Titanic Post

AUSTRALIAN TREASURY SECRETARY FEARS U.S. CRASH

DAVID UREN AND ROY ECCLESTON, AUSTRALIAN - Peter Costello’s closest adviser fears the US is heading for a devastating financial crash that could ravage Australia’s economic growth. Treasury Secretary Ken Henry likened the flood of money pouring into the US to support its budget and current account deficits to the stock market’s dotcom bubble of the late 1990s. Were it suddenly to stop, there would be shockwaves felt throughout the world’s economies.

The financial crash feared by Dr Henry would involve a sharp fall in the US dollar and a bond market sell-off, which would push up US and world interest rates. This would hit US economic growth and, as a result, cut Chinese exports of manufactured products to the American market. Fears that the world economy is in grave danger are growing in the major financial capitals. The International Monetary Fund, which is responsible for stability of the world economy, also warned yesterday of a sudden collapse.

The Australian