Four Corners: Aug 23
Four Corners looks at the story of the greatest financial crisis you will ever see... the one that is on its way...
- Published by David Knox
- on
- Filed under Programming
Monday night’s Four Corners takes a provocative look at the events leading up the Global Financial Crisis and asks if the attempts to avoid a ruinous collapse of banks and other major finance houses may set the world on the path to an even bigger meltdown.
“Overdose: The Next Financial Crisis” by filmmaker Martin Borgs is a film produced by the UK-based Journeyman Pictures.
When the world’s financial bubble blew, the solution was to lower interest rates and pump trillions of dollars into the sick banking system. On the face of it this seemed the only way to deal with impending disaster, but was it?
“The solution is the problem, that’s why we had a problem in the first place,” Economics Nobel laureate Vernon Smith says. For him, the Catch 22 is self-evident. Interest rates have been at rock bottom for years, and governments are running out of fuel to feed the economy. He asks:
“The governments can save the banks, but who can save the governments?”
Forecasts predict many countries will see their debt reach 100 per cent of their Gross Domestic Product in the near future. Greece and Iceland have already crumbled, who will be next?
The storm that would rock the world began in the United States when congress pushed the idea of home ownership for all, propping up those who couldn’t make the mortgage down payments. The market even coined the term NINA loans, meaning “No Income, No Assets, No Problem!”
Enter FannieMae and FreddieMac, privately owned, government sponsored mortgage houses. “Want that vacation? Wanna buy some new clothes? Use your house as a piggie bank!” People began to ask: “why earn money to pay for your home when you can make money just living in it?” With the government covering all losses, you’d have been a fool not to borrow.
The years of growth had been a continuous party. But when the punchbowl ran dry, instead of letting investors go home to nurse their hangovers as usual, the Federal Reserve just filled it up again with phoney money. For analyst Peter Schiff, the consequence of the spending binge was crystal clear:
“We’re in so much trouble now because we got drunk on all that Federal Government alcohol.”
If he and other experts are right, then the worst is yet to come as governments struggle to pay the debt they now owe as a result of their bank bailouts and bad investment decisions.
It goes to air on 23rd August at 8.30pm on ABC1 and is repeated on 24th August at 11.35pm.
Share
- Tagged with Four Corners
6 Responses
Just what did happen to the money that was taken (lost) and where will the money come from next time?
With the bailout of banks, there debt has turned into a nations sovereign debt why should this be the case when reckless banks deserve to go out of business.
Ignoring the political comments for a moment the big issue is the one raised by the 4 Corners story – that other nations (not Australia) are so debt bound that they can never get out of it and the impacts are far reaching. It goes to show the outter irrelevancy of whichever party holds office in Australia when locla policy settings will not dictate this nation’s status but what happens internationally.
@Goatrutter – you’re wrong all accounts and I won’t be voting Labor. If you had even the slightest grasp of the principle of cash flow and the multiplicative effect of a relatively small change in the monetary base on the economy’s total supply of money, you’d know that having the govt sit on a pile of cash would have been exactly the wrong thing to do.
@Goatracer are you by any chance Paul Keating. It sounds like he’s famous the recession we had to have line.
@Secret Squïrrel has got to be a Labor plant or genuinely deluded ,history will show that we all should have tightened our belts a little copped some of the flack maybe suffered a recession and all grew up.
The surplus that Howard and Costello acquired would have gone a lot further protecting us all from the real impending collapse instead of just buying everyone a Plasma/LCD panel and making clowns like the Squirrel feel all warm and mushy about their Fabian friends.
This is why we need Labor at the helm. They held this country steady, steering us thru the GFC while the coalition tried to vote down every initiative that Labor put forward. I am vehemently against an ISP-level internet filter, and Garrat’s inexperienced showed with his mis-management of the home insulation program, but these things are unimportant when compared with the general health of the economy. Frankly, Abbot frightens me – just wait until the leash and muzzle come off.
For those who have been suckered in by those ads bleating about “Labor’s” debt, if you had even a basic understanding of economics, you’d realise that it is a necessary result of responsible financial management during the GFC. Ordinary people with home mortgages are in far greater debt as a percentage of their income than Australia is as a percentage of its income (GDP). It’s nothing to be frightened of.
/rant