THE BUBBLE BURSTS...

“Ask five economists and you'll get five different explanations (six if one went to Harvard).” - Edgar R. Fiedler

The world economic crisis seems to be worsening and the share markets continue to totter. The multi-billion dollar rescue package approved by the US congress seems not to have affected the sinking confidence of investors and the world may have to brace itself for a very serious economic downturn. I was speaking to a friend today who is close to retirement and his superannuation funds have taken a hiding, making him contemplate yet another few years in the workforce. Nervousness abounds and trepidation is uppermost in the mind of some of the more parasitic of professionals: Bankers, stockbrokers, consultants, agents, non-producers of all sorts… The skimmers of the cream are anxiously watching the layer of cream get thinner and thinner and the milk get watered. This is the time of the lean cows.

Every now and then, we must have this reality check and the high-flying cowboys of Wall Street must come down a peg or two. The trouble is the ordinary person in the street will hurt also, or rather will hurt more. Where did the $700 billion come from? From where did this largesse rain down like manna from heaven? Surely not the bank account of Mr Bush or his cronies. The failure of the US bailout plan brought credit markets to a virtual standstill and some US traders believe US banks may start cutting credit card lines if the crisis worsens. It is also becoming virtually impossible in the US to secure new credit.

In the face of the world crisis, a slowing economy and tumbles in our own share prices, our Reserve Bank has cut official interest rates by 100 basis points to 6 percent in an effort to shield the Australian economy from further fallout from the global financial crisis. The central bank may make further cuts by Christmas, economists believe. This is a dramatic move and evidence enough that things will get worse before they get better. The Australian dollar fell 1.6 US cents in the minutes after the Reserve Bank announcement at 2:30 pm, to 70.36 US cents, but it has since risen back above 72 US cents. This is quite a dramatic drop as a few months ago it was almost on par with the US dollar.

The fear that a “recession” will escalate to a “Recession” is uppermost in most people’s minds at the present time. Economists may theorise and try to explain the burst soap bubble of Wall St in terms of economic cycles and the ideas of Marx and Engels, however, the moral of the story is that working people will just have to bear the brunt of factory closures, increasing unemployment, house dispossessions and descent into poverty that is inevitable in a Recession. Oh, by the way all of the unemployed dispossessed and poverty-stricken ordinary citizens must try and save some money to help the poor Wall St financiers and the bankers, the stock-brokering cowboys and the agents. They must maintain their million dollar lifestyles somehow. It’s so tough when their cooks and their butlers and their maids and their chauffeurs are all so poor, we must give them another $700 billion…