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Punch Q&A: Should we panic over European meltdown?

The Punch Team

by The Punch Team

11 Nov 05:50am

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Filed under: Asx, Economy, Europe, European Union, Italy, Markets, Stock Market

61 comments

The markets are melting down again. The ASX 200 fell $33 billion, or around 3 per cent yesterday, on the back of more European scares. As you’d imagine, people like CommSec Chief Economist Craig James were rather busy yesterday. But we managed to grab him for a few quick questions.

It's gettin' hot in here

What’s the best case scenario?
The best case scenario is that the Italian Government comes out with concrete proposals to address its budget situation. Another positive proposition would be instead of calling elections for early next year the Government or the Prime Minister simply resigns and a new government is formed. So anything that would provide a degree of confidence to the markets – at the moment we’ve got nothing.

And the worst case scenario?
It could be anything. It could be countries deciding to exit the Eurozone. It could be continued silence from the Italian officials on dealing with the situation. One of the worst case scenarios could be a country actually physically defaulting on its obligations. So there’s a whole range of negatives out there. There’s no one specific bad scenario; there are a number.

On a spectrum of worst case to best case, where do you sit?
I’m in the optimistic camp – I’m lining myself up with the Reserve Bank. In the past we’ve seen crises – whether it’s Savings and Loans or Latin America – and eventually when people’s backs are against the wall they come up with solutions. I don’t think this is going to be different.

In this whole crazy game of dominoes, which country could go next?
We are seeing investors and speculators moving from one candidate onto the other and it’s effectively the law of the jungle. It’s a case of identifying the weaker animal in the jungle and setting your sights on it and that’s what investors and speculators have been doing. They’ve moved from candidate to candidate. Italy is the latest in a string of crises that we’ve seen in Europe in recent times. If it gets its act together, investors will potentially focus on perhaps Belgium, perhaps France and it depends on how they address the issues and deal with their problems. The quicker you’re able to respond, the more likely the predators will move on to another candidate.

Is there anything Australia can do?
We could not panic. That would be positive. Our investors and institutions should be a little bit more forward thinking, and should take a big picture type approach to the current situation.

That’s it folks. Craig had to go and get a cool wet towel to wipe off his perspiration after that. Bottom line, he doesn’t believe that yesterday was the big shock that’s going to send the Australian economy spiralling into oblivion. Hopefully there won’t be such a moment any time, let alone sometime soon.

Or will there? You tell us. You lot are never short of an opinion…

Most commented

431Australia, you have nothing to fear but fear itself
390There's no one Thomson won't burn to save his skin
336Animal experiments won't cure me from cancer
313Thomson didn't answer the question everyone is asking
265Who murdered the Arts degree?
246A big day for Thomson, who thus far is guilty of nothing...
231South Australia. It's the middle bottom bit.
231Craig Thomson speaks. Meanwhile, in Australia...

61 comments

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    • Super D says:

      05:14am | 11/11/11

      There is a battle going on in Europe like we have not witnessed before.  It is a battle for survival between the Euro, a flawed political project, and democracy.  The two are mutually exclusive.  Either the Euro will survive meaning that the previously profligate nations of Europe are put on income management - their budgets are dictated to national politicians by unelected technocrats in Brussels.  Alternatively the Euro collapses and the people of Europe continue to enjoy full democratic rights.

      I think its worth everyone noting that the Euro was introduced with much fanfare and enthusiasm.  There was however a vocal minority who were more than happy to point out the obvious flaws.  They were of course derided for “not getting it” or not being “forward thinking” or being “nationalist throwbacks”.  They were, of course, absolutely right to be skeptical of this predominantly progressive pet project so naturally were derided as Euro-deniers.

      The parallels with the carbon tax in Australia are uncanny.  Lets hope that it ends better.

      Reply

    • acotrel says:

      06:47am | 11/11/11

      ‘The parallels with the carbon tax in Australia are uncanny.  Lets hope that it ends better. ‘

      Perhaps the free market ideology was flawed ?
      You can’t have it both ways !

