no doubt governments will need to do their bit, but spending on...

no doubt governments will need to do their bit, but spending on infrastructure is not how they will try tackle the issue of a credit crunch.

if they employ say 50,000 people using $50bn in infrastructure ... that is only a very small part of the nation’s workforce... and an even smaller piece of the global work force.

what governments need to and are trying to do is to kick start the problem at the source... the financial institutions employ and fund the economy... keep them going and the nation is employed ... if they seize up or go down.. the nation’s unemployment will increase by the millions.

One way of doing this is to provide credit through the repo market, where governments are buying securities off financial institutions so they have plenty of cash to keep lending money...

this worked pretty well in Australia during the GFC... our money markets didn’t stall completely like they did in other parts of the world (e.g US), which is partly why the Australian economy didn’t get hit as hard during the GFC...

the RBA has tried that trick again recently, pumping billions of cash into the repo market... but the impact this time wasn’t as great... credit spreads are still are still sky high and the RBA and all governments around the world need to get on top of this quick... because if people stop lending, then businesses will go belly up due to insolvency. It’s a very viscous cycle if it gets out of control... we are at the early stages.

interesting times indeed... the risks out there are greater than many can imagine at this point... the writing is on the wall, but not everyone is looking... most are just looking at their screens!