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2008 brings a stock market correction
with some similarities to those of 1987 and 1999/2000. As predicted
in a May 2007 post here, the collapse of the US economy, coming
for some time, has finally see the big borrowers - and of course
big lenders - brought down to earth.
Bearing the brunt of this will not only be Australian citizens
- you and I - and business, but also the Rudd Labor government.
Rudd will also bear the blame, but for no good reason other than
he's the recent (end 2007) incumbent.
The current correction is caused by the same basic factors that
caused the last two:
- lack of strategic government intervention and appropriate regulation
- non-strategic government intervention and inappropriate regulation.
What is wrong with this picture? What has caused governments here
and around the world to intervene where they cannot assist, for
example in choosing which large industries to fund and give tax
credits to, and to regulate the wrong thing - to regulate poorly,
or to not regulate at all when they should. Short-selling of shares,
especially in banks, powered the rapid fall in January 2008 and
fueled the exaggeration of shareholder concerns as to the undisclosed
liabilities in so-called "sub-prime" loans in the US.
This was especially the case in the Tricom-Allco case where Tricom
"lent" short-sellers Allco stock it held to short-sell.
The short-sellers were institutions managing our shares and superannuation
and so we all lost out as the market fall was exacerbated by rampant
uncontrolled short-selling.
Why were we not told of the sub-prime liabilities of the banks
in December 2007 when they were fully aware of the crisis? Where
was ASIC, the weak Australian financial regulator, when the crisis
began in November 2007? Australia needs good strong government and
strategic regulation to escape the troubled times ahead.
This instability will likely negatively impact on education, research
and development, and cultural support in Australia at the precise
time when government should be investing in these greenfield areas
for our future. What better way to inject non-inflationary stimulus
than through education and R and D?
Putting in superannuation will simply man we lose more money on
the next major crash! It would demonstrate that government is under
the control of not only property developers, but also the "big
end of town, the banks and large businesses who desperately rely
on a flood of "dumb" superannuation money to feed profligacy
and poor businesses.
If the Rudd experiment (or was that "revolution" - remember
Barry Jones was talking about a necessary "education revolution
in 1999!) is to not fail it will only be because he breaks the mold
and inverts the current government-industry relationship.
If is fails we will be able to detect failure by the growing direct
connection between people and their concerns using new communications
technologies, and the related growing of third parties and independents.
Political parties and causes utilizing new media (web 2.0, 4, 5
...etc.) will benefit from moribund big parties burdened by corrupt
campaign payments scandals.
In the next three years we will see politics take to the web like
never before. Will parties like the Greens be the winner? Nothing
is certain except those that use the new internet politics well
will dominate the next election.
Where is the party, or government - who understands the past, present
and future, and can take Australia strategically and relatively
safely forward?
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