US debt issuance leaps; Canada new jobs grow; Shanghai markets tumble; Japan has trade surplus; China tax growth stalls; Aussie inflation looms, house prices to sink; UST 10yr at 3.17%; oil drops, gold holds; NZ$1 = 65.4 USc; TWI-5 = 69.7

Hi David, I can definately understand your conclusion when looked at through the prevailing economic thought. I would contest however that our growth, through credit creation/money printing has detached from what should be the underlying driver which is productivity.
As with all credit it’s great for the short term but it’s not a long term solution especially the way we are using it.
The following is a very crude analogy but I feel as if our current economic system is like a dealer and a junkie. The dealer gives the junkie just enough to “keep things on an even keel,” make the junkie feel good or “prosperous” all while his life is slowly being eaten away (inflation and reduced productivity). The junkies outcomes are now more dependant on what the dealer gives them as opposed to what they produce. This will continue on in cycles with the dealer manipulating the junkie until they can continue no more. When that is, I don’t know? While credit isn’t heroin, it sure is addictive and while central banks aren’t dealers they sure behave like it.

There is a line of analysis that suggests the severity of the last crisis was caused by Paulson, Geithner and Bernanke making a terrible mistake in shutting down Lehman Brothers. It was only when they realised this that they started to do the right things. The principle action was getting Congress to suspend mark to market accounting, as it only works when times are good, in a crisis it causes the sort of collapse the Federal Reserve was established to prevent.

Central banks are made of people and sometimes they make mistakes. Hopefully they learn from them.

The trouble with central bankers and indeed a lot of economists generally is that they look at debt as something to service rather than pay back, particularly when considering their economic growth models. GDP that is debt fuelled, as it has been in the US (government) UK (government) Australia (Household) New Zealand (Household) is still debt rather than productive growth. It works okay for a time, but when it comes to pumping up a housing market or national debt However most people don't want to be servicing a debt when they hit their 60's and 70's, (repayment rather than servicing is the preference) but a government can palm the debt off on the unborn and therein lies the problem (servicing rather than repayment is their preference - the ultimate can kicking) So with all debt, how long can you keep expanding a balance sheet to support jobs and spending (either govt - creating jobs, or household - making people feel artificially richer) if the economy cannot kick start the 'real productive growth.' that is necessary.

Interest rates could still go lower in NZ and we could pump the credit system again.. But when it comes to the point of negative interest rates and still needing to pump the system, what you end up with is Japan. China's long term future could be a continuing success story, however it could also become the next Japan and lose a couple of decades. What impact will that have on the nations that rely on them? What pressures will it create in their society? How long will the 'home team' hide the reality from their people, Closed door politics (one party rule) is going to get very hard to manage in the digital age and don't forget that in the last crisis in 2008/09.. I-phones and smart phones were in their infancy, yes a few people had them but most of those phones didn't have a camera as well as all the mod cons they do now. 10 years on and information and access can spread like wildfire, even in China. I think Central banks may have a really tough job on their hand because last time around it was a global crisis, this time around we have the added concern of more nationalistic politics taking hold around the globe (apart from in New Zealand) because we're diffrunt? Or are we to seeing a shift towards a more nationalistic sentiment?

Appreciate your response..

My worry is the future, ie, now with Prices rising (all good for RBNZ to say, its mainly due to Oil), but its still stinging people, and masssive amounts of debt out there, how are they going to balance the possibility of retaining low inflation and reining in debt

Central Bankers can't fix the problem, David. Lomborg was just plain wrong (purposely, is my assumption) and Julian Simon took it to extremes suggesting that copper was in our heads. But their problem is all the same one - attempting exponential growth on a finite planet.

If you want to do that growing virtually, I have no problem. But when you want to buy physical stuff - which is the end spend for most folk - you are chewing into the planet. The end-game comes rapidly, the mid-game heralds the last possible 'doubling'.

Central Banks can't create physical stuff - they can only print numbers. Those numbers represent the expectation that the future will supply physical things. More physical things. QE was a bet without underwrite - meaning the numbers have to be reduced in buying-power. Whether that happens gradually or collapsingly is the only question in town.

There is no fiscal/monetary firepower capable of 'dealing' with' ultimate scarcity. Lorax 101. Have a nice day.

It is well deserved praise David. The coverage each morning is exceptional and helps to encourage some very good discussions which just don't happen on any other news site I've come across.

Sure, opinions will always differ on subjects, but what's important is that the debate takes place.

Absolutely David, from someone who's been here since you had hair.

To jump on the bandwagon as well, thanks! Interest.co.nz is what news should be, relevant and without the fluff or agenda of others. Plus I do enjoy a dabble in the comment section every now and then.