# It's official, spend and borrow, dont save



## MrBurns (5 November 2008)

Another drop in interest rates, so much for saving, the RB seems more intent on helping the share market and those who borrowed too much.

Close the TD and buy as Porsche and put the rest into BHP and RIO.


----------



## Glen48 (5 November 2008)

When you can get a Porsche for 50% off why not..I think most people will hold on to their loot and not spend or sink the money into their mortgage B/card. Which is good but won't help the shop owners. By spending you help the shops but it will only be a flash in the pan. We have to let every thing collapse and start again maybe under a saner system.
We should be encouraging Solar and offering tax rebates for companies who want to produce for export.
Houses prices should have a CGT over a certain limit say 300K and indexed up from there and not be taxable deductible, If some one starts a green business he should be allowed to pay a lower tax on every thing.
Cars  over 75 K taxed and not deductible.
People given different Tax rate and interest rates depending on what business they are in.
If you want to buy a machine which will make a product which will be exported pay a lower tax, buying a machine to tune up Rollers a much higher tax.
Will this happen ...never..... History repeats.


----------



## MrBurns (5 November 2008)

Glen48 said:


> When you can get a Porsche for 50% off why not..I think most people will hold on to their loot and not spend or sink the money into their mortgage B/card. Which is good but won't help the shop owners. By spending you help the shops but it will only be a flash in the pan. We have to let every thing collapse and start again maybe under a saner system.




Nothing seems to be collapsing at the moment.

A Porsche for 50% off ??? where where ???????????


----------



## professor_frink (5 November 2008)

> It's official, spend and borrow, dont save




thought it had been the official motto of our country for quite some time now

Whilst we continue to get huge tax deductions for IP's, franking credits for divvies on shares and absolutely no incentive to save a single penny in cash it will probably stay that way.


----------



## Smurf1976 (5 November 2008)

Glen48 said:


> We should be encouraging Solar and offering tax rebates for companies who want to produce for export.
> Houses prices should have a CGT over a certain limit say 300K and indexed up from there and not be taxable deductible, If some one starts a green business he should be allowed to pay a lower tax on every thing.
> Cars  over 75 K taxed and not deductible.



A few contradictions there...

Encourage solar, the most polluting and least economically viable renewable energy source (assuming we're talking about photovoltaic panels). But no incentives for cleaner (in terms of CO2) wind, hydro, geothermal, wave etc. Why not just encourage the cleanest technologies without trying to pick winners?

Apply GCT to the one house that I own because of past inflation which isn't something I wanted anyway and has given me a negative benefit to my real wealth thus far. But no tax on my neighbour's 2nd property, their shack, because it's not been inflated to the same extent in actual $ terms. 

No tax on a "green" business OK. But we'll tax a high-tech vehicle just as we'll tax a luxury gas guzzler. Shouldn't the tax be based on fuel consumption rather than purchase price?


----------



## Julia (5 November 2008)

While I was feeling much less than thrilled about the .75% rate cut, and perhaps even more irritated by the fact that when every section of the media appears to jump up and down with joy about rate cute, no attention is ever given to the people who've chosen not to run their lives with massive debt and instead to invest prudently and save, ABC Local Radio had on a Chris Leithner who said really well all that I was feeling.

Web address for newsletter:

http://www.leithner.com.au/newsletter/dec08_newsletter.pdf


----------



## gfresh (5 November 2008)

Savings are good.. Unfortunately the whole system is now rigged so that they are not  Let's "protect" the housing market by fueling another boom, as that is all Australia is good at other than digging some dirt, so in 5 years time when houses are double what they are now, even less people at the low end of the market can afford them.  Rinse and repeat. 

They're going to be even more desperate soon to kill off this naughty savings habit.. this weekend I consumed (I felt dirty) on some audio gear. Sales guy knocked off another 5% on the already discounted 10% - I didn't even have to ask


----------



## Mofra (5 November 2008)

Smurf1976 said:


> Encourage solar, the most polluting and least economically viable renewable energy source (assuming we're talking about photovoltaic panels). But no incentives for cleaner (in terms of CO2) wind, *hydro*, geothermal, wave etc. Why not just encourage the cleanest technologies without trying to pick winners?



