March 14, 2008 – 7:05 am
For as long as I can remember, Australia has been trying to mimic the U.S. Australians watch what Americans watch; eat what they eat, and as soon as we get word of the latest fashion craze in Orange County, we wear what they wear. Even in matters far less trivial than fashion, like war, history will show that if they fight, so do we.
There’s nothing wrong with a little copy-catting, or a little me too-ism. After all, imitation is the highest form of flattery, and for the most part the U.S. seems to get things right. But when it comes to imitation, there comes a point where you have to draw the line and say ‘Okay, this is getting a little sad’.
I refer particularly to the recent stock market turmoil following the U.S. sub-prime fallout and the ensuing writedowns. True, Aussie financials had some exposure to sub-prime related debt, but far less than did the Europeans, for example. Does it really justify the markets’ twenty percent slide since July 2007, when sub-prime first appeared on our radars, or the thirty percent plus decline in financial stock values since November? I think not.
It makes me wonder if the Australian psyche has become so diluted with U.S. perspective that Australians cannot fully distinguish between American problems and those of Australia. Their recession is our recession. Or are we just so determined to be like them that we will follow them to whatever end, no matter how much pain it involves?
It is now common knowledge that U.S. banks such as Citigroup and Merrill Lynch, coupled with International players such as UBS hold the lion’s share of sub-prime related losses. Shares prices in the aforementioned financial juggernauts have dropped approximately sixty, forty-five, and fifty percent respectively since the onset of the sub-prime woes. The rest of the losses have been spread largely amongst other major players across the G7.
Aussie banks carry an insignificant portion of the exposure, even proportionate to their overall size, and whilst they face some difficulties in the form of additional provisioning and the rising cost of money, there is no justification for the dramatic decline in share values other than a case of the wannabes.
CBA down thirty-five percent, ditto the NAB, and Macquarie has taken a beating to the extent of nearly sixty percent. Why?
It’s kind of sweet, in a way, that when big brother takes a hit, little brother steps in and cops one too. But when you compare the balance sheets, and indeed the broader economies as a whole, you will begin to understand my frustration.
The point I am trying to make is that U.S. problems are real. Ours are a self-inflicted multiple.
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