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An internationally renowned macroeconomist at the Australian National University, Professor McKibbin has been a Reserve Bank board member since 2001. He is not expected to be reappointed by Wayne Swan (Australian Treasurer) when his second term ends in July following his criticisms of Labor's budget stimulus spending and now its flood levy.
Professor McKibbin told The Australian the bubble in global commodity prices and property markets in Asia threatened to dwarf the US housing market bubble that led to the GFC in 2008.
He warned that the inevitable bursting of the bubble would reverse the surge in Australia's record high terms of trade, push down the dollar and leave the Reserve Bank struggling to fight off rising global inflation pressures.
"This is shaping to be much bigger than 2004 to 2007," he said in comparing the new excess of global liquidity with the global financial bubble that led to the worst global financial crisis since the 1930s.
Surging inflation is almost as great a threat to global economic stability as a new Europe-wide sovereign debt crisis, the International Monetary Fund has warned. Soaring oil and food prices are translating into dangerously high inflation in emerging economies, where there are already “signs of overheating in some countries via rapid credit growth or rising asset prices”, the IMF said in its World Economic Outlook update.
“In emerging economies, key risks relate to overheating, a rapid rise of inflation pressures, and the possibility of a hard landing,” the IMF said.
“With emerging markets now accounting for almost 40pc of global consumption and more than two-thirds of global growth, a slowdown in these economies would deal a serious blow to the global recovery.”
The IMF has markedly increased its oil price forecast for 2011, from $79 a barrel in October to $90, and is now forecasting that food prices will remain high until “after the 2011 crop season” as “weather-related crop damage was greater than expected in late 2010”.
“Near-term risks are now to the upside for most commodity classes,” it said.
The IEO report IMF performance in the run up to the financial and economic crisis, released in early February, covered the work of the Fund from 2004 through 2007. It found that “the IMF’s ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches. Weak internal governance, lack of incentives to work across units and raise contrarian views, and a review process that did not ‘connect the dots’ or ensure follow-up also played an important role, while political constraints may have also had some impact.”
I take a less sanguine view. While the world as we know it did not end in 2008, it was only through extraordinary international policy cooperation that a far worse outcome was averted. Moreover, the recovery underway today is not the recovery we wanted. Unemployment remains at record highs, with widening income inequality adding to social strains.
And global imbalances are back, with issues that worried us before the crisis—large and volatile capital flows, exchange rate pressures, rapidly growing excess reserves—on the front burner once again. Left unresolved, these problems could even sow the seeds of the next crisis.
In my opinion, reforms to the international monetary system that help us get to the root of these imbalances could both bolster the recovery and strengthen the system’s ability to prevent future crises.
Originally posted by BobAthome
Iceland and Ireland so far have catagorically stated that they will not repay the EU debt. so who's left?
Originally posted by CitizenNum287119327
Not being an economic wizard,
Would it be correct to assume that all the 'ghost cities' built in China will contribute to the asian property bubble.
It appears they are building these empty cities, to keep their economy running, but when no one buys them......
Whole, Worthless, Cities?
The global economy is facing ''a slow-motion train wreck'' with Greece only the first nation to be hit, Australia's Reserve Bank director Warwick McKibbin says.
Referring to the most recent global economic crisis as a mere ''blip'', he said the coming crisis could undo Australia's mining boom and bring on inflation of the kind not seen since the 1970s.
Professor McKibbin told the Melbourne Institute conference dozens of European countries now had gross government debts on track to exceed 60 per cent of GDP. ''Japan is forecast to be 200 per cent of GDP, the US is forecast to be over 100 per cent of GDP,'' he said.