The story of Rip Van Winkle is a metaphor about people who sleep through the revolution.
The world continues to go through an amazing economic shake up, and it’s far from over. Currently, even if American politicians can climb in from their egos we are still in for a whole lot of economic bad news.
The last crisis came in 2008, in the early days of the Rudd government. Since then we have had three opposition leaders and a new Prime Minister. We were told at that time that Australia would be ok; that our economy and banks were secure. That was before the 7th of January sell off had wiped 35 billion from the value of the Aussie share market. Our politicians were the last to grasp the situation.
But it soon began to dawn.
When the giant American insurance group AIG started to totter our leaders found we were not insulated from these historic economic shakings. On one Monday AIG suffered a 70% share price fall and its networks carried its reverberations around the world. Bear Stearns and Lehman brothers had collapsed and all the banks associated with them were also tottering.
Our economy was also at great risk.
Little did we know at the time that Prime Minister Kevin Rudd had received a secret report showing how threatening to Australia’s commercial wellbeing AIG’s collapse would be. They insured a third of all oceangoing cargos, and were the prime insurers for more than 100,000 businesses. Our building industry was impacted deeply, with tens of thousands of contractors unable to work because they couldn’t obtain insurance. Enterprises from peak corporations down to Girl Guide barbecue’s suffered paralysis from the loss of insurance cover.
Deeply worried by what he now saw, Kevin Rudd hit the phones to save A.I.G. calling the White House to convey an urgent message of concern to George W Bush. He called the World Bank, the Democrat house leader and anybody he could raise, because he knew any bailout of AIG would require Congressional support. He wanted to make sure that everyone knew that the decision had dire international implications.
Time being, the economic world was in free fall.
In New York and Washington, banks were tumbling like dominoes. There was an immediate run on the $3.4 trillion mutual funds industry. Suddenly there were no funds available in capital markets to keep business and industry going. Australia’s banks owed foreign creditors over $800 billion.
The head of the American Federal bank Ben Bernanke went immediately to speak to a private conference of Congressional leaders. He said, “ I spent a lot of time as an academic studying the great depression. If we don’t act right now and in a huge way, you can expect another great depression, only this one will be much worse.”
The members of Congress were then, as now, so involved in their partisan politics all the warnings fell on deaf ears. On 29th September 2008 Congress rejected the proposed 700 billion banking bailout that would have softened the blow. The outcome was that Wall Street suffered its biggest one-day fall in 20 years. Today the Republicans blame president Obama for the mess largely created by them.
The package recommended to Congress eventually got through a week later, but not before the chaotic genie was out of the bottle and many companies were collapsing around the globe.
The blindness of the arrogant and self satisfied .
In Australia the collapse included the private equity business that nearly bought Qantas, ABC Learning, and many others. By early 2009 investors were facing mammoth losses from collapsed companies, totalling $73 billion.
Superficial appearances indicated we had reason for our delusional optimism. Joblessness still hovered at a historical low of around 4%, and the media told us business seemed to be doing ok. However those who could see over the shoulders of our politicians were catching on, informed anxiety was rising steeply, and this was new.
While it was at its peak and before Congress agreed to intervene, Australian treasurer Wayne Swan and Prime Minister Kevin Rudd had quietly launched unprecedented emergency action. Hence the pink batts and school building blitz.
Most of us were sleeping through the real meaning of it all.
Before we point the finger at America though, it is haunting to remember that at the very time the world’s economic system was tottering on the edge , our Parliamentary headlines were about the internal petty politics of leadership within the coalition.
To top it off, the new government’s Labour Secretary, John Murphy rose in Parliament to complain about the size of a helping of beef stroganoff his wife had been served that day in the canteen. What is that statement about fiddling while Rome burns?
Whatever the outcome , the real battle for trust has been lost .
So we in Australia are once again waiting to see whether the American political system, so heavily built on competition, will be able to cooperate for the sake of its own people, as well is the world.
I am reminded of the verse in Proverbs that says “Only by pride cometh contention”.
I wonder how many of us will sleep, like Rip Van Winkle through this revolution, only to wake up in a different economic world? For those who believe in prayer-may be it’s time to give it a try.
My guess is we got off lightly thanks to China buying lots of our stuff so we could spend up.
The future? I think we need to do an enormous lot of hard thinking about China and our relationship to it – and how this will fit with India and the US.
I guess most people ‘trust’ the Greens. Even if that takes the form of complaining that they want to implement their policies (imagine a political party that sticks to its election platform!).
What the US has done is mealy a band aid solution to a cancerous debt addiction afflicting most of the West. The Annualized US GDP growth for this year so far is 0.85% vs the budgeted 4%, which means that they have over predicted by more than 300%. So how can they believe that their predictions are accurate over the 10 YEAR period of these so called cuts. It’s a joke. Plus when they talk about the cuts the cuts are over that 10 year period in order to make the cuts look bigger & back end loaded so it’s not 2. Furthermore it’s effectively only a reduction in the rate of increase. The Debt still goes up. It’s effectively intergenerational tyranny. To us an American saying it will be “… taxation without representation”.
I.O.U.S.A. Show’s how bad the picture was a couple of years ago. It’s worst now.
$1 out of every $11 the US Gov’t spends is on debt service or to put it another way they spend $1 Billion every day on debt service & $10 Billion on doing government things.
Remember the Tories made “massive cuts” in government sending in the UK? These “massive cuts” didn’t actually reduce government spending. Government spending actually increased.
There are massive Fiscal issues that are not really being properly discussed or dealt with.
Thanks for the awesome blog post. Bookmarked this
Very nice post. I have really enjoyed visiting your site posts. In any case I’ll be subscribing to your feed and I hope you write again soon! Thanks a lot, I’ll attempt to visit more frequently. Happy new year!
I have been meaning to post about something like this on my site and you have given me an idea. Thanks.
hi nice blog^^
Great web site. Lots of useful info here. I am sending it to some pals ans additionally sharing in delicious. And naturally, thanks to your effort!
This post is very usefull thx!
i love this part:
You made some good points there. I did a search on the topic and found most people will agree with your blog.
Hi there I like your post
I am always searching online for articles that can help me. Thank you
This web site is really a stroll-by way of for all the info you needed about this and didn’t know who to ask. Glimpse here, and also you’ll positively uncover it.
I don’t even know how I ended up here, but I thought this post was good. I don’t know who you are but certainly you’re going to a famous blogger if you are not already Cheers!
Damn! I was gonna do this! But, only for, like, two months. That’s probs why I never got around to it.
I savor, result in I discovered exactly what I used to be taking a look for. You have ended my four day lengthy hunt! God Bless you man. Have a great day. Bye
Great – I should definitely pronounce, impressed with your website. I had no trouble navigating through all the tabs and related information ended up being truly easy to do to access. I recently found what I hoped for before you know it at all. Reasonably unusual. Is likely to appreciate it for those who add forums or anything, site theme . a tones way for your client to communicate. Nice task..