To call your vision the worst case scenario is like calling Ghandi a little bit peckish. I’m not saying that we can all relax, but I think the doom-saying is a little premature.

The economy, pretty much Worldwide (US, UK, EU, Australia, NZ plus a lot of others) is now in cardiac arrest.

There is Worldwide credit freeze. No one is lending to another, especially banks are not lending to each other (which is an interesting counterpoint to all the “Oz banks are safe nonsense” …. they don’t think each other are safe, neither does anyone else in the World).

Now for the hard facts. Oz needs to import external money every day to survive. We have a current account deficit (forget the trade deficit this is the one that matters) in the $70B+ a year level.

To buy oil, to buy food, to buy cars, to buy computers, to buy .. you get the idea. We have to borrow money every day. We also have to borrow to pay the interest on our existing debts.

That inflow has stopped. We have about 4-12 weeks left unless things change. At that point our ’safe’ banks will have to stop new loans and call in existing loans (maybe your and mine mortgages) to survive. The Govt will have to bail them out (then again Dudd who knows?) but the Govt does not have the the money to do it (technically there actually is way but they will never do it)!

At that point the economy collapses as overdrafts disappear, corporate loans don’t get rolled over, people get turfed out of their houses .. in simple terms companies cannot (maybe even State and the Federal Govt) cannot pay wages. The country runs out of money.

Tick, tic, tick until Oz collapses and quite possibly defaults unless urgent, brutal action is taken. A 1% cut is not enough (3% maybe).

When I say brutal, I mean brutal. Guarantee all deposits, Nationalise at least 1 bank, nationalise super savings. Issue $300-$500B in 10 year Govt bonds and order the super funds to take it up. Pull all overseas investment money back into Oz, especially all the super fund money invested overseas. Print money like all hell and spend it.

As that hiker did a while ago, take your knife out and saw off your own arm to survive …. or die.

Oh, and incidentally, wasnt it scumbags like YOU at, oh I dunno, say, MACQUARIE BANK who drove cutting edge low equity dodgy-arsed banking on this side of the Pacific rim?

Woops…cant mention that. ‘Talking down AU institutions’ etc.

Obvs a higher cost of funds for banks makes a difference.

Oh, come on, Kim, you’re being disingenuous!

Corporate profiteering vs mortgage relief to ordinary struggling households — do I have to spell it out?

If Bob Brown had made the same appeal to banks, you’d be 100% behind it.
If not 200%!

*/slashdot joke*

Poor form Mexicans!

I note that Possum didn’t realise that either:

http://blogs.crikey.com.au/pollytics/2008/10/07/the-jaundiced-view-intrade-polling-confluence/

I thought that The Australian was supposed to be a national newspaper!

Paulus @ 4, no, why?

BBB @ 3 – Turnbull first criticised the government for not cutting enough, and thus having an even bigger surplus, then turned around and said the surplus was too big.

And yes, I think creating extra demand in the consumer sector through tax cuts is something you might do when a recession on the horizon. And maintaining a substantial surplus gives you flexibility to increase government spending in order to stimulate the economy when needed.

Possibly. Monday was a public holiday so that might have something to do with it as well.

Re: incoherency of Turnbull’s critique, my recollection is that he simply said that increasing spending by billions (quite apart from the tax cuts) was hardly consistent with Rudd/Swan/Tanner’s anti-inflation message. I don’t know the figures, so perhaps that critique was factually wrong. But if so, coherently wrong, I’d suggest.

I think you are right about the populism though. Turnbull’s line on the banks is appalling, and one that will very probably come back to haunt him.

BBB

‘It couldn’t possibly be because the numbers don’t show any leadership bounce for Malcolm Turnbull, could it?’

…. careful now, you’ll be getting LP another black mark in Christian K’s Big Book of Blogging Sins, for an offence under the “Prone to Conspiracy Theories” act.