(Australian PM) Kevin Rudd: let the weak go under

Source: Sydney Morning Herald

THE Prime Minister, Kevin Rudd, says all non-viable banks need to be shut down if the world is to recover from the global financial crisis. Outlining the pitch he will make to the G20 summit in London next month, Mr Rudd said dealing with so-called toxic assets must be the focus of the forum to be attended by the leaders of the world's 20 largest economies.

"Sick and unhealthy assets have the capacity to affect healthy assets and banks. It's like a virus which, if left untreated, can easily spread," he told a business lunch in Sydney yesterday. "Dealing effectively with toxic assets and the balance sheets of globally significant banks is fundamental to the recovery of private credit markets and therefore to medium-to-long-term economic recovery, across the global economy and for the Australian economy."

Mr Rudd will co-ordinate his approach with the US President, Barack Obama, with whom he will meet on March 24, before the April 2 London summit.

Mr Rudd said revitalising the global banking sector and re-establishing the flow of credit involved several steps, starting with "stress testing" all weak and significant financial institutions to ensure their balance sheets were sound. "All non-viable banks must be closed. Keeping insolvent banks alive is itself systemically damaging."

Read more: http://www.smh.com.au/national/rudd-let-the-weak-go-under-20090303-8ngp.html

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Given the success of Rudd's (and the RBA's) policies in keeping Australia out of recession- seems to me that Obama might want to listen to what Rudd has to say.

which of course we see in action every Friday evening.

Thanks to responsible regulation- Australia (like Canada) hasn't had bank failures- though as he mentioned, the financial system relies at times on foreign credit.

How low can you go?

Their stock market has tanked, their currency plummeted, and their beer is sub-par. This has all the classic hallmarks for a bad recession. On the other hand, the didgeridoo and their potent weed will make people happy and forget about their ruined futures.

That, unfortunately I have to agree with.

However, as of yet- the country's not in recession (though it may well be before the year is out). As far as currency is concerned- the drop in the Asssie's not an altogether bad thing- it helps exports at a time when demand is low. Once commodity prices start to rise again- so will the Aussie. In terms of Purchasing power parity with the states, that's achieved at an exchange rate of about 70.

The high 90's of last year was riduculous, historically- and counterproductive in just as many ways as the current lower rates.