Global chill brings economics in from the cold

By Sid Astbury, DPA,

Sydney : The global financial crisis has done wonders for the dismal science of economics. From Anchorage to Ankara the spooky talk about global warming has given way to debate on toxic debt and stimulus packages, job security and interest rates.

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There’s a fresh cast of characters in the news bulletins: out went the sports stars and fashion labels and in came Freddie Mac and Fannie Mae, Warren Buffett and Ben Bernanke.

Listen in on the conversations of commuters and be amazed at the discourse.

It’s not about Lance Armstrong’s chances of winning another Tour de France or whether Pakistan is a failed state but about bad banks, the paradox of thrift and how falling imports will affect the current account on the balance of payments.

And what about all those acronyms? There are the easy ones. GFC is the global financial crisis, the G20 is a grouping of finance minister, GNP is gross national product and measures the value of a country’s goods and services.

There are complex ideas too: the difference between supply and demand, that monetary policy is about interest rates while fiscal policy is about government spending and that falling interest rates aren’t good news for everyone.

Before banks started going belly up, tech-talk was what impressed. The digital divide, convergence, narrowcasting and bandwidth were good words to use.

The way to turn heads these recessionary times is to mention the automatic stabilisers, which is how changes in spending and income affect the economy irrespective of government policy.

There are playful terms, NINJAs is one, to show you are up to speed. NINJAs are those who allegedly caused all the trouble in the first place by taking out sub-prime mortgages they couldn’t pay because they had No Income, Jobs nor Assets.

Numbers that used to be reserved for measuring the solar system are now invoked to tot up what we owe – not just billions but trillions.

Figures that would have been extraordinary in the past – 651,000 jobs lost in the US in February alone – have been rendered ordinary by the scale of the downturn.

Economics has trumped everything. Prime Minister Kevin Rudd came to office in Australia proclaiming climate change the greatest challenge of our time.

Now, it’s the “sharpest synchronised downturn in the global economy in our lifetimes” that takes up all his attention.

Rudd, a fast learner, quickly ditched the environment when the economy went pop and can now trade terminology with the best of them.

The Australian Treasurer, Wayne Swan, was not so quick on the uptake.

Swan, who holds the top economics portfolio, was ridiculed for being unfamiliar with the arcane term NAIRU – which stands for the Non-Accelerating Inflation Rate of Unemployment and is valued by some economists as a measure of the level of joblessness needed to keep price rises in check.

Warren Buffett, a 78-year-old US billionaire lauded as the world’s canniest investor, avoids jargon in his newsletter to Berkshire Hathaway Inc shareholders.

Rather than saying he expected “negative growth”, the man they call the Oracle of Omaha talked of a US economy that had “fallen off a cliff”.

Also delightfully candid was his assessment that “not only has the economy slowed down a lot but people have really changed their habits like I haven’t seen”.

If he’d written like a pundit, the second richest person in the US might have said that a “fall in aggregate demand was constraining discretionary spending.”

Knowing the lingo brings a certain sort of kudos. But for Buffett, it’s enough to know that “in economics there’s no free lunch”.