What do you call it when unemployment starts rising and formerly sound financial institutions shut their doors to depositors and refuse to return their money. Some 75 or 80 years ago, we called it a depression.
Is it really a depression? Well no, it is not, because this is not the result of the world credit crisis, but the consequence of our very own Jim Hacker's failure to grasp a few simple facts.
The first is the law of the unintended consequence. If you don't think through a policy decision, you run the risk of all sorts of things going wrong that you didn't anticipate.
The second is that Sir Humphrey, the suave head of Jim Hacker's department in the Yes, Minister series, always had a point and was often right, especially in the earlier episodes before the producers began playing it for laughs.
''How very brave of you, Prime Minister,'' said Sir Humphrey. ''Eh, what?'', said Hacker, who well understood that bravery in this context is coterminous with stupidity.
Would that Kevin Rudd and Wayne Swan were less brave, more cautious and listened to our Sir Humphreys. Perhaps then we would have guaranteed all deposits with all financial institutions, with a cap on the guarantee. We would not then have had a large front-page photograph of self-funded retirees Don and Gail Reid, who have seen the value of their share portfolio bank shares drop by one-third and their deposits totalling $200,000 in fund managers AXA frozen.
That has nothing to do with subprime housing loans in the United States, and everything to do with the ineptitude of Rudd and Swan, who include a 29-year-old political adviser in their crisis discussions, but omit the governor of the Reserve Bank, Glenn Stevens, who seems to be out of the loop.
Stevens, who seized the initiative early on by dropping the official interest rate by 1 per cent, twice as much as expected, is thus responsible for the only economic measure whose soundness isn't being questioned.
He must be desperate. So must Treasury. Leaks like last week's revelation that the deposit guarantee, unless it were capped, would produce the effect it has on fund managers and their depositors don't happen until the bureaucracy loses confidence in a government.
The $10billion fiscal stimulus looks increasingly like a wrong policy. Certainly, the beneficiaries wouldn't think so, provided, that is, that there are beneficiaries from wrong policies.
Pensioners do need more money. They always need more money. First-home buyers can always do with a subsidy, and they will be grateful.
But are these measures necessary in dealing with a credit crisis? They look suspiciously like the welfare measures that Labor governments always take, in good times or bad, because social welfare is what they are about.
Australia has a special problem. We don't have much of a manufacturing industry any more. We import what we need, mostly from China, where production costs are low. The dollar has been strong so that on international markets we get a bigger bang for our buck.
So the Aussie dollar, which briefly made it to parity with the greenback, is down in the low- to mid-US60c range. Our commodity exports are going gangbusters, but imports, which were deflationary, are now becoming inflationary.
The row in Parliament about the advice to the Government on guaranteeing bank deposits is not about whether the secretary of Treasury, Ken Henry, is a good bloke. Of course he is competent.
Nobody is saying he isn't. When Rudd and Swan spring trenchantly to his defence it is no more than a political tactic. They are pretending Henry's integrity is under attack, when it is not. The attack is on the Government as to whether it is acting on official advice from Treasury, from Finance and from the Reserve Bank, and it is clear that it is not.
Stevens was not at the meeting when the decision was made to guarantee bank loans.
If Rudd had capped the guarantee at, say, $100,000, the big investors in the fund managers would not have had a reason to switch their holdings into bank deposits.
Henry was asked whether the ''regulators'' had any objection, and, said Rudd, he said they had not.
I would not have called the Reserve Bank, which was given autonomy under the Coalition government and made responsible for keeping inflation within a 2 to 3 per cent band, a ''regulator''. Surely, it is a lot more than that.
The Rudd Government is using the credit crisis to smuggle in irresponsible economic policies for the political purpose of getting as many more voters as possible on to what is referred to in the corridors of power as the taxpayer's tit.
What the Government is handling well is the spin. Some journalists have been put on a drip, as Paul Keating was wont to say. They are being briefed on inside stories.
So we learn that George W. Bush called Rudd who advised him to crank a G7 meeting up to a G20, which would include Australia. We even learn what Rudd said to Bob Brown.
Dare to criticise, and you become guilty of lacking bipartisanship. It seems that policies which are being developed against, or without, the advice of senior bureaucrats must be immune from parliamentary examination.
Rudd might speak Mandarin, the northern dialect of the Chinese, named for legendary Chinese bureaucrat scholars, but he doesn't understand Mandarin when those proffering advice and warnings are our own mandarins, the public servants who have spent decades working out how to run a country.
The world is in a mess except for Australia, where our mess is of our own making.
David Barnett is a Canberra writer.
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