Tuesday, 18 September 2007

global crash ...

now those of you who havn't been paying intention may have thought that the global economy had righted itself.

Not true.

Take a look at the Northern Rock fiasco in the UK. Last night the ABC showed an equally dire warning about the impact of the US sub prime mortgage crisis.

Very grim. Makes the tech wreck look like a christmas party.

But interestingly they failed to mention this simple and slightly frightening piece of logic:

US mortgage holders in part re financed their houses to buy additional consumer goods

The demand for these items in part fueled the staggering economic growth in China (where else do you think large screen tv's and ipods come from?).

This economic growth led to the mining boom in Australia

This mining boom led to our (Australia's) recent stellar economic performance and let us ride out the drought and other economic problems. It also allowed us to but these self same consumer goods given we don't make anything in Australia any more

So if the US doesn't buy consumer goods from China, the Chinese economic miracle stops suddenly. This stuffs Australia and leaves us on a very dry continent that can't currently feed itself due to the drought and no way of buying imports as no one then wants our mineral exports.

As they used to say in university exams - discuss ...

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