Many hydro plants are worse than brown coal plants for carbon emissions over a 25+ year lifecycle due to the rotting vegetation of re-claimed forest used to build the dam in the first place.


----------



## Calliope (5 November 2008)

professor_frink said:


> thought it had been the official motto of our country for quite some time now
> 
> Whilst we continue to get huge tax deductions for IP's, franking credits for divvies on shares and absolutely no incentive to save a single penny in cash it will probably stay that way.




Yes it is confusing, We are one of the few countries where interest on savings is taxed at the marginal rate. And do you know why?  Because it is so easy to collect, There is no minimisation or avoidance for interest payments. The taxman knows  exactly what you get as soon as you do.


----------



## tech/a (5 November 2008)

There is nothing confusing about it its basic economics.

No spending = loss of jobs = less taxes = more social security = Deficit.

Make it work for you.
Take on productive debt not bad debt!


----------



## BradK (5 November 2008)

Julia said:


> While I was feeling much less than thrilled about the .75% rate cut, and perhaps even more irritated by the fact that when every section of the media appears to jump up and down with joy about rate cute, no attention is ever given to the people who've chosen not to run their lives with massive debt and instead to invest prudently and save.]




Its a see saw - savers benefit from interest rates last few years, and mortgage holders benefit now. Swings and roundabouts. Your turn will come again. 

Brad


----------



## charttv (5 November 2008)

tech/a said:


> There is nothing confusing about it its basic economics.
> 
> No spending = loss of jobs = less taxes = more social security = Deficit.
> 
> ...




I second that.  Don't waste time fighting the system, go with the flow and thrash it for all it's worth.  I used to sit on the sidelines railing at how wrong it was and how it SHOULD change until I realised that it wasn't going to. 

I realised that if I didn't thrash it for all it's worth I would be left behind.


----------



## Smurf1976 (5 November 2008)

Mofra said:


> Many hydro plants are worse than brown coal plants for carbon emissions over a 25+ year lifecycle due to the rotting vegetation of re-claimed forest used to build the dam in the first place.



I won't turn this into another climate change debate, we've got a few threads on that already, but I'll just say that if you clear the vegetation first then that fixes the problem. Even just doing the math over the full life cycle instead of a mere 25 years makes it look a lot better.

My point wasn't about that though. It's why pick winners? If there's one thing governments consistently fail to do it's to pick winners. So let's not have another attempt at it with solar panels. Just set the requirements (not polluting etc) and go with whatever turns up that does it best. IMO it's not solar, but that's another debate.

Or I could put it more simply and just say "less government intervention". Stop messing with everything from interest rates to what I can download and how the lamp on the table works and we'll have a lot fewer problems. Many laws are necessary, but we've got way too much government meddling in just about everything now and it's pretty obviously not working too well.

Governments created this mess through their constant meddling, regulating everything that didn't need regulating and not regulating anything that did. It doesn't look as though they've learnt from their mistakes.


----------



## Smurf1976 (5 November 2008)

charttv said:


> I second that.  Don't waste time fighting the system, go with the flow and thrash it for all it's worth.  I used to sit on the sidelines railing at how wrong it was and how it SHOULD change until I realised that it wasn't going to.
> 
> I realised that if I didn't thrash it for all it's worth I would be left behind.



Unfortunately I have to agree with you there. It's sad but true.


----------



## MrBurns (5 November 2008)

Smurf1976 said:


> Unfortunately I have to agree with you there. It's sad but true.




Ok so you've made your money NOW what do you do with it, property is too risky as present and who the hell knows what the share market will do in the next few months.

Leave it in the bank get stuff all ?


