Stimulus and all that

But first, an apology. Yes, we have been silent for these past few months. It is not that we ran out of things to say, or took the huff at the state of the economy. We just got too busy. It is a poor excuse, but that is all there is to it. One of the marks of a cult is that it keeps its followers so busy that they don’t have time to think. The modern cult of government has made an art form out of this technique, and being in the business of interfacing between the real world and government, we have been run ragged. But we are back.

One of the things that has amazed us over the winter has been the way in which new buzz words have been so swiftly swept into everyday use in describing the financial state of affairs. It is not that long ago that green shoots meant, well, just that – the broad beans and snow peas poking through the surface of your lovingly tended patch of backyard dirt, all full of promise as our hemisphere begins its tilt back to the sun. Now it means something completely different. Now it is economists’ jargon for the early signs of economic recovery. People are starting to spend again – that is a green shoot. The housing market is holding up – that is a green shoot. The problem with green shoots, of course, is being able to pick which ones are the weeds. It takes time. Longer days, warmer days, and we will know for sure. But economists are so desperate for good news that they see green shoots everywhere – and there are plenty of amateur botanists as well. My google search turned up 2.7 million hits. What crop will this produce?

The word that grabbed my attention, though, is stimulus. The results are just through for the June quarter GDP, and it shows that Australia’s economy expanded at the rate of 0.6% for the quarter: an extraordinary result in view of what is happening in the rest of the world (except for Japan). And it is government stimulus that is credited with this result. Now a stimulus is “a detectable change in the internal or external environment”. It produces a reflex response. Tap my knee, and my foot shoots out. Tap the public purse, and the feet of tired shoppers will rush out there and shop on. So it seems to be. The question is, how much stimulus is a good thing?

In the Depression era novel “They Shoot Horses, Don’t They?” contestants in a dance marathon compete for a last man standing cash prize of $1,500. It is not a pretty story. In hindsight, they could have done without the stimulus. Hindsight comes without a rewind button.

Stimulate till they drop. Most contestants are still on the dance floor. But their legs are getting heavy. I hope they don’t get tangled up in the green shoots.