# Sowing The Seeds Of A New Crisis



## wayneL (23 July 2009)

OK I'm in two minds whether this "recession" is starting to recover or whether it is going to get worse.

My firm opinion is that massive Keynesian stimulus to promote recover sets us up for the next Apocalypse. The healthiest thing for the future health is for gu'mints to butt the f~~~ out and let the market do its job. 

The free market has not failed, the market is trying to do what it's supposed to do. Gu'mint interference always has unintended consequences.

If stimulus works, it will be temporary and perpetuate a possibly even bigger crisis later, with severely damaged capacity for markets to recover (because of debt and high taxation).

An article in today's Citywire discusses:

http://www.citywire.co.uk/personal/...spx?ID=350485&re=6266&ea=199083&ViewFull=True



> Daily View: Consumer revival imminent - but beware the consequences
> By David Campbell | 09:04:49 | 22 July 2009
> *The seeds of the next financial crisis may already be growing, as banks around the globe report record profits, JP Morgan Euro Fledgling manager Francesco Conte has warned. *
> 
> ...




This ties in with my street level observations. The punters are wiping out their cards and spending on Chinese tat again.


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## MrBurns (23 July 2009)

*Re: Sewing The Seeds Of A New Crisis*

I agree no pain no gain and the stimulus packages may have worked temporarily, which is good enough for polititians, but they will lead to an even bigger fall in time BUT when ? People aware of this are finding it increasingly difficult to sit on their hands , money in the bank, is going backwards and all they talk about is that there is more scope to REDUCE rates further.
It's a tough time for those with cash.


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## trainspotter (23 July 2009)

*Re: Sewing The Seeds Of A New Crisis*

Agreed WayneL. We have created a false economy by the interference of the governments. The market should have been allowed to correct itself and if that meant that there was to be blood on the streets then so be it. Y generation has not had it tough. They have no clues as to what it is like to have to actually WORK for a living. The good times cannot keep on rolling on forever. I believe all we have achieved will evaporate even quicker next time with horrendous consequences. It wil be the mother of all train smashes and I hope I have prepared well enough to stay afloat when it comes. A 12 month recession? RBT leaving rates on hold? WTF? Where is the pain? How can we learn from our mistakes in such a short time? Boom and bust cycles are getting closer together and with greater financial consequences for the future. IMO.


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## MrBurns (23 July 2009)

*Re: Sewing The Seeds Of A New Crisis*

If you can pinpoint what's keeping it up at the moment it may help identify what going to bring it down, I figure the propertry market resi and commercial, which will put enormous pressure on the banks because it will be worse than if the stimulus hadn't been applied.


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## nunthewiser (23 July 2009)

*Re: Sewing The Seeds Of A New Crisis*

im still waiting for "the recession " to hit oz !

yes i can see  the poms and the yanks having one , but wheres our one ?

might have to ring the pope seeing as he apparently controls it all now


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## Mr J (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*



> Y generation has not had it tough. They have no clues as to what it is like to have to actually WORK for a living.




I wonder why there's a facination with criticising other generations. The Y generation has to work like any other. In fact, they're actually working more than other generations, since there are more employed in the workforce than in previous generations.


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## wayneL (24 July 2009)

Mea Culpa!

"Sewing" should in fact be "Sowing". 

(Thanks Timmy)


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## Buckeroo (24 July 2009)

wayneL said:


> OK I'm in two minds whether this "recession" is starting to recover or whether it is going to get worse.
> 
> My firm opinion is that massive Keynesian stimulus to promote recover sets us up for the next Apocalypse. The healthiest thing for the future health is for gu'mints to butt the f~~~ out and let the market do its job.
> 
> ...




Good post WayneL & couldn't agree more. Only thing is, I wish I knew when to start hoarding food & dig a hole to bury all my gold!!

Cheers


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## skyQuake (24 July 2009)

Buckeroo said:


> Good post WayneL & couldn't agree more. Only thing is, I wish I knew when to start hoarding food & dig a hole to bury all my gold!!
> 
> Cheers




Bury it now! That way the you are sowing the seeds of your gold tree now, giving it ample time to grow and blossom. Just give me the exact address where u buried it so i can umm... come help water it and stuff.


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## trainspotter (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mr J said:


> I wonder why there's a facination with criticising other generations. The Y generation has to work like any other. In fact, they're actually working more than other generations, since there are more employed in the workforce than in previous generations.




Thanks for pointing this one out Mr J. Their credos is marked thusly: "They want to work, but they don't want work to be their life." Gen Y is 1982 - 2000 by the way. I should have defined it by work ETHIC I guess.