----------



## Glen48 (5 November 2008)

Maybe the Feds should buy all the Gold produced in OZ mines which keeps workers employed etc.
Go for renewable as much as possible, the Wind generators are made in Holland we should be able to make our own.
Cut OZ out of the world and cut off Globalisation and become self supporting.
There was China Man here in OZ who developed a Solar system and wanted Government support and got none he ended up going to China and is now one of that countries riches.
We should be able to make 36-48VDC Fridges TV Air cons etc.
12 V LED lighting.
The Feds have been in power for only a few months and the surplus is all but g o r n...as they say.
We need people in power to throw out every thing we use to do and design a new monetary system as this one is a dud.


----------



## Julia (5 November 2008)

BradK said:


> Its a see saw - savers benefit from interest rates last few years, and mortgage holders benefit now. Swings and roundabouts. Your turn will come again.
> 
> Brad



Brad, my frustration is not just at the fact that my cash is able to earn less, but that - as has been noted on this thread - we are going on encouraging the use of cheaper and cheaper credit.   Good debt is fine, and I'm pleased if people have more chance of getting into their own homes, *but not if there's a continuation of buying a house with the repayments calculated on the new low rate, with no thought to the capacity to meet payments if rates rise again*.

And I do have to swallow hard when I hear people griping about how high interest rates have been.  In the 80's I was paying 22% on an investment property mortgage.





MrBurns said:


> Ok so you've made your money NOW what do you do with it, property is too risky as present and who the hell knows what the share market will do in the next few months.
> 
> Leave it in the bank get stuff all ?




Actually less than stuff all.  Inflation is 5%.  Then deduct tax and you're well in the negative.   More people will I suppose be forced back into the share market, myself included.


----------



## Temjin (5 November 2008)

MrBurns said:


> Ok so you've made your money NOW what do you do with it, property is too risky as present and who the hell knows what the share market will do in the next few months.
> 
> Leave it in the bank get stuff all ?




As the editor of http://cij.inspiriting.com has recently said, maybe it's time to diversify some of the cash into individual equities that may perform really really well. Anyone who is on 100% cash are basically betting on a depression scenario and will stand to loss if hyperinflation do come. And if the latter time, commodities/specific equities might be the best place to hide your money.


----------



## aleckara (5 November 2008)

Julia said:


> Brad, my frustration is not just at the fact that my cash is able to earn less, but that - as has been noted on this thread - we are going on encouraging the use of cheaper and cheaper credit.   Good debt is fine, and I'm pleased if people have more chance of getting into their own homes, *but not if there's a continuation of buying a house with the repayments calculated on the new low rate, with no thought to the capacity to meet payments if rates rise again*.
> 
> And I do have to swallow hard when I hear people griping about how high interest rates have been.  In the 80's I was paying 22% on an investment property mortgage.
> 
> ...




Julia, while interest rates were 22% the overall principal compared to income was a lot lower back then. A lot of people dispute this fact; I've seen graphs that show it pretty well.

As the principal rises and people become more indebted to property interest rate sensitivity rises. In other words as an economic lever monetary policy gets more bang for your buck these days then it used to.

And Mr Burns you could always put the money into some sort of bet. If you think that in the next three years or so everything will turn bad use that money as collateral and put a bet on it. That's what markets are for.


----------



## Glen48 (5 November 2008)

commodities yes Mc Donalds USA is a good bet, maybe they will be used to work out the FX rate?
Have the Arch's floated in OZ?


----------



## MrBurns (5 November 2008)

aleckara said:


> And Mr Burns you could always put the money into some sort of bet. If you think that in the next three years or so everything will turn bad use that money as collateral and put a bet on it. That's what markets are for.




Not with you there ?


----------



## Smurf1976 (5 November 2008)

Glen48 said:


> We should be able to make 36-48VDC Fridges TV Air cons etc.
> 12 V LED lighting.



Even "electric" Smurf is confused as to how changing the operating voltage of household appliances is going to solve national financial problems.


