World economic turmoil should scare living daylights out of us: Westpac

[leavesoftrees]

THE economic turmoil in Europe and the US is nearing "catastrophic" proportions, one of the nation's leading banks warned yesterday, as it predicted a plunge in the dollar to less than US80c and three interest rate cuts next year.
James Shugg, Westpac's London-based senior economist, said the bank was preparing to slash its global growth forecasts from 3.2 per cent to 2.5 per cent for next year, to adjust to the deepening financial chaos in Europe.

And he called on Wayne Swan to abandon his "meaningless and unnecessary" commitment to a balanced budget by 2012-13 and instead consider new economic stimulus spending to buffer the Australian economy.

Mr Shugg said a halving of world economic growth rates in just two years was a sign of "really abnormal" financial circumstances.

"I've never been as scared about the outlook for global economy, and particularly in Europe, at any time in my past 25 years as an economist," he told a Westpac conference in Rockhampton, Queensland, yesterday.

"I've started smoking; I can't get to sleep at night. Markets are freezing up, banks are losing access to credit and funding; things are even worse than you are reading about.

"It is now a serious and considerable risk that we will see a collapse of European financial markets, one or more of the 17 members leaving the euro (currency) and the euro(zone) split up.

"This should scare the living daylights out of (everyone) . . . it's a global catastrophe and there are going to be impacts felt here in Australia."

Mr Shugg signalled Westpac was preparing to dramatically revise its view of the European economy, unless a political breakthrough was made in the next few days, from being in a slight recession to an economy shrinking by 4 per cent next year.

But he warned that if the EU split and its nations jettisoned the central euro currency the European economy could contract by as much as 10 per cent.

This dire scenario would collapse European financial markets, cause entire European states to fail and signal the start of a "real global catastrophe".

But Mr Shugg said the global crisis was not confined to Europe. He believes the US is "glossing over" its financial figures and is close to another recession or may have "nudged" into one.

He warned that the fallout for Australia would be profound, particularly if the signs of a Chinese slowdown were realised.

He said commodity prices would drop and the Australian dollar weaken, forcing the Reserve Bank to ease monetary policy and lower interest rates.

[Cjay]

I am VERY CONCERNED about this comment:


And he called on Wayne Swan to abandon his "meaningless and unnecessary" commitment to a balanced budget by 2012-13 and instead consider new economic stimulus spending to buffer the Australian economy.

That would push Australia deeper into debt than that reckless and pitiful excuse for a treasurer has already done. This would make us debt slaves to the cabal for probably two or three generations, if not permanently. I suspect James Shugg, the London-based senior economist for Westpac Bank, is a puppet and mouthpiece of the cabal. Fear and panic is their tool of choice. This impending financial apocalypse has been in the cabal's plans for a very long time.

Holey Pockets, Batman. We were in SURPLUS four years ago. Ever since Wayne Swan and his NWO socialist cronies formed government, Australia has been going backwards alarmingly fast. They will have already blown 167 billion dollars of our hard-earned savings in just four years. ENOUGH!

I urge you to read this financial commentator's views:


If this budget update was meant as a joke, nobody's laughing

WAYNE Swan's fiscal fiddle - while Rome burns? - is an utter joke.

A pretend-tightening to produce a pretend-surplus.

The forecast surplus - actually, all three forecast surpluses - are so paper-thin as to be literally, LOL, unconvincing and meaningless.

Really. It's absurd enough to claim a $1.5 billion surplus in 2012-13.

But to claim a $1.9 billion surplus in 2013-14 and a $3.1 billion one in 2014-15, is beyond even absurd.

Once again this government has conspired to send even Salvador Dali spinning green with envy in his grave, with its incoherent stumbling into a world beyond even the surreal.

Just quietly, Treasurer, the odd thing or two might change in the world over that time-frame, to produce 'different' numbers.

he odd financial meltdown perhaps, a global recession on this or some other planet perhaps.

What's that saying, about many a slip twixt Wayne's befuddled brain and dribbling lip, or some such advice?

Now you - or Swan - might say, it's the direction that counts.

The projected surpluses show the government taking the tough decisions.

And goodness me - or him and them - both the budget bottom line and the very low level of our government debt stand in stunning contrast to just about everyone else.

Even supposedly austere Germany would 'take' our numbers.

Well, of course, broadly, yes.

But it's got precious little to do with Swan or his sidekick Penny Wong.

We've got very low Federal Government debt.

Because John Howard and Peter Costello paid off the debt built up by the Keating Labor government with its budget deficits.

