent by the aggregate of all entities, including governments – up to and including debt repayments. How is the ever-increasing repayments of the interest on the ever-increasing national debt in any way a measure of increasing prosperity?
GDP is not an accurate measure of sustainable improvements to human well-being and quality of life. Or, to state it more accurately and usefully, wealth creation.
Back in the 1930s, Simon Kuznets, chief architect of the GDP, emphasized that it could not be equated to wealth-creation. He was right, but it is. Many things are going to disappear in the next few years, including prosperity and jobs. Of small consolation is that the false metric of GDP is one of them.