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June 14, 2006
The Australian stock market has plunged almost 10 per cent in the past month, wiping out almost all of the gains of the past year. As they say in the financial press, the market mood is darkening, due to global inflation fears and the possibility of the Federal Reserve Bank lifting US interests. A downturn beckons. Doesn' that place speed limits on Australia's economic growth.
The head of the International Monetary Fund, Rodrigo de Rato, said in Canberra yesterday that Australia has positioned itself well for a potential economic downturn by paying off its debt, and for utilising the current account deficit for investment rather than consumption, as is the case in the US:
Australia's external deficit reflects high investment, rather than inadequate domestic saving, and investment is especially strong in the resources sector--which boosts propects for future exports which boosts prospects for future exports.
Not suprisingly, de Rato reckons that Australia deficit does not need any government policy response but would look after itself as the surge in business investment levelled. The market will self-correct.
That's good to be reminded of neo-liberal doctrine. It's good to see the faith being reaffirmed.
However, won't the trick of getting ever-increasing export finances to finance Australian's ravenous demand for imports no longer work in the near future? Either export volumes have to increase dramatically, or overall growth will have to slow. Doesn't that require a policy response from the government?
The IMF--isn't this institution struggling to be relevant in the 21st century, where private capital flows dwarf offical lending. Isn't it failing to ensure an orderly unwinding of imbalances in the world economy? Dosen't the IMF face an identity crisis, given that the IMF was created to promote a sound trading system, aid countries with severe balance-of-payments deficits and assist those in economic distress? The IMF is no longer at the center of today’s international monetary and international financial system at a time when the system itself was becoming economically more unstable and technically more volatile.
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'The market mood darkens" Holy bat shit does that mean I have to sell my stocks and shares?and my shares in speckled trout were doing so well.Woe is me,does that mean my shares in Telstra(which I assumed I already owned)are to be worthless woa is me woa is me.And my super, my god my super,no the supers o/k my accountant Nicky Dow reckons if I sell one of my condo's in the Maldives, I will be sweet.He reckons the blue water yacht may have to go next week if the Footsie 500 doesn't come back on a low grade profit yield, in conjunction with my speckled trout.So all is not lost.
Gary as you can see I take the economic forecast of the world with all the seriousness it deserves,cause you see im probably one of those poor sods in the minority who reckons its all gonna blow up in their faces.The blow jobs that run this world think it can be exploited forever,we are fiddling whist not so much Rome burns but more like they are all wanking themselves into a fantasy world.I reckon the I.M.F. and World Bank are wankers paradise.I bet you can't walk,wade would be a better word, down the corridors of these places with out slipping arse over head.I must go,my wife has just put me in a head lock and dragged me away from the p.c.she reckons Im doing a little wanking myself.
Phill.