----------



## Glen48 (5 November 2008)

Sorry to short circuit you..Solar gives us DC so Solar panels supplying  DC   could run a 36-48 V fridge etc. If we developed such a item then we could start exporting to all the Countries running on AC...but don't worry it will never happen.


----------



## Nyden (5 November 2008)

Solar serves its purposes. Why don't we have tiny solar panels on our TV remote controls, or other devices like that? Imagine the savings in batteries (resources, charging new batteries) - it would be a sure fire way to combat wastage. 

I've had a solar-powered calculator for 8 years ... never needed to change the battery, works when it's dark (I guess it stores a little bit of energy) - it's great.


----------



## Smurf1976 (5 November 2008)

Glen48 said:


> Sorry to short circuit you..Solar gives us DC so Solar panels supplying  DC   could run a 36-48 V fridge etc. If we developed such a item then we could start exporting to all the Countries running on AC...but don't worry it will never happen.



Like the idea. Same with anything of that nature - develop, manufacture and export is the way to go.

But sadly, we have over the past 37 years almost completely dismantled anything even remotely related to adding value. And now we've got a whole range of policies which effectively prevent anything new of that nature being set up. 

Somewhat ironically, making solar panels here would be a big no-no with the Kyoto Protocol, ETS and so on since they are an energy intensive product to manufacture. It would be far more rational for the manufacturer to locate their operations somewhere else and simply supply Australia with imported panels. Sad, ridiculous and true.

That's why I'm not overly optimistic about the economic future of this country. We seem hell bent on destroying every opportunity we have to value add to anything. First it was the so-called "level playing field" that's never been even close to level. Now it's being blatantly tilted against us - and we're one of those doing the tilting.

Borrow and spend. Borrow and spend. That's the way - leaving a massive debt for the next generation to worry about. Just like the Americans did...


----------



## Glen48 (5 November 2008)

Even if we did generate a lot of GG wouldn't if be worth it in the long run once all the panels were in place, i don't know how much GG making them would generate.
There has to be a market all over the World for this sort of products as the World is in the same Boat.
Look at those 12 Volt Fridges Hot and cold developed for Space.
We will give out the 10B it will be up against the wall or heading to China and that will all be over in a few weeks like a Sailor on leave, if the was used for 10B developing a manufacturing industry will last a long time.
Old story teach a man to fish.....
All this shows we need regulation as no one can be trusted to do the right thing Globalisation and the level field with the cliff in the middle is all a crock.
Why did God create so many Economist?
She was hoping one would get it right.


----------



## ROE (5 November 2008)

Julia said:


> While I was feeling much less than thrilled about the .75% rate cut, and perhaps even more irritated by the fact that when every section of the media appears to jump up and down with joy about rate cute, no attention is ever given to the people who've chosen not to run their lives with massive debt and instead to invest prudently and save, ABC Local Radio had on a Chris Leithner who said really well all that I was feeling.
> 
> Web address for newsletter:
> 
> http://www.leithner.com.au/newsletter/dec08_newsletter.pdf




When rates are going down, economy is in a bad shape, people fear over unemployment level, people fear debt and people are general in an irrational state.

This play a great advantage to the people like you who has little debt and can pick up bargains  then when people are greedy and rational again you sell and get the hell out of there and the cycle will return.

I ain't got debt and this rate cuts doesn't bother me in fact it may do wonders to my stocks i been buying in a last few months


----------



## xoa (5 November 2008)

Attitudes to saving have really changed over the past 15 years or so.  Once upon a time, the government at least paid lip service to the importance of savings and delayed gratification. Now, though  our savings rate is sharply negative, our great leaders still want us to spend even more money we don't have. We're even worse than the Americans in some respects.

It's hard to know what to do. The RBA will continue undercutting savers by creating cheap credit out of thin air and ramping inflation. If interest rates were cut to 0% all the politicians and media pundits would rejoice, it's like Alice in Wonderland. Options are to cop it on the chin, speculate, or get out of the dollar.