The core values of the Builders and Boomers generations included solid values such as a strong work ethic, respect for authority, loyalty and commitment, financial conservatism, long-term planning, and delayed gratification. Of course many chose to reject these values however they are still culturally dominant. The values in vogue today are drastically different. IMO

It seems to me that when the Y Generation look back on themselves they will admire their lack of commitment to anything, zero respect for authority and pretty much everything I have written above will be opposite. And some also are studious and hard working etc. Notice I said "some" 

I have tried to employ several 18 to 25 year olds in the past and when they do decide to turn up to work it is a full time battle to get them "adjusted" into work mode. If I wanted a robot that I had to constantly program I would just get myself a microwave. The other thing is that they work for you for about 3 months and then advise you (not ask if they can) that they are going on holidays to Italy for a month. Classic. Or after 3 months they come into my office and demand a pay rise because they are now "Fully trained".

"NO, I am sorry to you but you canot be the CEO of this company, why? Well because you have to start off on the floor first and work your way up. This could take several years" Usually followed by the door hitting their @rse on the way out. Their choice not mine.

YES Mr J there are more Gen Y's in the workforce. Keeping them focused is another matter.


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## Sean K (24 July 2009)

Bigger crisis.

Perhaps major war.


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## malachii (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*



trainspotter said:


> The core values of the Builders and Boomers generations included solid values such as a strong work ethic, *respect for authority*, loyalty and commitment, financial conservatism, long-term planning, and delayed gratification. Of course many chose to reject these values however they are still culturally dominant. The values in vogue today are drastically different. IMO
> 
> It seems to me that when the Y Generation look back on themselves they will admire their lack of commitment to anything, *zero respect for authority* and pretty much everything I have written above will be opposite. And some also are studious and hard working etc. Notice I said "some"




Because the Baby Boomers were so well known for their respect for authority in the 60s and early 70s!!!

Sorry I dont agree.  Every generation goes through a rebellious, "I  want it now", "Up Yours" stage.  It's Gen Y's turn now - dont be jealous - your generation had their turn.

malachii

PS I'm Gen X.


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## gfresh (24 July 2009)

I tend to agree with trainspotter.. But then again, what is what is.

If this was a recession (for Australia) that has been and is going, then it is nothing.. I may have only been a teenager at the time, and not as experienced in some of the time, but at that age you tend to rememeber impressionable things, and the early 90's was definitely much harder than this. 

I think the lack of a hard recession in Australia, will be influencing the next into an air of invincibility, and a future bubble here, especially in housing. If there wasn't a bubble before in terms of income vs prices or whatever other measure, there sure will be in a few years time if left unchecked. 

Although this talk seems to be giving the air that the bears are capitulating.. surely not.


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## trainspotter (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*



malachii said:


> Because the Baby Boomers were so well known for their respect for authority in the 60s and early 70s!!!
> 
> Sorry I dont agree.  Every generation goes through a rebellious, "I  want it now", "Up Yours" stage.  It's Gen Y's turn now - dont be jealous - your generation had their turn.
> 
> ...




lol (small lol too) @ malachii. No need to be sorry. Sure there were rebelliousness with every generation previous. The times they were a changing. In the LIBERAL moral climate we find ourselves in a the moment there tends to be more slackers and not enough foot soldiers. 

Nothing to do with jealousy or being hypocritical of myself either. We have experienced a certain amount of rise and fall cycles, we have seen October '87 crash, we have felt oil companies strangle the supply, we have seen the darkside and are the better for it. 

Gen Y has NO IDEA of such matters. They have been borne into a land of milk and honey with nightingales droppig grapes onto the palms of their hands. (very soft hands I must say) In other words they have never EXPERIENCED the tough times. Nuffin to do with "Up yours" and "I want it now" ethos. "Ooohhh the boss didnt like my eyebrow pierced and the tattoo on my neck" they squeal ... Well if you are in the line of retail in the public eye in Myer, it was probably not a good idea to get this done. MAYBE OK if you work in a GOTHIC BONG SHOP.


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## malachii (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*

Trainspotter

I may have come across a bit strong - sorry for that because I actually agree with what you are saying - Gen Y have no experience in these things.  I guess my point was that if you talked to the War generation they would have had the same complaints about Baby Boomers.  They hadn't seen the Great Depression, no rationing from the war, they hadn't experienced the tough times.  I remember my Grandfather saying these things (and my mother still says them) about me (Gen X).  I agree - they seem a bit soft at the moment but I think I was too when I first left Uni and was expected to actually work at the bottom of the ladder for a while- SHOCK, HORROR!!  We need to just give them time to experience these things and come to the realization of what the world is actually about.  Some wont - but then again - I still occasionally see the odd (in every sense of the word!!) hippy getting around like it's still the 60s.  Some people never grow up!

malalchii


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## trainspotter (24 July 2009)

Thanks for the update. We are both on the same page. My gripe is that they are yet to experience a DOWNTURN. We have one now. We will see if they learn from the mistakes of our leaders. It has been so good for so long that they are not prepared nor do they have the first inkling of what is really going on.

