# Stimulus Boom, and where to next?



## Monario (5 September 2010)

Yet again, world markets appear to be riding the back of another boom, the stimulus boom. With most major governments around the world pouring trillions of borrowed money into economies and creating yet another high growth bubble. What will the bailout package for this artificial bubble be, or are we now at the bottom of the cookie jar and headed towards a recession never before seen.


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## Monario (6 September 2010)

Ok so maybe I should kick the comments off by expanding a little, I may have been a bit bleak with the subject.
I guess what I am looking for is people’s general opinion on where both Australia, and the world economies are headed, and what we might see over the next few years.

As stated, in my opinion, we are in the midst of a worldwide stimulus boom, the big players (superpowers such as the US and China) have poured trillions of dollars into their economies to try and get things rolling again, but at the end of the day all they have done is create a huge stimulus bubble, a bubble that has already started to unwind, sure we are still seeing great gains in a number of sectors, but I believe they will be short lived. All this has been done with Borrowed money.

Housing stimulus is over, and we have begun seeing a decline in prices, this is not obvious in some areas, particularly South East QLD and Sydney due to interstate migrants and foreign investment in these areas, and in Perth the mining holds them up, but it is only a matter of time before we start seeing the effects in these areas also. Rents are on the decline, there are huge vacancies in many high rise developments (properties on the gold coast are a prime example, and we are still building more, one of the biggest residential towers is still under construction, this is bound to further hurt prices) , holiday lets are down. And many of the government stimulated projects are coming to their final days..Etc. etc.

Australia, obviously , is doing well compared to other developed nations, but how long will it continue for, are we to reliant on China’s growth, which in larger is supported by Americas consumption, or are we decoupled from these economies, are the current multibillion dollar mining sector investments enough of a buffer to see us through the tough times ahead, or are we only now reaching our peak and headed for a decline. Has our housing affordability finally tipped the balance and will be the precursor to the next recession, or will something else raise its head.

Whatever it may be I feel Australia has a minefield to negotiate in coming years, whether enough of the over inflated bubbles within our own economy and the world economy will be enough to tank us or not is the point of discussion here and I would love to hear your thoughts on what is ahead.


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## waza1960 (6 September 2010)

> Yet again, world markets appear to be riding the back of another boom, the stimulus boom. With most major governments around the world pouring trillions of borrowed money into economies and creating yet another high growth bubble. What will the bailout package for this artificial bubble be, or are we now at the bottom of the cookie jar and headed towards a recession never before seen.



        I think you need to look at each country independently as far as bubbles go atm.
    Has China got a stimulus created Bubble? Almost certainly IMO.
    I don't believe that the US has a bubble atm due to the stimulus being relatively ineffective and therein lies their major problem.
   I think Australia has a housing bubble and a two stage economy (mining and the rest) The problem for us will be when China's growth slows down further and our mining boom is over at least temporarily.
 This will cause significant Federal Government deficits and if the housing bubble deflates at the same time we will have a perfect storm.


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## Monario (6 September 2010)

Thanks for the reply Wazza



waza1960 said:


> I don't believe that the US has a bubble atm due to the stimulus being relatively ineffective and therein lies their major problem.




I agree it has not worked, however, it has definately kept america afloat (a bubble of sorts), they would be in one hell of a recession with out it, and I think all they have effectively done is prolong the inevitable, and possibly created a bigger whole, no actually they definately have. 

One of the things that worries me the most is the US auto industry and their cash for clunkers scheme, terrible terrible short term fix, and talk about good money after bad. Bail the industry out with taxpayer $'s then use borrowed $'s to encourage people to buy a new car artificially stimulating the auto industry and also indirectly the finance sector through the loans taken out against these cars. All passed off as a "Green Scheme" are the US taxpayer really that naive.

The US is living on borrowed money, how long can they manage to keep doing it? they have their AAA credit rating right now, but it cant last, just like the subprime fiasco, when people realise what they are effectively buying surely the domino effect will start. Will China follow? or is their internal growth strong enough?


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## waza1960 (6 September 2010)

> The US is living on borrowed money, how long can they manage to keep doing it?



