Tuesday, October 14, 2008

Keeping a sense of perspective

The first stanza of Rudyard Kipling's If reads:

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;

I was reminded of this last night listening to both the Australian Prime Minister Rudd and Opposition Leader Turnbull talking on TV.

I did not intend to post today - I try to limit my posts on this blog to three a week. But seriously, we are in danger of entering very bad policy territory.

So far as Australia is concerned, I think that the financial crisis is over. It was always an international rather than domestic issue, but we had to deal with the flow-on effects. Globally, too, I think that we will soon be able to put it behind us.

We now have the problem of the real economy. Already trending down, this has been hard it by the financial turmoil.

Managing the real economy is a matter for sensible fiscal and monetary policy. Yet here the rhetoric of at least Australia's leaders is still dominated by the financial crisis - we must avoid global melt-down.

Please, Mr Rudd, take a deep breath. Yes, we need to take action to reduce the effects of economic downturn. But we also need time to think the best ways through.

If you treat the real economy with its longer lead times as though action here was part and parcel of the financial crisis, we are going to end up with a mess. Let's avoid this if we can.

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