    • Nathan says:

      06:59am | 11/11/11

      what does the carbon tax have to do with it at all there are not parallels. The Eurozone as we know it will collapse, they do not have close to money to be able to bail Italy…..if the idiots in power listened to what was being said and acted responsibly this issue could of seen a better outcome

    • Nick says:

      07:00am | 11/11/11

      acotrel, neither the Euro economy nor the Australian has any kind of characteristics of even a morbidly functioning free market. What a truly unintelligent thing to say

    • acotrel says:

      07:11am | 11/11/11

      @Nick
      ‘acotrel, neither the Euro economy nor the Australian has any kind of characteristics of even a morbidly functioning free market.’

      Tell that to all the farmers who sell their cattle to the Asian market.  And to all our industries that have no tariff protection, so they can !

    • acotrel says:

      07:13am | 11/11/11

      I wonder what the World Trade Organisation will take responsibility for ?

    • Super D says:

      07:22am | 11/11/11

      @aco - both the euro and carbon market are contrived political creations.  They might be markets but they certainly not free.

      @nathan - the similarities between the introduction of the euro and the carbon tax are many.  If you can’t spot them then you are too busy cheering to think rationally.

    • Labor is Toxic says:

      07:26am | 11/11/11

      Its a stupid system where people are stupid enough to vote for a profligate government are not made to pay for their mistakes. The people of Europe have benefited from the manner in which the Government has spent money ...... now they expect someone else to pay. I am wondering how China is going to behave when Governments tell them that they are not going to see their returns??

      Western Society has been built on ‘slavery’ ......  African, Irish, Eastern European and now Asian. The current debt and social impacts are because most people are not willing to pay $15.00/hr for a person to work in a steel mill, build a TV or Computer, sew a shirt and assemble a car, or to buy from a company who’s product costs are higher because it has appropriate workplace safety and environmental controls. This is the simple psychological problem associate with free trade. If you want to keep buying cheap foriegn goods ( I still don’t understand why people buy food grown and packaged overeas) don’t expect our economy to hold up.

    • acotrel says:

      07:37am | 11/11/11

      @SuperD
      I wonder what this means ? :
      ‘But for trade opening to work, we need to ensure that it is accompanied by international rules and by domestic policies that create insurance for workers and business against the Schumpeterian impact of competition and the now well-known volatility of markets. Therefore, cobbling together complementary domestic policies with trade openness helps magnify the benefits from trade while at the same time blunting any vulnerability from sudden shifts in external economic conditions. Better worker training, greater mobility in labour markets, more expansive social safety nets and investing in critical areas such as health care, education, clean energy and infrastructure, and not least a better regulated financial system are all essential. ’

    • jf says:

      07:51am | 11/11/11

      acotrel says: 07:47am | 11/11/11
      ‘The parallels with the carbon tax in Australia are uncanny.  Lets hope that it ends better. ‘

      “Perhaps the free market ideology was flawed ?
      You can’t have it both ways !”

      One has nothing to do with the other.

      The flaws that you believe you see in the free market are all flaws of excessive government intervention.

      To move away from a free market necessarily requires a command government. One thing is for sure, no economy is so flawed as one managed by a dictatorship.

    • acotrel says:

      08:15am | 11/11/11

      @jf
      ‘To move away from a free market necessarily requires a command government. One thing is for sure, no economy is so flawed as one managed by a dictatorship.’

      Have you ever heard the expression ‘checks and balances’ ?  It’s why we have the Westminster system of government, to express the desires of the individual.  However every now and then a dictator slips through, and does things like Workchoices !  The system worked last time - we chucked him out on his arse !

    • Nathan says:

      08:23am | 11/11/11

      @super D
      2 examples of the similarities would be nice thats all. But please make them real examples and not loose connections that can be made with anything.

      FYI thought you would of seen that “free self regulated markets” do not work. Point in case the US

    • MarkS says:

      08:53am | 11/11/11

      My standing in my workplace has increased dramatically because of this. I work for a British company & loudly stated that when Britain was considering join the euro that is was a really stupid idea. The economies of Europe are too different. The Pommy expats told me I was crazy, that Britain should join the euro. Now they are relived that it did not.