ABSOLUTELY that previous generations bleat on how the "newbies" have never experienced a depression, war, financial crisis etc. The point being that this Gen Y we have on our hands are about to go through a world of PAIN. I just hope that they will take something of value out of the equation.


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## Ageo (24 July 2009)

wayneL said:


> OK I'm in two minds whether this "recession" is starting to recover or whether it is going to get worse.





Im in the same boat, looks like a fast (false?) recovery and people start jumping on the band wagon to not miss out on the supposedly boom then when all seems well another big bubble hits.

In the end you cant manipulate markets forever as the system will always try and reset itself.


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## Julia (24 July 2009)

malachii said:


> Trainspotter
> 
> I may have come across a bit strong - sorry for that because I actually agree with what you are saying - Gen Y have no experience in these things.  I guess my point was that if you talked to the War generation they would have had the same complaints about Baby Boomers.  They hadn't seen the Great Depression, no rationing from the war, they hadn't experienced the tough times.  I remember my Grandfather saying these things (and my mother still says them) about me (Gen X).  I agree - they seem a bit soft at the moment but I think I was too when I first left Uni and was expected to actually work at the bottom of the ladder for a while- SHOCK, HORROR!!  We need to just give them time to experience these things and come to the realization of what the world is actually about.  Some wont - but then again - I still occasionally see the odd (in every sense of the word!!) hippy getting around like it's still the 60s.  Some people never grow up!
> 
> malalchii



I don't think you came across too strongly, malalchii.
I doubt there has ever been a generation that didn't criticise the one or two that followed it.
Generalisations just don't make a lot of sense to me.


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## jonojpsg (24 July 2009)

So the questions for us, as the informed minority on ASF, are:

1.  How do we trade/invest over the coming months/years?  WHat signals do we keep our eyes on, as I keep beating myself over the head with the thread Immnent and Severe Market COrrection coming which I could and should have read and paid attention to but didn't!?  When do we short (and should we??)?  Do we buy gold?

2.  If the trigger is to be resi and comm property values decreasing, when will the banks actually admit to the values being lower and recognise that in their balance sheets and who is going to make them do that when the consequences of that are so serious?  As someone pointed out to me a while back, in Oz, the value of your house can decrease by 20% but the bank can't revalue it and demand that you pay up to bring your loan back to an acceptable LVR.  This only happens if you have to refinance.

Look forward to more on this.


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## cuttlefish (24 July 2009)

*Re: Sewing The Seeds Of A New Crisis*



trainspotter said:


> The core values of the Builders and Boomers generations included solid values such as a strong work ethic, respect for authority, loyalty and commitment, financial conservatism, long-term planning, and delayed gratification. Of course many chose to reject these values however they are still culturally dominant. The values in vogue today are drastically different. IMO




Yeah nobody ever sat around smoking pot and doing nothing but criticise the authorities in the 60's or 70's did they.     (sorry for OT to thread).


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## cuttlefish (24 July 2009)

lesson 1 ... read entire thread before replying to a post     I see my comments have already been made by others.


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## Timmy (24 July 2009)

With respect all, this thread has strayed from its intended subject into the generation gap debate.  It (the generation gap) is a lively topic and appears to be attracting interest ... but ... maybe not here?

There is a thread The kids of today..., where oldies can bitch about the youth of today and youngies can flip the bird to the oldies.  Can we take further generation gap debate over there if possible?


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## Bushman (24 July 2009)

jonojpsg said:


> 2.  If the trigger is to be resi and comm property values decreasing, when will the banks actually admit to the values being lower and recognise that in their balance sheets and who is going to make them do that when the consequences of that are so serious?




NAB just raised an additional $2b-odd to sure up its Tier 1. What more 'fessing do you need? The question in Australia is more will equity markets keep bailing them out? 

As for the US, comm property is the next shoe to drop. But with valuations already off by 30-50%, how much more do they have to fall? So maybe not a complete wipe-out. 

Who has been reading about the burgeoning carbon derivatives market? Some are calling it the next CDO with an expected exposure of $2-3trillion. If the Dems do not step in and regulate 'shadow banking' then there could well be another Lehman and a credit freeze. Regulatory risk is still there as far as I can see. 

B'ah hum bug brothers and sisters!!


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## Knobby22 (24 July 2009)

Well I'm going to disagree.

All the "pundits" Fox commentators and Austrian school-uber conservatives have shown that they have no clothes.

They have been wrong about the Keynsian stimulus which they said wouldn't work. Now it has worked they are saying it's going to get worse  (generally in 18 months time) and the system hasn't been cleaned out even though it obviously has had a great effect on many dodgy enterprises.

