Global Bloodbath Sparks Financial Crisis Fears

• Global Bloodbath Sparks Financial Crisis Fears
  by frank.chung@news.com.au, http://www.news.com.au/
  GLOBAL markets are in meltdown with losses approaching those not seen since the global financial crisis. Should we be worried? Absolutely.
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  Australia bet big on never-ending Chinese growth and, increasingly, it looks like we could walk out of the casino empty-handed.
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  Global stock markets have been rocked over the past few weeks amid growing signs of a slowdown in China. It’s causing fears we could be seeing a re-run of the 1997-98 Asian financial crisis, and there are dire implications for the Australian economy.
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  The Australian market has closed down 4.09 per cent at 5001, with $60 billion stripped from the value of the nation’s companies. It’s the biggest daily fall since September 2011, and is compounding an already dismal stretch which is on track to be the worst month since the GFC.
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  The benchmark S&P ASX 200 has fallen more than 16 per cent from its highs near the 6000 mark earlier this year. The local market looks to be heading for its first negative year since 2011.
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  From their highs earlier this year, US shares are now down 7.5 per cent, eurozone shares are down 14 per cent, Asian shares have fallen 20 per cent, Chinese shares are down 32 per cent and emerging market shares are down by 17 per cent.
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  Meanwhile, the Shanghai Composite has crashed 8.4 per cent this morning, putting even greater pressure on Australian stocks, particularly the big mining companies.
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  On top of everything else, there are fresh fears that Greece could exit the euro after Prime Minister Alexis Tsipras called for snap elections after growing division within his radical left-wing Syriza party over the stricken country’s bailout deal.
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  So should we be worried? “The short answer is absolutely,” said ABC Bullion chief economist Jordan Eliseo. “The volatility over the last week has simply revealed the fact that the primary cause of the GFC — excessive debt and capital misallocation — has not been solved.”
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  LF Economics’ Lindsay David said all the data and current trends pointed to “at the very least a financial crisis in Asia” in the not-too-distant future. 
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  “Concerningly it could force many South East Asian nations alongside Australia to jack up interest rates to defend their currencies at the worst possible time,” he said. “This is a scenario I don’t think mainstream economists — government and private — in Australia have taken into serious consideration as a possibility.”
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  Nicholas Teo, a strategist at CMC Markets in Singapore, told Bloomberg News the outlook for the world economy was clouding. “It seems like we’re seeing the makings of the 1997 Asian financial crisis all over, with emerging-market currencies plunging,” he said.
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