      The euro was always a bad idea for Greece. Their only export of much worth is importing tourists. But the value of the euro is defined by the German economy. So holidays in Greece cost too much, lowering Greece’s income while they were charged interest as if they where Germany. The result was always going to be massive debt.

      Europe can have no direct influence on Australia, as long as declining European purchases from China are matched by increasing Chinese consumption we are roses. If not, things might get a little slow.

    • mick says:

      08:56am | 11/11/11

      From all the comments I believe that both the editorial and the comments fail to recognise the true picture.

      Firstly, Australia is tied to China.  Although China will not stop it will slow.  so we will follow and there will be pain as Australia is committed to imports as we have let our manufacturing industry die.  Paying for these imports in a slowing economy is another story again.

      Secondly, the eurozone is a void.  There is an unimaginable debt hole created by countries borrowing to live a high life style.  No amount of hocus pocus from governments is going   to make the underlying problem go away and the world will take a rather large hit.  Don’t believe that Australia is immune.  That will be the damage control rhetoric but we will not escape without pain.

      So by all means dream on.  The game is slowly playing out.

    • jf says:

      09:16am | 11/11/11

      acotrel says:09:15am | 11/11/11

      @jf
      ‘To move away from a free market necessarily requires a command government. One thing is for sure, no economy is so flawed as one managed by a dictatorship.’

      “Have you ever heard the expression ‘checks and balances’ ?”

      Of course. Why is that relevent? 

      “It’s why we have the Westminster system of government, to express the desires of the individual.” 

      That is right. And that system, along with other systems of democratic government are what differentiates a free market economy from anarcho-capitalism.

      “However every now and then a dictator slips through, and does things like Workchoices !”

      Strong words. But yes, the system did work. The electorate decided it didn’t like Workchoices and voted the government responsible out of office. Pretty piss weak dictatorship that called an election and honoured the result.

      “The system worked last time - we chucked him out on his arse ! “

      But I thought that you said it was a dictatorship. If the system worked then it would be a system of a dictatorship which typically doesn’t honour free election and therefore failed abysmally. Thus, you are either a wilful liar or an idiot.

    • Richard says:

      05:57pm | 11/11/11

      @ Nathan, who said “FYI thought you would of seen that “free self regulated markets” do not work. Point in case the US”, You CLOWN!

      You’re case study of the US proves the EXACT opposite of what you think it does, i.e. what soft socialism and government regulation and interventionism does to a market.

      What do you think Fannie Mae and Freddie Mac are? What do you think the Glass-Steagell Act was, what do you think the Federal Reserve is?

      All government distortions of the free market, and all what ultimately ended up causing ALL the economic woes that currently beset America.

    • Dan says:

      04:10pm | 12/11/11

      “The parallels with the carbon tax in Australia are uncanny.”

      i.e. Anything bad that happens anywhere is exactly like something JuLair is doing becuase my irrational burning hate for her makes it so.

    • Mahhrat says:

      05:57am | 11/11/11

      I am no economist, but I’m wondering whether we are starting to see the end of “money” as the phoenecians invented it.

      The problem with “interchangeable” money like this is while it provides great flexibility, it’s incredibly open to abuse from the unscrupulous.

      Perhaps there is a combination of monetary & barter-style economies we can aspire to?

      Reply

    • marley says:

      07:11am | 11/11/11

      @Mahrat - that’s what the Greeks had before the Euro.  Now, it looks like they’re heading for pure barter.

    • Jane2 says:

      07:28am | 11/11/11

      And yet cash is making a huge resurgence as people move to minimise their debt.

    • Mahhrat says:

      08:29am | 11/11/11

      @Jane2 - Yes, the removal of debt reliance goes a long way to improving your options, and if we can make that a global thing, that’d be awesome.

      I know this, because my only debt is my house, which theoretically is an asset.  I have no net debt, and it’s a wonderful thing.