We would have gone into Depression if they had been listened to. 

Honestly, I don't know how anyone could think we should be going back to the gold standard in this day and age.

The aim now is to slowly tighten monetary policy, bring back regulations to ensure banks act responsibly and enforce them.

ps.  I was going to start this thread with the words "with respect" however it implies the opposite.


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## Timmy (24 July 2009)

Bushman, along this theme of banking regulation.  I think the Basle Committee on Bank Supervision is due to issue a report in October to suggest ways of tightening regulation on banks etc.  I am very hazy on the state of play with this, anyone who knows more please post it.

The reason I think this is important is one of the keys to Australia's relatively light scathing (at least so far) in the GFC and global recession is the regulation of the banks (APRA).  Obviously there are a lot of other factors, but banking oversight and regulation in Aus. have helped.  So I will be interested to see what sort of reforms are proposed for banking regulation and oversight in other Western countries.


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## Timmy (24 July 2009)

Knobby22 said:


> They have been wrong about the Keynsian stimulus which they said wouldn't work. Now it has worked they are saying it's going to get worse  (generally in 18 months time) and the system hasn't been cleaned out even though it obviously has had a great effect on many dodgy enterprises.




Yep.  I can't how see any responsible government could have done anything but implement a Keynesian response, as has been done.  Scorched earthists will be along soon to disagree.


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## cuttlefish (24 July 2009)

Focusing on Australia specifically, I agree with comments that so far Australia is yet to experience anything that I would liken to severe downturn. 

From my own empirical/subjective observations of whats going on around me in the street, the same patterns appear to be replaying and I can't see where truly productive new investment is occurring.   The housing market is being stimulated by the first home owners grant and low interest rates are encouraging more to take on debt.  In the meantime those that do own property are still redrawing to the limit of their most recent valuation to buy knick knacks (holidays, tv's, cars etc.).  The auto market has been stimulated by big tax exemptions.   How can this continue?  How can Australia continue to fund these 'subsidies' designed to 'stimulate' the economy without stimulating real productivity initiatives.  (I don't see roof insulation as quite fitting this goal either ).

In relation to the US they are generating enormous amounts of debt and again I can't see where real productivity is being created that will be able to service that debt over the long term.  

In the meantime I'd be assuming that the problems with auto makers etc. will be having a real and negative impact on their current productivity levels.   It would also appear that they may have to inject yet more capital into some of these institutions.  Surely at some point they will generate more debt than they can service through productivity, meaning that they will then have to monetise which will be inflationary.  

I don't have a good picture of where/what drives the bulk of US productivity - it sounds like the auto makers formed a significant enough part to have a big impact if they fail - but then again technology (apple, google, msoft, etc.) must mlso be an emerging influence - can these take the place of the other industries or can they modernise the other industries like auto so they can generate real productivity in a competivie global environment.

I still see a huge risk of the USD undergoing significant devaluation and a significant inflationary environment occuring inside the US - or alternately that their economy stagnates into a sort of semi-protected state with the USD possibly becoming regulated either officially or unofficially. This latter scenario could lead to some kind of free market currency substitute coming into play - whether or not thats gold or not is another matter but if the 'free market' surrounding the US dollar is eroded then some other free market benchmark will have to take its place.  (actually both scenario's would lead to lack of confidence in the USD and the emergence of some other global benchmark currency to take its place).


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## Uncle Festivus (24 July 2009)

Knobby22 said:


> Well I'm going to disagree.
> 
> All the "pundits" Fox commentators and Austrian school-uber conservatives have shown that they have no clothes.
> 
> ...




Has it worked? At what cost? Who pays for it? Who will lend the money eg Net Long-Term TIC Flows was neg $20B for May? As usual, the beer & skittles mob have very little factual data to back up their claims, other than hope & rhetoric based mostly on the opinions of people who have comprehensively gotten it wrong from the start. The starting point for enlightenment for anyone wanting to know the real facts can be found from the Wardens Of Liquidity & Debt themselves - 

http://research.stlouisfed.org/tips/alfred/index.html

Some nice parabolic curves to be found there, esp the debt one going off scale.



Timmy said:


> Yep. I can't how see any responsible government could have done anything but implement a Keynesian response, as has been done. Scorched earthists will be along soon to disagree.




An interesting concept - a responsible government? Yes, they have only done what they know how to do ie print money or expand the money supply to the banking system but have only succeeded in giving the equity markets a boost, which doesn't equate to economic salvation for the real economy; you know, the one where real humans have jobs and make things. Only problem is, all the making get's done in low wage countries now. China has been exporting wage deflation for several years now meaning that we have to lower our standard of living to compete with them, ie less discretionary cash, unless it's on credit - again.

