Americans are now awake to the fact that their housing market will be ‘cactus’ for years, but most Australians remain blissfully ignorant that our beginning-to-burst bubble is even worse than the US’s.
Take a peep at this excellent discussion between David McWilliams, Gabor Steingart, Joseph Stiglitz, and Simon Wolfson, as moderated by Stephanie Flanders. It canvasses the possibility of the ending of the Eurozone. McWilliams is a standout.
The discussion touches upon the two approaches destined to fail: “Helicopter Ben’s” USA method , simply running the money-printing presses ad infinitum, and the austerity strictures Eurozone lenders are seeking to apply to the PIIGS “sinner” nations (which must clearly worsen their plight).
It also suggests the best approach. McWilliams says Iceland is bluntly correct: “We don’t have any money, we have fish. We’re not paying your money back.” Nor should they, of course, because each and every one the European banks were disdainful of risk management. They lent out funds that could NEVER be repaid, so who exactly are the real “sinners” here? Debt that can’t be repaid won’t be repaid.
What’s the relevance of all this to Australia, you may ask. Well, when we do awaken from our Rip Van Winkle torpor (it seems we must suffer the collapse before the mainstream is prepared to contemplate solutions), we have the benefit of seeing the failures transpiring in the US and Europe, and, making the comparison with those countries that have wiped their hands of the shortcomings of banks, we will be able to hang our miscreant banks out to dry, too.
When real estate has finally tanked in sleepy Ozland and carcasses are all over the floor, I’m betting our government(s) will try nevertheless to send us down the “austerity measures” trail, to bail out our banks at grave cost to people and the economy; but by then we’ll know better and resist.
The difficult-to-beat solution would be refusal to reward banks for their spendthrift policies, combined with Ken Henry’s panel’s recommendations to start the wheels of the economy rolling again.
If we take heed of the warnings we’ve had the luxury of already witnessing from overseas, we’ll be able to navigate our way through banks’ self-interested arguments (which will undoubtedly be taken up by the spin doctors in the ‘respectable’ media).
To make their same mistakes doesn’t bear thinking about.
If Australia suffers a crisis like Europe or the U.S and austerity mearsures are imposed. I doubt Australians will be willing recipients, Especially as many Australians are already struggling financially.
Maybe you’re right, the RBA and the government aren’t going to want to act any differently from Europe, Steve, but I believe many Australians, seeing that ‘austerity’ isn’t working over there, will yell blue murder and, hopefully, help us to change course and act independently. We’ll see, I guess?
I hope you are right about Aussie public resiting but I am not hopeful. Going by the reaction from the press and even the public/investors about the recent credit downgrade of the banks. I think the opposite is true. The public will want a bailout because they want their own hides bailout out too. The press feed to much of real estate advertising and banks it has become an Industrial Complex. I am simply outraged that our banks have been able to continue on as before given the collapse overseas for banks with the same business model. Then I see today in the fin review the Aussie banks have just under $6 Trillion of Derivative exposure. I hope we dont wake up one day to find Glen Stevens has just written a cheque for $100 Billion like his Fed Cousin.
Steve