    • Labor is Toxic says:

      06:15am | 11/11/11

      I expected the European Debt to cause tremors late in October ..... out by two weeks. Anyone with any financial understanding could see the immenent colapse. Swan ignored the warnings and has overestimated Australia’s Economic Growth, $40B increase in revenue, in a vain attempt to hide his profligate spending. When the budget outcomes are published next year watch the ‘Net Financial Worth” as it appears that Labor is capitalising expenditure .... again to hide theri spending.

      Reply

    • Nathan says:

      07:16am | 11/11/11

      @Labor is toxic
      Is that in a similar irresponsible way how Howard and Costello bought surpluses by the sale of Telstra or changing the accounting method or how they sold massive portions of gold.

    • rb says:

      07:33am | 11/11/11

      @ Nathan, people have short memories.

    • Labor is Toxic says:

      08:31am | 11/11/11

      @ Nathan

      You have a very short memory.

      Keating sold many government assest, including the CBA and QANTAS while running up a $96B Debt that was costing approximately $10B/year in interest, but Howard is very naughty for selling Telsta and paying off debt. I do not understand your logic!!!

      Yes Howard sold off our Gold Reserves over 10-years ago, but what you fail to understand or mention is that the Gold price was going down at the time approximately $US400/oz to approximately $300/oz. in fact it slid to around $US250/oz in 1999 ..... at the time no one thought that the price of gold would be what it is today. You could also say Keating lost Australia money fo not selling the gold at $500/oz in 1987

      The differential in pricing was estimated this year at approximately $5B (I do not know if this took into count inflation) or 360M/yr over 14years.

      Compared to Keatings annual interest bill and the profligate waste of the Rudd/Keating Government ..... well lets just say the dissolution of the Pacific Solution cost more money!!!

    • acotrel says:

      08:37am | 11/11/11

      @Nathan
      ‘they sold massive portions of gold. ‘

      We don’t make many printed circuit boards in Australia anyway, and gold jewellery is so out of fashion.

    • rb says:

      09:02am | 11/11/11

      @ Labor is Toxic, you point at one side of politicsand find fault, Nathan didn’t disagree but point out similarities with both. Your name sums it up.

    • Dan says:

      04:17pm | 12/11/11

      Unemployment down, interest rates low, very little debt compared internationally and surplus within reach (in 2013 or shortly thereafter).

      Why are you people so biiter?

    • Jase says:

      06:17am | 11/11/11

      The US is printing money to inflate its way out of its debt problems, Italy and Greece cannot do this with the euro, its inevitable that one is going to fail given enough time, lets get it over and done with, sooner rather than later.

      It is kind of like getting into a cold pool, if you walk in and prolong the inevitable, your just putting yourself through more pain, just jump in and its only uncomfortable for a short period of time.

      The worst case scenario is that the European Union collapses, like all investments that fail, put it down to bad experience, write it off, and move on.

      A complete collapse of Europe is not all doom and gloom, as it will “clean” the worlds economy and leave a very firm message to manage your debt because you will no longer be bailed out.

      Reply

    • Tubesteak says:

      07:46am | 11/11/11

      If the EU goes under then that is bad for everyone. It will leave the US and China to duke it out. It is always much better to have several large dominant players who can compete with each other. If there is only two it is bad for everyone. Especially, if one of those two is on the decline. Japan also isn’t much of a contender anymore.

      This is a lesson to contain your debt and not live on borrowed money. The socialist welfare states have failed and they need to be reeled in. We need to get back to a more competitive economy where a government exists only top provide the basics where market failure doesn’t. This is the tough lesson to be learned from all of this.

    • Jase says:

      08:07am | 11/11/11

      I agree tubesteak, but realistically, no lesson will be learnt until one of these countries is allowed to default and in all honesty, I cannot see the EU making it out of this mess, the cracks are to large.

      China is going to become the dominant economy regardless of EU or the US, and the next will be the rise of India. India will take the place of China as the cheap manufacturing hub and China will become the worlds largest consumer of those goods.

