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the market mood darkens « Previous | |Next »
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.

| Posted by Gary Sauer-Thompson at 3:09 PM | | Comments (7)
Comments

Comments

'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.

The bilateral trade agreements have been end-runs around the WTO and IMF.

Bilateral trade agreements.Now there's a contradiction in terms.As we (Australia)have been shafted by as usual our American friends what is a word for a trade agreement we have no say in.??????

Phill,

Maybe the darkening nmood suggests that the economic good news used by the Howard Government to show that they are such wonderful managers.

Increased interest rates to control inflation is not good economic news.

Cameron,
Globalization can be a bit of an illusion as this comment in The Age shows.

As you know Australia has a shortage of bananas due cyclone Larry wiping out most of Australia's banana crop several months ago. Yet there is a worldwide oversupply of bananas. They are literally falling off the trees in places such as Ecuador, Brazil, Colombia, Costa Rica, Mexico, the Philippines, China and Indonesia.

Australia could readily import enough bananas to meet local demand, and the imports would be far cheaper than the pre-cyclone Larry bananas and they would be every bit as tasty. Yet, we refuse to do this because we want to protect the local industry when it cranks up again.

And it not just Australia blocking bananas--it is standard practice.

Gary,it will be the interest rate rises that bring the house of cards down.Howard knows this and as you know has covertly intervened in the decision of the reserve bank who control the economy.This as any economist worth his salt knows, is the beginining of the end when you let x lawyers and union heads intefere with commerce.The warnings of what is about to transpire have been around for a long time,as usual politicians all do what they do best.Sleep on the job in between having a good wank.
Phill.

Gary, Yeh they are more managed trade than free trade, but either way, they are an attempt for nation-states to create trading blocks outside of the international liberalist institutions of the IMF and WTO.