Nervous yet?
How many people out there in the real world understand just how dicey things have become in the short time of this current stock market collapse? The news of a huge landholding in NT going under the hammer is only the latest in a string of large rural properties up for sale. This is not just about the changing environment resulting from global warming although that is certainly a factor, nor is it just about development roadblocks courtesy of the local NT government. There has to be a suspicion that the collapse of the Australian dollar in the currency markets has a bearing as well.
Australia’s long recent history of expanding current account deficits has been a concern that most politicians have ignored. The orthodox mantra has been that Australia’s deficit is really about foreign investment in building a better Australia. The contradiction between economic indicators that suggest a sound, healthy domestic economy and a massive imbalance in terms of international trade has never been reconciled, simply because there is no reconcilliation. Our “healthy” economy is founded on debt. The great driver of the Australian economy is of course housing and naturally enough, the growing imbalance in international trade has fueled a noticeable domestic real estate bubble and a burgeoning growth in household debt.
Joining the dots shouldn’t be too dificult for most people. As the Aussie dollar slides down, we need to make much more money locally to pay for our indebtedness. A major run on our currency and a contraction of our economy will leave only the prospect of selling the farm to cover our arses. Not a particularly attractive scenario but one that is a bit close for comfort. Paul Sheehan in the Brisbane Times sums it up this way -
“During 17 years of unbroken economic expansion and a 10-year commodities boom, it took a lot of people, borrowing a lot of money, taking a lot of unproductive risk, to get to where we are today: a nation with excessive debt and excessive vulnerability to external circumstances barely within our control”