    • Labor is Toxic says:

      09:11am | 11/11/11

      I feel that you are right ...... Germany and France are not watertight. They should have cut Greece when they had the chance. Having a currency that is played across borders that have different economic values was a dream ..... and the dream became a nightmare ...... and the nightmare became this reality.

    • Tubesteak says:

      09:48am | 11/11/11

      Jase
      Yes, India will be the next power, too. Their population is also increasing faster than China’s which also plays another part. Tata is a brilliant example of Indian business success.

      LiT
      France is not very good at all. Too much of a socialist welfare state exists there. They are only better off than some of the basket-cases.

    • Blind Freddy says:

      10:41am | 11/11/11

      @Tubesteak

      Watch out for Russia too.

    • SimonFromLakemba says:

      11:14am | 11/11/11

      A large part of what happened was Greeece, Italy cooked their books upon entry into the EU, and now sh*t is hitting the fan.

      All are correct in saying they have a huge welfare net which is catching upto them.

      In Greece the public service is huge with good salaries, they just cant sustain.

    • Super D says:

      06:25am | 11/11/11

      The premise of fiat money (money backed by regulation/promises as opposed to a representation of a tangible asset ie gold backed) is that its integrity will be maintained and that Governments won’t just keep printing more and more money - like they do in Zimbabwe.  That is it is the responsibility of the issuer to maintain the integrity of the currency as a store of value such that it will be useful as a medium of exchange.

      Aspiring to a reduction in the utility of money is aspiring to a reduced level of economic activity and lower living standards.

      Reply

    • acotrel says:

      07:56am | 11/11/11

      @SuperD
      ‘Aspiring to a reduction in the utility of money is aspiring to a reduced level of economic activity and lower living standards.’

      There is no way back to the ‘good old days’ ? How disappointing,  I was looking forward to taking my cabbages to the supermarket on horseback,to trade for a new pack of blank DVDs.
      I’ve got the wind generator going so I can burn a few movies on my computer.

    • Damian Parkhill says:

      07:24am | 11/11/11

      Let the good times roll….........

      I just want to facepalm at all of this…........ its all been going on for nearly a year, and they are -still- trying to claim they can put the broken egg back together causing My faith in humanity has slipped another notch! (didn’t think it was possible).

      Anyway I think Erick called it, we’re heading for another great depression.

      Reply

    • Erick says:

      05:48pm | 11/11/11

      I think it would be very difficult to avoid another Great Depression at this point.

      Still, nothing is certain.

    • P. Darvio says:

      07:55am | 11/11/11

      I think I have some old Italian “Lira” Money in a draw somewhere from a past holiday in Italy pre Euro….might be time to go find it…...

      We shouldn’t worry in Australia - Uncle Wayne will save us all again with Pink Batts…..

      Reply

    • NESLIHAN KUROSAWA says:

      08:02am | 11/11/11

      Hi Punch Team,

      I do not think that it is not a total meltdown as yet, surely Europeans have been through much tougher times during the II World War.  The actual question would be “can the Europeans actually recover from all current debt problems in the Euro Zone”?? Who can see into the future, exactly & clearly.
      No one wants to admit it of course, but I am guessing that Spain & Portugal are next on the list with their unemployment rates are at their highest point.

      The stock market has always been very volatile & unpredictable in the past! Real solutions might be all about spending less & saving more, I presume!!
      Surely, most Australians out there in the job market are not worried about losing millions of $$ down the drain in a matter of days!!  I really assume that the main concern here would be just like the Europeans, all about job security, high inflation rates, basic cost of living & very high unemployment rates!!  Best regards to your editors.

      Reply

    • Elphaba says:

      08:07am | 11/11/11

      I’m not panicking. 

      First of all, there’s no point panicking about things you can’t control.  Second, I’ve got another 35 years (at least) working life yet, so I’m in for several market corrections over the course of that time.

      Meh.  My super is going gangbusters given the current upheaval (I lucked out and picked a good one purely by accident), so I’m sitting pretty.  Onward and upward…

      Reply

    • Michael says:

      09:02am | 11/11/11

      You never know Elphaba, you might try your hand at a boutique line of baked beans and similar products as you perfect the recipes and techniques.