----------



## Smurf1976 (6 November 2008)

Glen48 said:


> Even if we did generate a lot of GG wouldn't if be worth it in the long run once all the panels were in place, i don't know how much GG making them would generate.
> There has to be a market all over the World for this sort of products as the World is in the same Boat.
> Look at those 12 Volt Fridges Hot and cold developed for Space.
> We will give out the 10B it will be up against the wall or heading to China and that will all be over in a few weeks like a Sailor on leave, if the was used for 10B developing a manufacturing industry will last a long time.
> ...



Agreed with your underlying point about manufacturing being a good thing. I'm simply pointing out that we've put up so much red tape and tilted the palying field so far against us that it's just about impossible for anyone to manufacture anything profitably in Australia these days. 

Go to just about any shop and you'll find that huge amounts of what they sell are from overseas. I nearly ended up with Chinese frozen veggies today until I read the label and put them back in the supermarket freezer.

On any rational assessment you'd surely conclude that sending vegetables from China to Tasmania doesn't make sense. It's like sending coal to Newcastle given that we've got the major company vegetable processing plants right here in Tas. But nope, someone's worked out that it's cheaper to buy from China.

The real classic one is fish. Caught in New Zealand. Shipped to China for processing and putting in a plastic bag. Then shipped to Australia to be sold. And yes that's true. No wonder we've got a huge current account deficit.

We are never, ever going to compete at manufacturing when others pay their workers $1 an hour and have no safety or environmental regulations. I'm not against safety, cleaning up the environment and so on but I think there's a real need to understand that Australian industry just can't do those things and still be price competitive with other countries which dump the waste straight in the air / water and don't give a damn about the workers.


----------



## xoa (6 November 2008)

Smurf1976 said:


> We are never, ever going to compete at manufacturing when others pay their workers $1 an hour and have no safety or environmental regulations.




Japan manages to compete. Germany too. We used to. It's not that we can't, we don't want to.


----------



## MrBurns (6 November 2008)

xoa said:


> Attitudes to saving have really changed over the past 15 years or so.  Once upon a time, the government at least paid lip service to the importance of savings and delayed gratification. Now, though  our savings rate is sharply negative, our great leaders still want us to spend even more money we don't have. We're even worse than the Americans in some respects.
> 
> It's hard to know what to do. The RBA will continue undercutting savers by creating cheap credit out of thin air and ramping inflation. If interest rates were cut to 0% all the politicians and media pundits would rejoice, it's like Alice in Wonderland. Options are to cop it on the chin, speculate, or get out of the dollar.




Not wanting to speculate with my super and get out of the dollar into what ?
Have to cop it on the chin, I feel like I'm being forced into the share market and I dont like it, property will go backwards so not going there yet.

Sit on the fence and watch inflation hoping it wont go too high, I only pay 15% tax in super so it's not too bad.

I seriously think Wayne Swan is all but hopeless, no faith in him whatsoever, not that it's his fault but you like to think there's someone in charge who has a clue and he clearly hasn't.


----------



## Smurf1976 (6 November 2008)

xoa said:


> Japan manages to compete. Germany too. We used to. It's not that we can't, we don't want to.



Partly agreed but I'd argue that those two aren't so much competing in manufacturing per se. They're more about design and manufacture rather than just manufacture. Sure, we could do that here, but it requires a fundamental rethink of Australian manufacturing towards the production of finished consumer goods rather than refined metals etc since the latter is a bulk commodity with little opportunity for differentiation (though there are exceptions).


----------



## cuttlefish (6 November 2008)

MrBurns said:


> Not wanting to speculate with my super and get out of the dollar into what ?
> Have to cop it on the chin, I feel like I'm being forced into the share market and I dont like it, property will go backwards so not going there yet.




You could consider putting a small proportion into yen.

I think that with unfundable bank deposit guarantees and worldwide money printing and pump priming going on there's still a possible risk of further AUD devaluation and/or inflationary pressure at some point  (the latter seems unlikely at this point but who knows what the future will bring if the aus govt has to go to the printing presses).


----------

