Return of Volatility- $A no longer considered safe bet

The zombies have hit the streets in the US to protest the protection of the financial markets whilst the ordinary citizen receives little support. There are no zombies in Australia (yet) in fact normality has returned.

In what is a return to normality for the $A it has fallen to 95c/US. (this is fall of 13%) Ironically this is due to the concerns with the European markets and failing US economy as investors have dramatically left so called risky currencies for the 'safety' of the US$.
This is despite the solid news regarding the Australian economy. In summary the information that has surfaced in the last week;
# The Trade surplus is the second highest on record at $3.1 billion.
# Building approvals have improved signalling increased confidence in the domestic economy.
# The terms of trade have continued to rise (highest in 140 years) Chinese manufacturing continuing to expand.
# Despite the EU market voting to allow stability expenditure of E440 Billion contagion in the European market continues with Greece close to default, previously Portugal, Spain and Ireland have been mentioned as having financial risk. The risk has now spread to Italian and French banks.
# Protests regarding corporations being saved whilst people continue to lose their jobs spread across the United States.
# News of global financial issues has meant that the RBA is now preparing the market for a cut in interest rates. Interestingly 'jawboning' regarding a cut in interest rates will mean the $A will fall further which will be positive news for sections of the Australian economy.

Where is the leadership?

As Australia slides into a rather boring election campaign (thus far) it is worthwhile to note that there is a difference between the two main parties. One outcome that seems certain is the increased importance of the Greens and the animated version of Bob Brown which is worth witnessing after many years of droll, monotone.
I know you want to keep it connected to the main game or the game that you are concerned with at present so here are some articles to read.
The first is the thoughts of business- which interestingly are favouring the ALP at present due to the fact they will lower company tax and be introducing a super broadband. see Fate of business.
Another interesting read is the thoughts of Jospeh Stiglitz who had the following to say on the 730 report. You can watch the intereview with this Nobel economist on the global economy and Australia's performance.

KERRY O'BRIEN: There's been a lot of criticism of waste in the way some of Australia's stimulus money was spent. Is it inevitable if you're going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers' money?

JOSEPH STIGLITZ: If you hadn't spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced - that's waste. You would have had high unemployment, you would have had capital assets not fully utilised - that's waste.

Empire building and destruction

The pages of history are a great place for people who like to place their own twist on events or revise what actually happened.
So the elevation of the first Afro American to the White House will obviously be an event that many remember as pivotal in the history of the United States of America. (check out the recent Foreign Correspondent for those who think I am on my own when I am particular about what America means.)
I digress, will Barack Obama be remembered for the beginning of the end of the empire that currently is the U.S.?
For those of you who play sport or any other competitive pursuit, there is nothing more satisfying than beating the top team and if you are the top team you find that others always elevate their efforts against you. It is only a matter of time before the number 1. falls and others rejoice. So when you are the number 1 world power (U.S) and you have been that way since 1945 then it is reasonable period of time to consider when the end is nigh.
In the article 'An empire in decline as the world turn upside down' Peter Hartcher considers the amount of debt held by the Unite States and how it is becoming an issue. Commentators and the opposition in Australia bemoan the $50 billion Budget deficit Australia has- well consider $1.4 trillion with current interest repayments of public debt at 8% and heading towards 17%.
Obama may be the President that was in power when the Global Financial Crisis of 2008 happened however he does not deserve to be blamed. According to Alan Greenspan (the previous head of the Federal Reserve (US Central Bank) he just did not believe that businesses would operate in a non-rational fashion. That is why did they lend to people when there was a high risk that there would loan defaults? Greenspan believed that the profit motive would prevent this stupidity, well he was wrong and so whilst socialism collasped so to is uncontrolled capitalism now under pressure.
We shall have to wait and see the end result. What is your view? I can see a merit for anyone who makes a comment.

Welcome Year 12 Eco Class

Fellow economists, here is a copy of a blog I posted last year (Thursday, March 19, 2009). It is highly relevant to what we have been studying and the hyperlinks lead to an interview on the ABC.

Is Foreign Aid good for Africa?

On the 17th of March, Foreign Correspondent (yes on the ABC) had an interview with Dambisa Moyo a Zambian-born economist. This is some of the information from the ABC web site.

"In her new book, Dead Aid, she argues that official aid is easy money that fosters corruption and distorts economies, creating a culture of dependency and economic laziness.
Moyo is particularly dismissive of the ‘celebrity aid’ model popularised by international stars such as Bob Geldof and Bono and says many aid organisations and NGOs are more interested in perpetuating poverty in order to justify their own existence."

Interesting thoughts indeed. Moyo is a believer in trade and the power of the market as opposed to the aid model in which she claims the only growth occurring is in the Swiss banks accounts of the political elite.
Lastly she claims that 10 percent of Africans were living in poverty in the 1970s compared to 70 percent now.
What do you think? It would be good to hear some comments via the blog.... (PS this is not a new concept it is new for an African economist to be suggesting it though)