      I’m thinking Paul Newman scale of operations.

      Elphabeans? smile

    • Elphaba says:

      09:09am | 11/11/11

      Hahaha, true!  Would you buy beans with the Wicked Witch of the West on the front?  I would… smile

    • Michael says:

      09:31am | 11/11/11

      Yep i would too smile

    • stephen says:

      08:10am | 11/11/11

      Yes we should, but no so much as if China and India feels the heat.
      And nows the time, I think, to be selling uranium ore - and lots of it - to India.

      Reply

    • earl says:

      08:49am | 11/11/11

      No one is answering the tough questions. Europe and in the medium term China are doomed to follow Japan into the lost decade/century even. Why? The debt crisis is but an early symptom of illness. The real problem is population growth or lack of it. An aging population in a supported socialist state cannot continue to grow, simply because there is only so far you can take productivity improvements and taxation before there is no money left to take to fund the retirement of the retirees. Why no one has seen or wants to talk about this beggars belief.

      People keep talking about the global population of 7 billion. But the only reason countries in the developed nations are still growing is because of immigration and the productivity improvements from telecommunication and computers. When that hits the wall it is inevitable decline, e.g. Japan as the classic case study. Wait till China hits the wall - estimated in as short as 10 years, then you will truly see something scary.

      Reply

    • Labor is Toxic says:

      10:09am | 11/11/11

      @ Earl

      The problem is people expect a standard of living and are not willing to pay for it. Why??? Because the media tell them that they should have a particular standard of living!!!

      Gone are the days where a politician can state “Ask not what your country can do for you, ask what you can do for your country.”  The western world has moved to a ‘WHAT’S IN IT FOR ME!!!  Culture’, which degenerates our society as politicians try to appease minority groups whose ‘plight’ is accentuated though wedge media stunts that fill our news in a vain attempt to attract revenue.

    • earl says:

      10:25am | 11/11/11

      @Labor

      You are right in that there is an ever increasing expectation of bigger and bigger government. I predict that this baby boomer generation will be the last one to get away with the excellent services we see because unfortunately for the x and y generation, we will be left carrying the load with ever shrinking and declining living standards.

      No one yet has the courage to really argue the case for root and branch reform of the entire social welfare system to ensure that it is sustainable for a population projection with a ratio of 2 workers to 1 elderly rather than 6 to 1 as is the case presently. Symptoms in Europe are only the beginning.

    • Max, of Rocky says:

      12:03pm | 11/11/11

      @ earl

      You are right,

      How much is being paid in baby bonuses, childcare, first home owner schemes and other like government handouts? 

      These were not available to the baby boomers and they managed OK.

      Time for change, time for means testing.  smile

    • sir ronald bradnam says:

      09:04am | 11/11/11

      Never forget that politicians and governments created this mess in the first place. If they were directors of a company and had put the company in a position where it was trading whilst insolvent because they were spending twice as much (on company expenses to keep them in the position they had become accustomed to) than the company actually earned, they would be in jail for their actions. So why they are now being lauded as the solvers of this problem im f…... if I know and everyone knows that Swan, Gillard and the labour government trying to give them advice is a total waste of time as that bunck of financial morons know as much about finance as my 12 year old niece, well actually she is quite clever so i didnt mean to demean her.

      Reply

    • Anna C says:

      11:32am | 11/11/11

      The EU cannot avoid the inevitable. Now, open wide and take your medicine like a man. Reign in your spending, pay down your debts, live within your means and stop whingeing.

      Before Australia starts getting too smug remember that we are not immune from this economic disaster.