       The simple answer is when they accumulate enough debt that the US Dollar tanks and it ceases to become the reserve currency,however if China's economy contracts and there is further EC debt problems amongst the PIIGS then the US dollar will strengthen as a safe haven and the merry go round will continue.


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## Julia (6 September 2010)

Monario said:


> One of the things that worries me the most is the US auto industry and their cash for clunkers scheme, terrible terrible short term fix, and talk about good money after bad. Bail the industry out with taxpayer $'s then use borrowed $'s to encourage people to buy a new car artificially stimulating the auto industry and also indirectly the finance sector through the loans taken out against these cars. All passed off as a "Green Scheme" are the US taxpayer really that naive.




A scheme which our esteemed Prime Minister has proposed be replicated here.
I agree with your overall concerns, Monario, but the political addiction to 'keeping us out of recession' is unlikely to be checked.


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## Monario (6 September 2010)

Julia said:


> A scheme which our esteemed Prime Minister has proposed be replicated here.




A point I forgot to mention, thanks for that julia, our scheme will be slightly better than the US version, but still a terrible idea.


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## Monario (6 September 2010)

Here is a great article, a little old, but the last paragraph sums up my point quite well as to why the US is headed to a drak place.

http://www.huffingtonpost.com/sheldon-filger/sovereign-debt-crisis-now_b_577989.html


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## Monario (15 September 2010)

With the current economic climate, and the risng Aussie, and falling US dollar, I would have thought this thread to draw a few more comments than this.

I now look at the AU vs. US and wonder if we are moving closer to my for mentioned thoughts, the US dropping like it is cant be a good thing, especially as they have moved into more of a consumer based economy and have little in the way of exports...

Worrying times ahead I feel.


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## Boognish (15 September 2010)

This is an excellent if scary report on everything you've raised here OP.

http://www.abc.net.au/4corners/content/2010/s2987864.htm


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## explod (15 September 2010)

Boognish said:


> This is an excellent if scary report on everything you've raised here OP.
> 
> http://www.abc.net.au/4corners/content/2010/s2987864.htm




Yep, sums up what many have been pointing to on ASF for a number of years now.  And we have been howled down for it too with many of those good posters gone for just trying to help.

People will only take in what they want to hear.   For people not listening you only have to go through the Property Thread.


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## Mr Z (15 September 2010)

waza1960 said:


> ... debt problems amongst the PIIGS then the US dollar will strengthen as a safe haven and the merry go round will continue.




That is until they look at the unfunded liabilities of the US and realise that they make Greece look good. The US, LOL, the biggest PIIG of them all! It is just a matter of time... be long all things tangible... be long Australia when this monetary inflation really grabs hold.


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## robots (15 September 2010)

explod said:


> Yep, sums up what many have been pointing to on ASF for a number of years now.  *And we have been howled down for it too with many of those good posters gone for just trying to help.*
> 
> People will only take in what they want to hear.   For people not listening you only have to go through the Property Thread.




Hello,

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Kimosabi, knocker, knocker1, mr burns, pepperoni, TomR, Numbercruncher (although he probably went because didnt become a mod), chops a must, Dowdy, S Keen, Fujitsu Consulting

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thankyou
professor robots


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## noie (15 September 2010)

Speaking of Stimulus , Japan made a move today to stops the Yens rise, usd/yen traders would have been a little happy.


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## MARKETWINNER (14 September 2013)

We had some kind of boom globally after stimulus. Now after tapering also we will have some kind of long term growth globally. In the short run some sectors will benefit lot.

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions.


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## Dona Ferentes (21 December 2020)

_Its now 2020, and Covid has unleashed a "Boom for the Ages". _

How much global fiscal and monetary stimulus has there been of late? ... Some $14 trillion of fiscal stimulus and $8 trillion of monetary stimulus (give or take a *trillion*.)

Bank of Japan’s balance sheet as a percentage of GDP.... 131.67%
The Fed’s balance sheet as a percentage of GDP ........... 35.79%
The ECB's balance sheet as a percentage of GDP .......... 59.96%
and RBA's balance sheet as a percentage of GDP ....... a mere 25%

So, where to next?


