Is Costello Planning To Undermine The Australian Economy And Stock Market In A Last Ditch Effort To Stay In Power?
Treasurer Peter Costello knows that if his government loses the coming federal election, he can kiss goodbye his dream of one day becoming prime minister. But that's not all he will lose. Come the day after the election, if Costello is no longer the treasurer for the next three to four years, he will have disappointed his many local and international masters.
As we count down to election day, and the Howard government faces near certain defeat, Costello is getting grimly desperate. He is now lashing out out at the banks, the Reserve Bank in particular, the Labor Party in general but now also the global financial system.
The Australian economy, and the global economy in general, is weak and fragile he now tells us.
If his government loses the election, recession will descend. Few economists agree with Costello, but that won't shut him up.
Costello wants Australians to be terrified of daring to vote Labor. Think of your mortgage, think of your stock portfolio. His verbal terror campaign will grow only more shrill, and dangerous, as the election draws closer.
Labor will destroy, or at minimum thoroughly damage, the Australian economy, claims Costello. He may as well be standing on a street corner, with dried vomit on his shoes, a wine cask under his arm shouting, "You're all doomed! Doomed I tells ya!"
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But even all that cheap talk fear-mongering doesn't fully explain Costello's incredible statement on how the world markets are now facing a global financial "tsunami". It's his first missile in a coming volley, and he will inform us in coming days how the "tsunami" will affect the Australian economy, and in turn, the pockets of every Australian.
Mr Costello predicted the US economy would weaken in the wake of its subprime mortgage meltdown, and said the breakneck pace of Chinese growth could not continue.
At some stage, likely to coincide with a move to a floating exchange rate, the Chinese economy would unleash even greater instability on global markets than the US had.
"That will be a wild ride when that happens," he said. "That will set off a huge tsunami that will go through world financial markets."
Figures released yesterday show the Chinese economy grew at an annual rate of 11.5 per cent. Inflation has run above 6 per cent.
China's fixed exchange rate, widely seen as undervalued, has been blamed for the growing trade imbalance with the US, because it keeps the price of Chinese products artificially low.
"All flows of capital they have been sending to the US might reverse, and you will get a major realignment on major currency markets," Mr Costello said. "China is very strong but you can't just grow an economy in double figures on a long-term basis."
So Costello is saying that if China wanted to, they could utterly devastate the already staggering American economy. Is he admitting the American economy, and the world economy in general, is now at the mercy of China?
China now holds more than $1.3 trillion in US debt, that is the "flows of capital" Costello is talking about. Americans, on average, spend more than they earn and rely on Asian financial giants, like China, to buy up their debts. But China has been showing signs of preparing to dump some of that American debt, even if it means massive losses. American debt, in the form of Treasury bonds, are quickly becoming next to worthless on world markets, and China won't let itself be left holding that much in dead money. Also, more and more countries are now choosing to dump the American dollar as the international trading currency of choice, and the US dollar is losing its standing as the 'oil currency' on world markets. The Euro is now starting to take its place, for Iran, for Russia and, soon enough, probably for Japan as well.
Local, and international markets, play close attention to the words of the Australian treasurer. Costello is going to have to be very careful with his claims between now and election day.
Unless, of course, Costello's plan is to try and start stock market brush fires in the next month, in the hope that a fast storm of bad economic news, and plunging local share markets, will frighten Australians into voting the Howard government back into office.
As we've said before, there are many powerful, very wealthy people in this country, and internationally, who will suffer if the Howard government loses office, as they most surely will if things don't change dramatically in the next few weeks.
The Australian corporate elite have probably never had a cosier relationship with an Australian government in history, and that relationship will go through a process of transformation under Labor. To a point, anyway. But it's the kind of change the poisonously greedy don't want to undergo. They don't want to renegotiate, with a new government. They want the cosy relationship to stay the same.
The Australian people are not the only masters Costello serves. You shouldn't put any act of desperation beyond the reach of these people, or Costello himself, between now and election day.
They have so much to lose if the Howard government is swept from power.
We are unlikely to see a calm, and orderly, change of government.
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