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.