      Reply

    • Robert S McCormick says:

      12:08pm | 11/11/11

      What I don’t get is that most of the companies listed on the ASX are local. The vast majority operate very successfully. They make lots, sometimes huge profits. They are well run. Our banks are well run & have, we are told, little or no exposure to any of the disasters in the USA, with it’s $US15 trillion debt or the EU with it’s, & they make yearly profits, mostly from the people of Australia, totalling, collectively, 10s of billions. Our unemployment levels are, albeit very slowly, falling, Our Federal Government’s debt level is, we are told, very manageable & only a tiny percentage of GDP.
      Yet…
      Our stock markets slavishly follow what is going on in the Stock Markets of the USA, UK, & EU. Why? Why? Why?
      Now I can understand why those markets are jittery &, seemingly, in free-fall. Every day, it seems, there is another financial disaster, another company going broke, another exposure of gross corruption within Governments & Commercial organisations. Those countries are so badly managed, so lacking in Finacial Regulations it is a wonder they can even operate.
      Have a look at the US & their politicians. All the experts say that in order to rein in their huge debt there needs to be a complete re-think on taxation in the US where, we are told, rich companies & people pay almost no tax whatsoever. Even their great Warren Buffet, investor & financial wizard, has stated that it is ridiculous that he should be paying less tax in the dollar than his secretary.Yet the Republicans refuse to allow any changes to be made.
      Why can’t Australia cut loose from the US, UK & EU? Why should 10s of billions be wiped off our stock market, with the resultant flow-on to Mum & Dad investors simply because some corrupt US, UK or EU company, with no connection to Australia, goes belly up?
      Is this the last great big Cultural Cringe we have to overcome?

      Reply

    • Esteban says:

      01:09pm | 11/11/11

      If only it was as simple as cultural cringe Robert.

      We trade with the rest of the world. We send lots of monerals to China and they make stuff. The biggest market for the Chinese is Europe. If Europe goes into a deep recession they won’t buty as much from the Chinese. We won’t sell as much stuff to China and prices will soften because of falling demand,

      Less wealth overseas means less tourists coming to Australia.

      Less wealth overseas means softer priced for agricultural exports.

      Recession and European bank failures results in a reluctance of International banks to lend to each other. Australian banks get a lot of their money from overseas. They will have trouible getting it and if they do it will cost more. Australian banks will not have the money to lend to businesses so business investment will fall driving up unemployment. What money they have for business loans will have higher interest rates because the banks have had to pay more for the money.

      The same applies for housing loans so Australian domestic construction will suffer. House prices fall or stagnate causing consumers to save instead of spend and retail suffers. (retailers get their stuff from China?)

      we are all individual parts of a global economy. The share market falls because they understand this precisely.

    • Sheep Traders says:

      03:29pm | 11/11/11

      “Why why why”

      Baa baa baa

    • john says:

      11:57pm | 12/11/11

      Get rid of the international banks and international bankers. You can’t have gang of nation looters ruining the western financial system. Create National Central bankers and let the country’s run them, but make sure they owned by the people not foreign internationalist capitalists. Get out of the free market and start producing. No more Chinese goods. The reason why we are purchasing Chinese goods is most likely because the western dollar is so over inflated, that it has driven locals goods up high, getting stuff from china hides the inflation. Just look at home prices, it’s been drive by foreign loans, most likely coming from FED, who prints the money out of thin air, drives up inflation in Australia and then takes a cut in their counterfeit money! Amazing why pay interest to international banking counter-fitters? When a country can create its own money? and pay no international interest.

    • Rod says:

      02:09pm | 13/11/11

      John, both Alan Kohler and I agree with you.  This is no longer an extremist point of view.

    • Peter says:

      06:08am | 12/11/11

      Thinking people knew Europe would soon turn into a mess. Whenever the Socialist/Marxist Progressives take over disaster, anarchy and chaos soon follow. As long as you have these extremist fools in charge of anything don’t expect anything to be fixed. What a mess and the sheeple voted for the sweet sweet lies and now have to pay a heavy price just like Australia will pay a heavy price for electing an extremist loony Left wing Government

      Reply

    • dan says:

      04:02pm | 12/11/11

      What the F are you talking about?

      Reply

    • Cate says:

      10:59am | 13/11/11

      No.  Julia Gillard and Wayne Swan have it all under control.  We should be hysterical.

      Reply
 
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