For whom the bell tolls? src: http://www.theaustralian.com.au/bus...warwick-mckibbin/story-e6frg8zx-1226013167028 RESERVE Bank board member Warwick McKibbin has warned that Australia is being caught up in a global bubble that could hit us much harder than the global financial crisis and expose the weaknesses of Labor's economic settings. Professor McKibbin told The Australian the bubble in global commodity prices and property markets in Asia threatened to dwarf the US housing market bubble that led to the GFC in 2008. He warned that the inevitable bursting of the bubble would reverse the surge in Australia's record high terms of trade, push down the dollar and leave the Reserve Bank struggling to fight off rising global inflation pressures. "This is shaping to be much bigger than 2004 to 2007," he said in comparing the new excess of global liquidity with the global financial bubble that led to the worst global financial crisis since the 1930s. "This cycle is even bigger." Professor McKibbin suggested the surge in global liquidity fuelled by US monetary expansion had echoes of the early 1970s surge in food, mining and energy prices that led to global "stagflation", or the combination of high inflation and high unemployment. The Reserve Bank meets tomorrow and is expected to keep official interest rates on hold following a week in which political instability in North Africa and the Middle East has pushed oil to more than $US100 ($98) a barrel. An internationally renowned macroeconomist at the Australian National University, Professor McKibbin has been a Reserve Bank board member since 2001. He is not expected to be reappointed by Wayne Swan when his second term ends in July following his criticisms of Labor's budget stimulus spending and now its flood levy. Yet if it proves correct, Professor McKibbin's warning would pose a dilemma for the Reserve Bank over whether to jack up interest rates in response to global inflation pressures just as our export prices start to fall. Professor McKibbin said the bursting of the new global bubble would severely test the Gillard government's budget settings and its reregulation of the job market. "We have not tested these changes that have come under the Rudd-Gillard era," he said. "We are about to." His analysis suggests much of the surge in mining, energy and food prices is being driven by the near zero official interest rates and so-called quantitative easing of credit conditions in the US and Europe in the wake of the GFC. The Reserve Bank's commodity price index has jumped 49 per cent in the past year that includes a recent 9 per cent jump driven by a surge in food prices. Reserve Bank governor Glenn Stevens last week noted strong demand from China and India had fuelled the surge in Australia's terms of trade -- the ratio of the prices we get for exports compared to the prices we pay for imports -- to their highest sustained level for at least 140 years. This was producing the biggest mining development boom in a century. But Professor McKibbin suggested that perhaps 40 per cent of this terms of trade surge was being driven by US and European monetary expansion, which is feeding generalised inflation pressures. "That is why inflation is taking off all over the world," he told The Australian. "It is already out of the bag. As interest rates go up, a whole bunch of assets and balance sheets will get crunched, so I am not optimistic." Professor McKibben said Australia should have been generating budget surpluses to direct into a sovereign wealth fund as the terms of trade has surged to record highs. And should have been deregulating the job market to help the economy digest the looming terms of trade reversal.
Excellent, someone being honest about the situation instead of saying 'Everything is fine', im surprised it made it in the media... I remember Costello saying 6 or so months before the Libs lost the election that "there are financial hurricanes on the horizon and we need to prepare". They would've perfect at the helm but good ol' aussies gave them the boot.
such a truthful summation in a the mainstream media is worrying to say the least. Close your eyes put your head between your legs and kiss goodbye to your...
Considering the number of people who fell into the hype hook line and sinker over the last 20 years, I can't see some bland admission from an RBA board member making a damn bit of difference now. I knew we were in deep trouble in 2000 and the market started going stupid (the last time I even looked at buying a house) but it's gone on to new highs that I would have never thought possible. The only way this is going to play out from here is with a lot of pain, a lot of tears and a lot of finger pointing. But when the RBA guys themselves say 'um, look, we might be in a bit of trouble here', that's usually a good sign we are in some VERY serious shit. The naysayers can laugh their tits off, but I'm damn glad I'm not toting the average Australian mortgage in my back pocket at the moment and I've actually got a pretty secure job!
They'll never let on there's a problem... from one side of the world to the other the aim is to keep the music going to the very end... Like that Iraqi Information minister who would broadcast to the nation "everything is fine, we're winning the war"..meanwhile over his shoulder US Marines are putting the US flag over a statue of Saddam. We've had 3 major businesses go bust up here in the fortnight just gone... all of them had owners/operators out front saying 'everything was fine' even while the removalists were carting the gear away for the liquidators behind them. I can just imagine the PM at a press conference telling the media scrum everythings under control, while just behind the curtain her aides are packing her plane ticket into her luggage (packed with The Lodge's fine silverware) Don't believe a word they say...believe your eyes.
yeah" baghdad bob". that was hilarious I seen ghaddafi this morning saying they love me hahaha reminded me of baghdad bob
The deceipt is becoming more transparent and time is running out. IMHO. [youtube]http://www.youtube.com/watch?v=Gwm0ESZJSRI[/youtube]
Yet time and again, people WERE WARNED through the entire process - and were openly ridiculed, lambasted, written off and dismissed. Isn't it amazing how AFTER the fact, people are suddenly 'wise'? That the media are suddenly 'all over' this 'story' like it's new? Open a friggen history book people! This has happened again and again and again and again and again... But even WHEN these people are 'exposed', what are you all going to do about it? Fine them? Don't make me laugh. They OWN the system people. They OWN YOU!
He wouldn't be a Liberal appointee would he? I don't think good old Swanney will renew his contract either - much better to get a Labour economist in. I know - it doesn't make much difference but he wasn't saying it when Howard and Costello were handing out funds. malachii
Does such a creature even exist these days ? They'd need to resurrect the corpse of Franken-keating to get anywhere close...
