Fiscal Frets

Is anyone besides myself worried about the growing financial crisis in America atm?

I've heard all the arguments:
- Australia relies on an export market to China to get cash flowing into our economy, not the American market (I.e. - we only have to start worrying when the Asian market crashes).

- Australia has a safer/better credit loaning system (no mortgages to those who can't afford them) by matching real equity that the borrower owns with the amount they loan from the bank.

- Australia doesn't have any foreign debt to get caught up in (Supposedly).

- Consumers ought to be able to receive interest cuts when the Reserve Bank drops its rates (Mind the 'ought' here - not necessarily going to happen), which in turn should free up cash to flow through the economy.


BUT - here are MY reasons why all doesn't seems as peachy-keen as the government would have us believe.

- How many businesses (superannuation funds, for instance) have interests in America? At the moment, it's not just US banks that are suffering, but hedge funds as well. Who says our own super funds aren't tied up in a sinking ship (more like the Titanic than a dingy) in overseas investments?

- I heard someone say the European economy was going strong, but I have my doubts - banks in Britain, Netherlands, Iceland(? I think) and other banks have needed serious bail-out from the EU over the last few weeks thanks to the sinking USA Titanic.

- If the interests cuts aren't passed on by the banks (Rudd went out and a gave them the best excuse ever - thanks Kev.) because of banking costs 'going up' Australian economy is going to face similar problems as the rest of the globe is. The cash simply won't flow when investors and consumers alike wonder how Wall Street is going to recover not only from the credit crunch, but also from the knock back from Congress of the USA government's bail-out plan.

Cash flow will freeze. What does that say for the average worker? No money going out, no money coming in and the debt keeps on piling up. Even more so as the banks get desperate for cash to cover the debts they'll be saddled with from overseas institutions not being able pay back the money they owe.


Big mess. Big question - do you pull out your money to stuff it under a mattress? If you've got investments in stocks - well, I'm no financial expert, but I would. Who knows how far the tsunami effect of the Wall Street fallout is going to reach.

Best piece of advice I've found so far on this whole matter?

"If you don't over borrow or overspend, you're far less vulnerable to whatever problems the financial system may have." ~ Time September 29 2008, pg 23.

I.e. - Live within your means!

Not that I can claim I have particularly well, but as the Time magazine also points out, this problem isn't different, just bigger. I guess it's a heads up. It's happened before, just in the thousands, or millions instead of billions and trillions - just do what you can and don't spend too much!



*sigh* Sorry for the rant, this global crisis really has me on edge for some reason.....

Hm. Should be alright for Australia I think. I'll be keeping an eye out on the international/local developments though - this thing is far from over.

b.