Could “it” (1929 or something similar) happen again? Probably not, but there has been no time in the past 20 years when the world and Australian economies have looked as vulnerable as they do today. For those who want to start getting scared, there’s an ample supply of stories about how it could all unravel. This will be one of them.
Following the crises in numerous Asian countries in 1997-98 and numerous South American countries in 2001-02, currency speculators suddenly notice that most of the English-speaking countries are running large current account deficits, and decide this is a problem. There is a panic run on the US, Australian and NZ dollars and perhaps on sterling. Hedge funds get caught with short positions and collapse, pushing major banks to insolvency. At this point, emergency measures, like bank holidays, are needed, and the story fades to black …

How plausible is this scenario? Not very, given that most of the speculators are located in English-speaking countries themselves. But, as
Tim Colebatch notes, Australia has more foreign debt, relative to GDP than Uruguay, which was just forced to close its banks. Given a few more years of big deficits, the US will be in the same position. A dramatic collapse seems unlikely. But it seems equally unlikely that the era of big current account deficits can continue much longer.