All the debt we now have is down to Swan and his two prime ministers Kevin Rudd and Gillard.

In the four years he's been Treasurer, he will have racked up total deficits adding to $167 billion by the end of this financial year.

Swan has had four budgets, four deficits, averaging $42 billion a year.

And then we are expected to believe, the budget bottom line will leap, just, into surplus in the next year.

I don't.

The one thing we know as an almost absolute fact is that the actual budget bottom line in the 2012-13 financial year won't be the $1.5 billion surplus forecast yesterday.

There's some faint, very faint, possibility that it will turn out to be a bigger surplus.

Almost certainly, it will be a deficit; and very likely a big deficit.

That's the weirdest part of what we got yesterday.

The utter pointlessness of all the fiscal huffing and puffing.

What matters even in Swan and Gillard's own terms, is not what the 2012-13 budget deficit is forecast to be at the end of November 2011.

But what it turns out actually to be in that year.

Or at the very least what the formal budget in May 2013 has to admit it is likely to be.

And indeed, what games have to be played in that budget to either once again pretend we will be getting a surplus; or actually taking some real decisions to cut spending and/or boost taxes, to try to get one.

May 2013 is probably not going to be an ideal time for the Gillard (?) government to be having to face up to the reality of a budget deficit.

It is likely to be facing an election later that year: wasn't that what Peter Slipper designed to achieve?

Just on those narrow political terms, it would probably have made greater sense to have admitted in November 2011 that yes, the budget was going to still be in deficit in 2012-13.

Especially as yesterday's claimed surplus won't fool anyone.

And the real outcome will have surfaced by then anyway.

It adds to quite a coup.

We have a treasurer who's effectively announced he's a fiscal joke and that the prime minister hasn't a political clue.

Great combination.

Three final points.

First, the budget numbers, like the broader economy, are going to be swamped by what happens in Europe, the US and China.

That ranges from broadly Europe stumbling on without an actual denouement and China continuing to perform - through various combinations, to the worst case scenario of both China and Europe going bad.

Secondly, whatever Swan thought he could 'buy' with this fiddle, he's not going to buy an interest rate cut.

It's just too pathetic.

If the Reserve Bank cut next week, it would be because of external developments.

And the same goes even more emphatically, and dramatically, through 2012.

Finally, the fiddle captures the depressing reality of this government.

We need real productivity-boosting reform.

To help insulate us against global disaster.

Or to properly optimise the China boom.

Instead we've got a Treasurer who manages to uniquely combine the most basic political cynicism and really quite breathtaking incompetence.

Depressingly, well served by a debauched Treasury.


Source: Terry McCrann, Herald Sun (Melbourne) November 30, 2011
Link: http://www.heraldsun.com.au/business/terry-mccranns-column/if-this-budget-update-was-meant-as-a-joke-nobodys-laughing/story-e6frfig6-1226209577420

[Anchor]

So the message is "Be Scared"

LOL.

Fear - just say no.

Seriously, the tests are starting to really become apparent now.

Measured on the nugget scale, I'd say this lot were a bunch of butt-nuggets.

;)

[eric charles]

butt nuggets hihihih . Fear not but prepare , in not scared , im anticipating it with open arms , a collapse needs to occur , wipe the slate clean !

[toad]

Its only a matter of time. Its hard to really gain a perspective on this matter with all the misinformation, fear tactics, and 'truth'.

[Mulder]

Since Australia has already committed suicide with carbon taxes, we should be VERY scared. Let's hope Labour loses the next election and the opposition un-does carbon taxes - in fact, lets go back to the laws prior to 9/11 as the only real terrorists in Australia are in Govt.

[Cjay]

Personally, I'm looking forward to a total financial melt-down and reset, for I have nothing to lose and I am confident in my survival skills. However, the vast majority of people in developed countries will hurt a lot and will not cope well during the transition to a new paradigm.

[Hughe]

@Cjay,

Budget surplus is a big scam.

How they really prove that the balance sheet is green or red? I'm waiting and waiting the entire money based economy being destroyed soon. Present generation will surfer. I can say definitely next generations will have BETTER lives than us without debt nor slavery labor work. I slowly came to realize money is F*ing illusion, control mechanism to enslave humans. People's will power and collective efforts created civilization.

The whole banking system is built upon lies. It needs to be abolished for humanity.

[Anchor]

@cjay: Yup. Lots of "transitioning out".

I might even go myself, though it seems unlikely to me at the moment. I don't really care, and I am positively certain I have no fear about it.

Loose the fear, find the joy. Pretty simple really.