There has been a temporary lift in discretionary spending due to lower rates, but when your freindly bank has to go to the open market to compete with the rest of the world, and central banks, then rates will rise, or as has been shown already they won't pass on any more RBA cut's.

The aim now is to know _when_ to tighten monetary policy, of which Bernanke & co have admitted they don't have a clue when that will be...Mr Market will do it for them....


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## Ageo (24 July 2009)

Knobby22 said:


> They have been wrong about the Keynsian stimulus which they said wouldn't work. Now it has worked




Has it worked or has it delayed the inevitable? 

Temporary fix's are not necessarily the solution to a problem.


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## Buckeroo (24 July 2009)

skyQuake said:


> Bury it now! That way the you are sowing the seeds of your gold tree now, giving it ample time to grow and blossom. Just give me the exact address where u buried it so i can umm... come help water it and stuff.




Aw, that would be swell - address is 2000 Miles Road, South Pole, Antarctica.


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## Buckeroo (24 July 2009)

Timmy said:


> With respect all, this thread has strayed from its intended subject into the generation gap debate.  It (the generation gap) is a lively topic and appears to be attracting interest ... but ... maybe not here?
> 
> There is a thread The kids of today..., where oldies can bitch about the youth of today and youngies can flip the bird to the oldies.  Can we take further generation gap debate over there if possible?




Are you baiting the argument Timmy?. 

Everyone knows the younger generations are sillier than a bird flying under water & the older generations think everyone that's younger, are sillier than a bird flying under water. Whats there to debate?

Cheers


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## Knobby22 (24 July 2009)

Ageo said:


> Has it worked or has it delayed the inevitable?
> 
> Temporary fix's are not necessarily the solution to a problem.




Hey but everyone said it wouldn't work.

If the facts don't match the expected reality then maybe the assumptions are wrong.


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## trainspotter (24 July 2009)

Don't want to be seen as nit picking BUT:-

Penguins are birds who lost the ability to fly millions of years ago. These birds are such good swimmers that they seem to fly along in the water. They are as graceful and swift underwater as other birds are in the air.

Also remember seeing a David Attenborough thingy where some sea going Gannett bird crashes into the water and flaps it's wings underwater to "fly" towards it's prey. Thought this might help.


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## Knobby22 (24 July 2009)

Uncle Festivus said:


> An interesting concept - a responsible government? Yes, they have only done what they know how to do ie print money or expand the money supply to the banking system but have only succeeded in giving the equity markets a boost, which doesn't equate to economic salvation for the real economy; you know, the one where real humans have jobs and make things. Only problem is, all the making get's done in low wage countries now. China has been exporting wage deflation for several years now meaning that we have to lower our standard of living to compete with them, ie less discretionary cash, unless it's on credit - again.





You are arguing at cross purposes, more people did keep their jobs.
Now what has to happen is that the governments become fiscally conservative and stop running deficits. I agree it would have been better if the USA and GBR hadn't run up huge debts before the cataclysm and instead had built up reserves as per Keynesian principles however the result is still good.

About China. We have been exporting to them our dirtiest industries and getting very cheap products in return. China will become a super power eventually, let natural economic forces develop. History shows our standard of living has been increasing in Australia. We didn't have incompetant government though.

And the crack about responsible government. Yes. Responsible. Not irresponsible like Bush was.


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## Buckeroo (24 July 2009)

jonojpsg said:


> So the questions for us, as the informed minority on ASF, are:
> 
> 1.  How do we trade/invest over the coming months/years?  WHat signals do we keep our eyes on, as I keep beating myself over the head with the thread Immnent and Severe Market COrrection coming which I could and should have read and paid attention to but didn't!?  When do we short (and should we??)?  Do we buy gold?
> 
> ...




Good questions Jonojpsg - its a dilemma for me as well

My strategy is still defensive although dabbling in the market. Property I'm wary of, unless I can jump in & out quickly for a profit. I'm keeping a good eye on the US, as I reckon a world collapse will start with a loss of confidence in America just as before.

I will probably be defensive until the CDO issues have been resolved & the economy can support itself without stimulus.

Cheers


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## cuttlefish (24 July 2009)

Knobby22 said:


> Hey but everyone said it wouldn't work.
> 
> If the facts don't match the expected reality then maybe the assumptions are wrong.





The facts aren't in yet imo.    As an analogy - if someone has three maxed out credit cards, then applies for a fourth with another institution and draws down on it to pay the interest off on the other three cards they can probably get by for quite a while before that one maxes out as well ... then they can apply for another though at some point the institutions will stop giving them credit.   (or maybe not ... thats sort of why we are where we are in the first place ...).

