I’m not particularly literate when it comes to the financial markets, I understand what the stock market and futures markets are and how they operate, but if you asked me to pick a stock I’d pretty much throw a dart at the prices from the day’s paper. Despite this, I feel qualified enough to categorically state that the global economy is just about screwed.
The big news at the moment is that Bank of America are buying out failed investment bank Merrill Lynch, backed by taxpayers funds of course, and another high profile bank, Lehman Brothers, is filing for bankruptcy. This is just a continuation of the collapses that we’ve been seeing over the past year and there’s no sign that it’s likely to stop any time soon. At the moment the US government, which isn’t particularly solvent itself considering it’s continued spending in Iraq, is quietly throwing cash at the financial sector to maintain ‘confidence’ in the economy.
Why does any of that concern me? Well, apart from the fact that I work for a US owned company at the pointy end of the Fortune 500, I have no doubt that when the USA crashes it’s going to cause a lot of pain here too. In the 1920s the level of global trade and financial interconnectedness was tiny compared with what we have today, yet even then the Great Depression was a world wide problem. My guess is that the only country that won’t be devastated by the collapse of the US financial system is Cuba, I guess those trade sanctions weren’t so bad after all. For example, today the ASX is warning investors not to deal with the local arm of Lehman Brothers and I suspect that a lot of other US owned financial houses in Australia will be feeling nervous about their future.
As well as the financial pain, we will no doubt also have to suffer the dimwits in the Federal Opposition gleefully crowing about how Labor has ruined the economy, despite the fact that this crisis has been precipitated by the same type of free market chicanery that the ilLiberals are so fond of. Sadly, I have no doubt that there will be plenty of people left hurting when their superannuation loses even more value than it has this year who will be looking for someone to blame, and Kevin07 will be firmly in their sights. Unfortunately, if the worst does come to pass, you can forget Brendoc’s extra $30 a week for pensioners, because worthless super funds will mean that there’ll be a lot of extra Baby Boomers lining up for their cheques.