> Jerome Powell’s post-FED meeting press conference last week .... comments about equity market valuations.
> 
> _The bottom line is that he has no concerns about equity valuations or financial stability.
> In fact he urged us to compare equities to bonds and not look at P/Es._


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## sptrawler (21 December 2020)

Dona Ferentes said:


> _Its now 2020, and Covid has unleashed a "Boom for the Ages". _
> 
> How much global fiscal and monetary stimulus has there been of late? ... Some $14 trillion of fiscal stimulus and $8 trillion of monetary stimulus (give or take a *trillion*.)
> 
> ...



As long as the ink doesn't run out, neither will the money, just add more columns to the spreadsheet. 😂


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## moXJO (24 December 2020)

Majority of businesses I have talked to have had their best year. Its the end of the bear forever. Apparently governments can just spend billions with no downside.


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## sptrawler (24 December 2020)

moXJO said:


> Majority of businesses I have talked to have had their best year. Its the end of the bear forever. Apparently governments can just spend billions with no downside.



We did say at the start of this government spending spree, it is the first time in Australia, where the government has taken on the financial shock instead of letting business absorb it. We also wondered if it would work.
Well up to now, it looks as though it actually may have worked, but maybe it hasn't fully played out yet.
It is the first recession I've seen, that has had such a rapid turn around, especially when you consider the fiscal impact on some businesses, time will tell if they were viable in the first place IMO .
Interesting to watch how fast inflation recovers, or if it actually does increase.


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## moXJO (24 December 2020)

sptrawler said:


> We did say at the start of this government spending spree, it is the first time in Australia, where the government has taken on the financial shock instead of letting business absorb it. We also wondered if it would work.
> Well up to now, it looks as though it actually may have worked, but maybe it hasn't fully played out yet.
> It is the first recession I've seen, that has had such a rapid turn around, especially when you consider the fiscal impact on some businesses, time will tell if they were viable in the first place IMO .
> Interesting to watch how fast inflation recovers, or if it actually does increase.



Libs seem to have got this spot on. Seems they were better socialists all along.


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## sptrawler (24 December 2020)

moXJO said:


> Libs seem to have got this spot on. Seems they were better socialists all along.



I'm not sure it was about socialism or capitalism, I think that the system has moved on from the clunky politics of 30 years ago.
I think with data processing abilities and computer capabilities, things have moved on and this government actually listened to the experts rather than trying to exploit the disaster for political gain.
Usually, during the massive economic hits I've seen in my life, it has been a case of the government saying this is beyond our control and suck it up $hit happens.
Then everyone gets sacked, businesses go broke and slowly we drag ourselves out of the gutter.
This time, the government propped up businesses, supported the un employed and underemployed.
Now it looks as though businesses that weren't viable wont come back, or have transformed their business model, to survive.
Those that were viable are returning and are employing those who are wanting work.
Those businesses that flourished, have improved and adapted to a new norm, which has improved their profitability and processes.
IMO it has been pretty amazing, actually astonishing.
We are lucky we are an island, small population and lots of money, but even with that it has been handled extremely well IMO.
But having said that, it could all fall on its ar$e, time will tell.


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## qldfrog (25 December 2020)

sptrawler said:


> I'm not sure it was about socialism or capitalism, I think that the system has moved on from the clunky politics of 30 years ago.
> I think with data processing abilities and computer capabilities, things have moved on and this government actually listened to the experts rather than trying to exploit the disaster for political gain.
> Usually, during the massive economic hits I've seen in my life, it has been a case of the government saying this is beyond our control and suck it up $hit happens.
> Then everyone gets sacked, businesses go broke and slowly we drag ourselves out of the gutter.
> ...



Can i still suggest we have not seen the impact yet? So called vaccine will not save us from the next outbreak in winter.. remember, this virus is a flu..so seasonal so either we keep locked away from the world with no 100 pc garantee or we open but then need to change the narrative around the virus.
The 2pc death rate of elderly has been named a calamity justifying all this economic and social pain.
Will the 2pc death rate of vaccinated elderly population be accepted by the public in 6 months?


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