This is analagous to what the current governments appear to be doing to me - the government is going into budget deficit to create stimulation packages that encourage people to spend their money in a non-productive way.  

Where/how is the additional productivity needed to pay off this new govt debt (received by the govt in the form of taxes from productive tax payers) going to come from?  

Similarly if the banks keep lending for mal-investment (e.g. allowing consumers to redraw against inflating property valuations for discretionary non-productive and non-investment spending) then how does this help stimulate the productive investment needed to create the jobs to allow these people to continue to service this non-productive debt?


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## Buckeroo (24 July 2009)

trainspotter said:


> Don't want to be seen as nit picking BUT:-
> 
> Penguins are birds who lost the ability to fly millions of years ago. These birds are such good swimmers that they seem to fly along in the water. They are as graceful and swift underwater as other birds are in the air.
> 
> Also remember seeing a David Attenborough thingy where some sea going Gannett bird crashes into the water and flaps it's wings underwater to "fly" towards it's prey. Thought this might help.




Well, there you go, the younger generations aren't that silly after all

Cheers


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## grace (24 July 2009)

jonojpsg said:


> So the questions for us, as the informed minority on ASF, are:
> 
> As someone pointed out to me a while back, in Oz, the value of your house can decrease by 20% but the bank can't revalue it and demand that you pay up to bring your loan back to an acceptable LVR.  This only happens if you have to refinance.
> 
> Look forward to more on this.




I've read this here and there on ASF but is it actually the case?  I thought most mortgages had a "material change in circumstances" in there, which the Banks have certainly used in the past in commercial property in relation to a material change to the market.  I am told this happened in rural lending with deregulation of the Dairy Industry when there were no defaults on accounts, just a material change in equity due to market conditions at the time.  So, is it true that this doesn't exist in Residential mortgages??


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## Uncle Festivus (24 July 2009)

cuttlefish said:


> Similarly if the banks keep lending for mal-investment (e.g. allowing consumers to redraw against inflating property valuations for discretionary non-productive and non-investment spending) then how does this help stimulate the productive investment needed to create the jobs to allow these people to continue to service this non-productive debt?




That's the core of the problem yet some people still don't get it ie the problem(s) not fixed, only delayed?

Non Productive Debt!


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## Knobby22 (24 July 2009)

cuttlefish said:


> The facts aren't in yet imo.    As an analogy - if someone has three maxed out credit cards, then applies for a fourth with another institution and draws down on it to pay the interest off on the other three cards they can probably get by for quite a while before that one maxes out as well ... then they can apply for another though at some point the institutions will stop giving them credit.   (or maybe not ... thats sort of why we are where we are in the first place ...).
> 
> This is analagous to what the current governments appear to be doing to me - the government is going into budget deficit to create stimulation packages that encourage people to spend their money in a non-productive way.
> 
> ...




I see the stimulation as cushioning the bad effects which obviously had to happen. By this occurring we did not enter a Depression and in Australia we appear to have pretty much missed out on the recession.

I don't see how mass destruction of the economy helps productivity. We need micro economic reform, something that recent governments have been struggling to provide.

In the rest of the world the property correction has occurred. I agree Australia's property is still overpriced but I envisage it will be a slow correction i.e. sub inflation growth in property for the next 7 years.


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## prawn_86 (24 July 2009)

Uncle Festivus said:


> That's the core of the problem yet some people still don't get it ie the problem(s) not fixed, only delayed?
> 
> Non Productive Debt!




Yeh but at what point will it all come crashing down? Thats the big question.

Its all well and good to recognice the macro problems (i think most here on ASF do), but one cant invest solely based on the premise, as it may be generations before everything falls in a hole. Its like those that got out after a yr of the commodities boom (or missed out all together), and then sat just watching everything go up, constantly calling for a fall. They were right eventually, but at what opportunity cost?

I dont know the answer myself. Wish i did....


----------



## Uncle Festivus (24 July 2009)

prawn_86 said:


> Yeh but at what point will it all come crashing down? Thats the big question.
> 
> Its all well and good to recognice the macro problems (i think most here on ASF do), but one cant invest solely based on the premise, as it may be generations before everything falls in a hole. Its like those that got out after a yr of the commodities boom (or missed out all together), and then sat just watching everything go up, constantly calling for a fall. They were right eventually, but at what opportunity cost?
> 
> I dont know the answer myself. Wish i did....




The beauty of allowing for it is having a plan for it, without precluding from partaking in it? 

The point it all comes crashing down, in the USA's case, is when they can't service their debt through foreigners buying their bonds/treasuries. 10yr treasuries is the canary in the debt mine?


