What is it about all these expert commentators who keep raving about opinion polls and political strategies as if Australia somehow won’t get sucked into the vortex of a global depression and massive sovereign debt defaults?
This is Possum Comitatus in Crikey yesterday:
Looking at the Essential Report from yesterday — which was probably the best poll undertaken in the last 12 months by any pollster — the magnitude of how wrong the Coalition not only got the stimulus package, but the broader GFC starts to become apparent.
And this is what a puzzled Insiders host Barrie Cassidy asked Dennis Atkins on Sunday:
My question on the Coalition is — okay, they voted against it lock, stock and barrel — but who were they going into bat for, who were they representing?
Hello! The Coalition was absolutely right to oppose the reckless debt binge which will only heighten the risk of an Australian sovereign default along with massive Kennett-style spending cuts and tax increases.
We’re now facing a global economy that will contract by 10-20% given the leverage in the system. Total US liabilities are a frightening $US56 trillion with the government component only $US12 trillion. That can never be paid back and borrowing more just delays the solution and increases the size of the inevitable default.
Every day we hear different stories about places being worst affected. The AFR editorialised about Japan today and Glenn Dyer yesterday pointed to the massive liabilities in Russia and Eastern Europe in Crikey.
Try joining the dots. It’s clear that the vast majority of the global banking system will be nationalised. We’re part of this because Australian bank liabilities and deposits have been guaranteed.
With the global banks having huge exposures to weaker countries with falling currencies and huge borrowing requirements, the equity in those countries will be wiped out in what is going to be one gigantic debt for equity swap.
This will leave government backed banks in strong countries controlling vast swathes of assets in weak countries. The Australian banks, for instance, will have huge influence over New Zealand.
As all this happens, the challenge will then be avoiding wars, riots and revolutions.
For instance, the British Government already has enormous influence over many Australian companies with loans owing to the now nationalised HBOS and Royal Bank of Scotland.
Look no further than the teetering Asciano, which controls vital Australian businesses such as Pacific National and Patrick Stevedores. Asciano is being advised by RBS’s ABN Amro division as the British taxpayer attempts to recover up to $500 million in loans.
The Swiss government at UBS and the Germans at Deutsche Bank are doing the same globally, as are the Americans through the likes of JP Morgan, Citigroup and Bank of America
Ultimately, the world’s leading powers will need to get together and collectively wipe out the excess credit in the system. And that also means US sovereign debt, which is being piled on at a ridiculous level.
The trick here is to recognise the problem and move swiftly to complete this global debt for equity swap and then slowly sell all the government controlled assets back into the private market.
Given that the process has and will continue to wipe out much of the world’s retirement savings, governments will need to step up with state pensions funded from the progressive sale of those nationalised assets over time.
In the context of all this, why would you voluntarily surrender your balance sheet strength with $22 billion in reckless cash handouts over a four month period? It’s time the political pundits awoke to the disastrous tactics of the Rudd Government and their debt-addicted state government mates.
While your view of the bigger picture may be an apt description of what the world is facing, Stephen, the reality on the domestic front is that if the government does not step in to replace money private industry is pulling out, Australia will head into a disorderly collapse.
Dealing with that collapse will damage the government’s balance sheet faster and perhaps to a greater extent than the stalling measures they are undertaking now. My understanding is that they are hoping this will be a V shaped crisis, with the rest of the world recovering in time to rescue us.
We still have inertia on our side, and a stimulus to keep us sailing could prevent an avoidable depression.
Krugman is ignoring the US govts already parlous balance sheet. He is using Depression tactics yet forgetting that the 30s was a completely different time. The US as a whole was the world’s largest creditor. The situation is entirely in the reverse now, David.
There’s a lot of gotcha in many of these comments – Mayne has offered a weapon to those who were itching to beat up on the Rudd Government on any issue, I suspect. Mayne makes an interesting analysis of the deep future – not one I’ve seen in the popular media, nor Crikey even. So where are the supporting advocates – not even Taylor on Lateline earlier this week seemed to offer this doomsday analysis. And for those grieving neo-liberals, logic suggests that Mayne’s analysis puts the Turnbull (he is still there isn’t he?) Liberals in the same can – Turnbull would go the same track as Rudd (increase Federal debt) only in two slices, not one. And as for formulating an alternative position, the Liberals just sacked “wait and see” Bishop as shadow treasurer. So much for their enlightenment. Now if only they stopped playing political spoilers and took up the meaning and implications of Mayne’s analysis they might be taken seriously. But just what does Mayne offer as an immediate strategy? Wait and see? Bet he’s got some fat to live off – not like the bulk of wage and salary earners. They live in the here and now – so if you’ve got an answer Mr Mayne, cough it up. Of course, there may be some enigmatic figure thinking along similar lines to Mayne and waiting, all knowing, in the background for the financial equivalent of Marysville before arriving in his shiny fire truck. If only we’d thought to ask him earlier he could have put us all right.
Phill, the arrogant nonsense in your last sentence should not go unanswered because you are far from being the only person who is spreading this tabloid bullshit. The bonus will go mostly to ordinary working men and women around Australia. There is absolutely no reason to believe that they will spend it any differently to their ordinary income. Yes, some will spend it on electrical goods (which is apparently a social crime according to many patronising gits) and a very small percentage will be gambled or spent on drugs. Some of it may even be spent on Asti Spumante. But the great bulk will be spent on ordinary everyday goods and services and that will not be deserving of the stupid contempt of people such as yourself.
Very apt analysis of what is really happening out there! Thanks Stephen for writing what evry thinking person wants to say. That is – excluding all those who are watching their post boxes for the $900.
This so-called stimulus package might create another minor blip in retail spending, and it might keep a limited of number of “tradies” all of whom will always have a job anyway, in work. But at the end of it all, this package will scarcely generate one dollar of future income for the Australian nation, and it will take generations to pay it off.
More power to Harvey Norman and the casinos, to say nothing of State Govts raking in gambling taxes.