Letter to the Editor

194 Kemps Rd

Katunga

Vic 3640

Dear Sir

As reported on ABC radio AM 1/7/08

The Swiss based Bank for International Settlements is the central bank for central banks.

 In its latest annual report Chief Economist Bill White argues that the consensus view underestimates the problems and the World Economy may be at a tipping point, facing an economic catastrophe. “The facts suggest that the magnitude of problems to be faced could be much greater that many now perceive”. Global Banks with loans of $us37 trillion in 2007, or 70% of world gross domestic product are still in the eye of the storm. Dr White said the US subprime crisis was the “trigger”, not the cause of the disaster. Associate Professor of Economics at the University of Sydney Dick Bryan said “It is quite an extraordinary message; I think it’s a big statement saying that the world economy could potentially be facing one of the biggest crisis for the last 150 years”. “It’s telling central banks that they got it wrong”. “They shouldn’t have let us get into the precarious position”. “That they should have been constraining credit earlier and that they have put us in a position now where there just aren’t clear policy options”. Satyajit Das who is a risk analyst who tipped the global credit crisis in the same interview said. “It is an extraordinary statement of how close the world is to a total financial meltdown”. On the 20 December 2007 President George W Bush stated “My view of the economy is that the fundamentals are strong”. In the US Fannie Mae and Freddie Mac (which own or guarantee around 40% of the total value of US home loans which is approximately 5 times the size of the Australian economy) are insolvent. Runs on the banks have occurred, sparked by the bankruptcy of IndyMac Bank (the third largest bankruptcy in US history). Home repossessions in the US are now running at four times the level of the Great Depression, with 110,000 home seizures and another 250,000 foreclosures declared in June alone. In Australia, ABN- Amro economists Kieran Davies and Felicity Emmett have revealed to The Age (14/7/08) that the scale of direct taxpayer bail-out of Australia’s banks, via the Future Fund, is much greater than the $2 billion previously disclosed. An increadible$35 billion of the Future Fund’s total pool of $62 billion was parked in Australia’s banks as deposits in April, which accounts for a total of one-third of all the growth in deposits in banks in the past year.

Yours Jeff Davy

 

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