----------



## gfresh (24 July 2009)

Seems there is a lot of *what should be happening*, and *what is morally right* and *what may happen*.. I know I get caught up in that myself often, but unless you are a true revolutionary, the world is not going to change just because you think it should. Things so far are no different to what has been happening for the last 100+ years, greed, bubble, bust, boom, excessive debt, boys with the money and power protecting their mates. 

Some get burnt in these sort of major corrections, but most who had the power/money come out if it continuing to build their empires -- yes it's at the expense of others, and yes it's probably not right, but the world goes on, the wheel turns, and the cycles continue, just as they always have. Why would it stop now? The world has been through worse and survived, and it has come through last year and surived.. when is that time it does stop and the world is plunged into the next Dark Ages *Who knows*.. but on all probability it will continue, just as it has, maybe slightly changed, but the way it has always done in some general sense. Remain adaptive to whichever way things *are going* in short term increments.


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## Buckeroo (24 July 2009)

Knobby22 said:


> I see the stimulation as cushioning the bad effects which obviously had to happen. By this occurring we did not enter a Depression and in Australia we appear to have pretty much missed out on the recession.
> 
> I don't see how mass destruction of the economy helps productivity. We need micro economic reform, something that recent governments have been struggling to provide.
> 
> In the rest of the world the property correction has occurred. I agree Australia's property is still overpriced but I envisage it will be a slow correction i.e. sub inflation growth in property for the next 7 years.




Well, can you tell me then how our economy is going to now operate without stimulus. What's the extraction plan? More stimulus?

Cheers

P.S. Good topic WayneL - so much to say and so little time to act


----------



## beerwm (24 July 2009)

Buckeroo said:


> Well, can you tell me then how our economy is going to now operate without stimulus.




GFC struck.... people dont spend. fear

so stimulus.. government spends for you.

confidence improves... people spend.

[just filling the gap left by low confidence / who knows whether its worth 300 billion in debt - probably not]

- would of been a better policy to talk up our economy [ increase confidence/spending] - but Rudd's not too bright.


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## wayneL (24 July 2009)

Knobby22 said:


> I see the stimulation as cushioning the bad effects which obviously had to happen. By this occurring we did not enter a Depression and in Australia we appear to have pretty much missed out on the recession.
> 
> I don't see how mass destruction of the economy helps productivity. We need micro economic reform, something that recent governments have been struggling to provide.
> 
> In the rest of the world the property correction has occurred. I agree Australia's property is still overpriced but I envisage it will be a slow correction i.e. sub inflation growth in property for the next 7 years.




It's a bit rich to cast aspersions on the Austrians. They were the ones who foresaw the problems. All the Keynesians and Neo-Monetarists wouldn't accept that there were problems and had the childish temerity to openly scoff the Austrians.

Putting that aside for the moment, Austrian economics is not about mass destruction of the economy, it is about allowing destructive bubbles to deflate and free market based correction of idiotic malinvestment. 

The tech bust was a classic example of how it should happen. There was no mass destruction of properly productive elements in the economy.

Unfortunately, this time the underlying bubble happens to involve everyone's most important asset... their house. The malinvestment is not so much the item, rather, the price of the asset and the relative capital resources allocated to it. It's a credit/price bubble that has filtered out into everything else.

It should be allowed to pop.

However there are reasons why governments are so interested in propping this one up and it's to do with demographics unfunded welfare/pension obligations in the near future. 

Overinflated assets was the gu'mints (collectively) method of trying to deal with the demographics bomb that is due to start its chain reaction very soon.

The UK Labour government even made the asinine prediction that they'd abolished boom and bust. Such stupidity should be a capital offence.

Shame the Keynesian muppets didn't realise what the Austrians have known for since the economic Garden of Eden. That is, you cannot suspend the business cycle forever and you f~~~ with it at your peril.

Knobby, the "stimulus" (i.e. rob from future generations to prop up failing banks and asset speculators) may work for now. But it is to early to tell the ultimate outcome. A bottle of tequila will cure the DTs... temporarily. Ultimately an addiction, whether to alcohol or credit, has to be cured by some serious therapy.


----------



## Smurf1976 (24 July 2009)

The early 90's is still very firmly in my memory since, due to personal circumstances, it was somewhat as life changing event for me. 

What we've seen this time is NOTHING in comparisson - it's a bit of a dip which everyone from the office junior to the CEO seems to think will be over in a matter of months.

The fundamental psychology hasn't undergone the transition from boom to bust. Most still seem to think of the boom years as normal with a return almost here. Psychology normally changes drastically at true bottoms in the market or economy...


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## cuttlefish (24 July 2009)

Smurf1976 said:


> The fundamental psychology hasn't undergone the transition from boom to bust. Most still seem to think of the boom years as normal with a return almost here. Psychology normally changes drastically at true bottoms in the market or economy...




