No, Really, It's Not a Recession

I read today in the newspaper that we're not going into a recession, and that the economy is likely to keep growing. And no, I was not reading one of those newspapers you see at the checkout lines in grocery stores with headlines like "Aliens Stole My Baby" and "Elvis Spotted Alive on South Pacific Island."

For those who don't know where I live, if you're in the United States, Europe, Japan, or a number of other First World countries, I'm sorry to say that this won't be true for you. You're already in a recession, and one that's touted to be the worst economic downturn since the 1930s.

But here in South Africa, everything's rosy. South Africa's financial minister, Trevor Manuel, announced today that South Africa's economy is likely to keep growing through this year. South Africa has kept to sound economic policies for the most part since its first democratic election in 1994, drawing the country out of debt after the country's economy had sunk into the doldrums in the 1980s, as country after country refused to trade with it due to its racist policies. The South African government passed the National Credit Act, which came into effect in June 2007 and essentially prevented people from taking on debt that they couldn't repay.

Now... don't you wish that someone had thought about that in the United States? Instead, U.S. banks lent recklessly to people who couldn't repay their debts. That's what the subprime lending meltdown was all about. During this downturn, Americans should look long and hard at their spending habits, as most of my fellow bloggers have wisely suggested. Taking on debt inevitably siphons off money that can be used to create wealth.

That said, South Africa isn't immune to the downturn. Already, massive layoffs are looming in the mining sector here. Platinum, which is widely used in automobiles, is stagnant. Gold mining companies are laying off workers, even with the gold price going above $900 an ounce.

So... maybe if people keep seeing gold as a safe haven, the South African economy won't follow the First World into a deep recession. I hope it just doesn't inflate the rand too much, as I get paid in dollars...

(Originally published at The Creating Wealth Blog on 1/26/09)