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Howard's End: 911 Did Not Cause Global Meltdown

The New Zealand public are being spun a line by the mainstream media that "but for" the September 11 attacks on America, the New Zealand public would have looked askance at the Government's $885 million bailout of Air NZ. Even before the attacks, airline revenues had already suffered their worst plunge in 25 years Maree Howard writes.

There's no way in the world that the need for Government's Air NZ bailout can in any way be attributed to the September 11 attacks on America.

The attacks are now being used as a convenient scapegoat for all manner of inept business management over a long period of time.

For example, the latest available data from the U.S. shows that airline revenues had suffered their worst plunge in 25 years with May/June analysis revealing major U.S. carriers alone losing $1.5 billion.

Earlier this year analysts expected corporate profits to rise 9% for the year. Yet, by August, profits were expected to drop 8% - a reversal which stunned Wall Street.

Bu even then, the Wall Street experts were sounding like they were from another planet. The actual profit decline, announced in a slew of released company reports, revealed a 17% decline.

JP Morgan Chase's earnings had already fallen a whopping 77% in the second quarter - before the September 11 attacks.

By July the world debt pyramid was beginning to unravel and a combination of financial crisis in Turkey and Argentina saw shaky debt in the billions of dollars which exposed major U.S. banks such as Bank of America, Chase, JP Morgan and Citigroup.

As the synchronised global recession took hold, everybody was hoping someone else would pull them out of their mess. When you look at Europe, Asia and the U.S. it was like three drunks trying to hold each other up.

Japan, Argentina, Brazil, Chile, Germany, most of Asia, Italy, France, England, the U.S. and Spain, to name just a few, all began spiralling into recession.

Government's can lower interest rates, slash taxes, pump-prime the economy and, like in Japan, even dish out free money, but it won't matter much because the coming bankruptcy crisis is being driven by fundamental forces that authorities cannot control - i.e. the lowest savings rate in global history, the biggest consumer debt loads, and the worst destruction of stock market wealth of all time.

The U.S. Federal Reserve offering cheap short-term money does very little to help consumers pay of their $1.6 trillion in outstanding debt, three-quarters of which is locked in at much higher interest rates.

Nor can the Fed force exposed banks to lend out any lower-interest rate money it pumps into the economy - its called the liquidity trap. This is what is preventing Japan from staging a recovery.

A credit crunch is the most severe thing that can happen when banks start closing their loan departments with the only function of a loan officer being to call in loans. It becomes indiscrimate and no longer relies on whose credit rating is good and whose is not.

Even the much-vaunted U.S. tax cuts will only see between $300 and $600 received per average household - not enough to make even one payment on a typical credit card bill.

In Japan, bankruptcies in May were the second highest in history. In Germany analysts are expecting a surge in telecom bankruptcies and in England, the number of receiverships have gone through the roof - up 82% in the first quarter.

Japanese reforms have forced banks to liquidate another $1.2 trillion in bad debts.

In my view, the bottom line is that companies will continue to disappear, stocks will go bankrupt, capacity will be scuttled, workers will continue to be shed and rectifying a burst bubble will not be remedied by profligacy.

Doom and Gloom? - maybe. Reality? - definitely.

A message for mainstream media - stop trying to convince people that the financial woes of the world and long-term business ineptitude, can now be blamed on the September 11 terrorist attacks on America.

ENDS

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