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Australia’s Economic Calm Before the Storm

A Perfect Storm

A Perfect Storm

The RBA now admits that Australia will enter an economic recession this year, whereas there has been evidence that the Government’s bailouts have worked in reducing mortgage stress. This was probably not the intended effect of Kevin Rudd’s stimulus packages, but certainly a win for working Australians who, in their wisdom, put the cash in the bank instead of splurging it. However it is still remarkable that the RBA thinks Australia will sail through the global recession without many scratches and bruises. How do they think this will happen?

The Rudd “stimulus” money many received was arguably an unconstitutional act and is being challenged as such in the courts (a challenge which has since failed). It also appears that the money arises from foreign borrowings, such as from China. Although Australia is not engaged in a Cold War with China, genuine questions arise as to how this all impacts on the national interest, on security financially and militarily. More and more parallels with Gough Whitlam’s era are being used to place pressure on the current Government, but few of these relate to the probable real reasons for The Dismissal. It’s not likely that Kevin Rudd will be toppled any time soon, as far as any public information indicates. Time can only tell.

What could be expected, however, is a curtailing of “freebies” this year, followed by rising inflation over the next year or two. The shear enormity of money being thrown about in North America (expansion of the money supply from $850 billion to $4 trillion) cannot go unnoticed. It is inconceivable that this kind of desperate money-printing won’t result in hyperinflation in the US, with knock-on effects abroad. It could even spell the end of the US Dollar altogether, with louder and more direct statements supporting the abandonment of fiat currencies. This in turn should raise alarm bells with regard to the likely geopolitical fall out of America’s demise as an economic and political power. It won’t take long for America’s military to follow suit. Chess pieces will start moving all over the place, with potentially horrific effect.

How will all of this affect Australia?

It is quite possible that what is coming will surprise even the pessimists. Nobody in the Australian media is considering the ramifications of war breaking out. It already has in some ways. The rise of Internet based espionage should be taken as an important signal. The lines are being drawn as to who is becoming whose enemy on the international level. Other attacks have been so broad that the culprit will probably never be identified, nor the damage caused known. It’s a cluster of events whose timing is interesting, but there is likely to be much more activity in this regard than the public can ever be aware of. I guess one can only hope that so much information has been leaked to so many that nobody will have the confidence to attack anyone else, resulting in accidental peace.

The effect on Australia of North American and European financial turmoil has so far been quite mild. There are no major demonstrations, no big shifts in unemployment figures, no mass-defaults on mortgages. What has to be understood, however, is that the international economic crisis cannot end overnight. It will play itself out over years and will likely spill over into social and military conflict. The Australian Government cannot prop up businesses, households and banks for that long. It will have to flinch and let things go the way they are destined to. Soon, what we read in the newspapers about far away lands will become realities at home.

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