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In this week's Australian Alert Service
19 September 2018

Did the can kicked in 2008 stop in 2018?

The tenth anniversary of the 15 September 2008 collapse of Lehman Brothers brought renewed warnings of another global crash, and admissions of just how close Australia came to a full-scale banking collapse. While still claiming we "successfully navigated the GFC", thenPM Kevin Rudd revealed that Treasury worked on contingency plans for six months prior to the Lehman bankruptcy, following the bailout of Bear Stearns. The Council of Economic Regulators, comprising Treasury, the Reserve Bank, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, put together a "Memorandum of Understanding on Financial Distress Management" to map out the regulators' various roles and responsibilities for keeping banks afloat.

"We feared a run on the banks as the global contagion set in", Rudd admitted in a 13 September Australian Financial Review article, going on to brag about how his government's reaction saved the nation from crisis.

But it did not; it kicked the can down the road, and we now have something far worse to deal with.

Rudd's policy director, Pradeep Philip, has also spoken out about the war-gaming for financial disaster that went on in those months of 2008. Extreme scenarios were played out, such as "What if there was sovereign default, a country went bust?" Without the bailout by the US Federal Reserve, Philip said, "the banking system would have been insolvent". He indicated it could all happen again given the dangerous, much higher levels of US corporate debt.

On 16 September, Martin Feldstein, President of the US National Bureau of Economic Research and former chairman of the White House Council of Economic Advisors under Ronald Reagan, warned the Daily Telegraph that the next bear market could set off a $10 trillion crash of US household assets. "When the next recession comes, it is going to be deeper and last longer than in the past. We don't have any strategy to deal with it", he said. Describing a scenario not seen in the post-War era, he said the USA is entering uncharted and perilous waters.

In the UK, where the prospect for a Western government committed to serious financial reform is highest, former Labour Prime Minister Gordon Brown told the Guardian, "We are in danger of sleepwalking into a future crisis. There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world." Brown, who was PM when Lehman collapsed, admitted that governments had not been tough enough on the banks since the crash.

UK Shadow Chancellor John McDonnell gave a speech on 15 September outside the Bank of England pointing out that ordinary people are still paying for the response to the GFC with austerity budgets and falling living standards. McDonnell said: "One of the key lessons to be learnt from the crash is that never again must we allow finance to become the master of the economy, rather than its servant. Labour in government will put finance to work for the real economy."

So feared by the City of London's banks, this prospect, inclusive of Glass-Steagall banking regulation, a national investment bank and the renationalisation of vital infrastructure, is becoming more likely with every new banking tremor. The 16 September Telegraph reports that investment bank Keefe, Bruyette & Woods puts the chance of a Jeremy Corbyn Labour government sweeping to power this year at 31 per cent! This could materialise with a snap election brought on by a vote of no confidence in PM Theresa May's Brexit strategy.

With the crash in motion and warnings of violent social unrest not seen in 50 years ("JPMorgan is thinking pitchforks and Fed stock buying in the next financial crash", AAS 12 Sept.), elite interests are intent on staying in power using the now familiar pretext of terrorism to justify a police-state crackdown (p. 9).

Articles include the following:

  • 10 years after the GFC, financial system again on the brink
  • Learn from Australia—UK needs in-depth inquiry into banking crimes
  • Did Downer lie to launch 'Russiagate'?
  • Woodward's fear: Trump is President
  • Vladivostok Forum: strategic talks and economic development hopes
  • Discussion of Glass-Steagall on the rise
  • Why is British intelligence letting loose convicted terrorists?
  • How London's Euromarket killed Bretton Woods
  • The real Goldfinger
  • Corbyn will take on the City
  • Help homeowners and farmers: break up the banks!
  • Unsung hero: Engineer L.B.S. Reid
  • ALMANAC - Lessons for a recovery: A qualitative economic transformation-Part V


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