I think this is right - and true innovation and change comes out of this transition.  I can respect the arguments that the bust phase is not necessary and that it really is possible to acheive a readjustment into a new phase of growth while providing enough stimulus to cushion the economy from the truly destructive elements of full recession.  On the other hand I can't help feeling that the pendulum has to swing back and forth and the longer it swings one way the worse the swing the other way is going to be when it comes.


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## drsmith (24 July 2009)

Below is some discussion on durable goods manufacturing/non-durable goods manufacturing in the USA and how it's response to recessions has changed.

http://wallstreetpit.com/8781-fed-watch-the-debate-over-the-shape-of-the-rebound-continues


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## Glen48 (24 July 2009)

Most crash's occur in Sept/ October things are pointing in that direction the Dow could hit 10,000 before we see a massive downturn over the next few months.


----------



## Buckeroo (24 July 2009)

beerwm said:


> GFC struck.... people dont spend. fear
> 
> so stimulus.. government spends for you.
> 
> confidence improves... people spend.




Aha, yes if people could spend. But how are they going to do that when their taxes are increasing due to the deficit & interest rates are rising. Consumers will not have any disposable income to spend on goods & services.

So, we still have the question, how do we get back to having an unsupported economy?

Cheers


----------



## cuttlefish (24 July 2009)

I don't know if anyone's ever watched Bear Grylls in Man vs Wild .... but the way that the gov't's are injecting cash at the moment feels a lot like when he drinks his own urine to 'hydrate'.   That sort of approach really isn't gonna last forever - which means unless you have a broader achievable goal in mind, it might provide some short term relief, but its also pretty pointless.


----------



## Knobby22 (25 July 2009)

Buckeroo said:


> Well, can you tell me then how our economy is going to now operate without stimulus. What's the extraction plan? More stimulus?
> 
> Cheers
> 
> P.S. Good topic WayneL - so much to say and so little time to act




More savings. No more stimulus.


----------



## Sean K (25 July 2009)

Knobby22 said:


> More savings. No more stimulus.



What's the growth rate of this plan? 

Can modern humans do it?


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## trainspotter (25 July 2009)

Consumerism is the answer. Give the population $900 three times and all is fixed. No wait ... they tried this already. Did it work? Nope. Bigger debt and no clear business plan to trade their way out of negative territory.


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## Sean K (25 July 2009)

trainspotter said:


> Consumerism is the answer. Give the population $900 three times and all is fixed. No wait ... they tried this already. Did it work? Nope. Bigger debt and no clear business plan to trade their way out of negative territory.



Definately sowing the seeds for a much bigger crisis from all accounts. But, in the mean time ... make hay!


----------



## Knobby22 (25 July 2009)

wayneL said:


> It's a bit rich to cast aspersions on the Austrians. They were the ones who foresaw the problems. All the Keynesians and Neo-Monetarists wouldn't accept that there were problems and had the childish temerity to openly scoff the Austrians.
> 
> Putting that aside for the moment, Austrian economics is not about mass destruction of the economy, it is about allowing destructive bubbles to deflate and free market based correction of idiotic malinvestment.
> 
> ...




The Austrians always say doom is coming. If there predictions varied a bit I might have more respect. Follow this blog for others that have made the prediction.

http://www.debtdeflation.com/blogs/

Keynesians also agree with free market theory especially creative destruction. The difference is that Austrians believe that if no one touched anything, economies would enter an amazing nirvana of steady state of growth and everything is self correcting. Sort of a heaven on earth. This is despite history showing that it's rubbish.

Of course we need creative destruction, we just don't need a 15 year depression.

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.

In Keynes's theory, some micro-level actions of individuals and firms can lead to aggregate macroeconomic outcomes in which the economy operates below its potential output and growth. Austrian's believe in Say's Law, that supply creates its own demand, so that a "general glut" would therefore be impossible. Keynes contended that aggregate demand for goods might be insufficient during economic downturns, leading to unnecessarily high unemployment and losses of potential output. Keynes argued that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation.

Keynesians are more realistic. 
Because prices are sticky in the New Keynesian model, an increase in the money supply (or equivalently, a decrease in the interest rate) does increase output and lower unemployment in the short run.

Keynesian economists advocate using monetary policy for stabilization.

When the economy is hit by some unexpected external shock, it may be a good idea to offset the macroeconomic effects of the shock with monetary policy. This is especially true if the unexpected shock is one (like a fall in consumer confidence) which tends to lower both output and inflation; in that case, expanding the money supply (lowering interest rates) helps by increasing output while stabilizing inflation and inflationary expectations.

Keynsians also believe you should adjust the nominal interest rate in response to changes in inflation and output. 

In my words Keynsians treat an economy is more like a transistor. Without positive and negative fedbacks it will not operate in the "zone" and you will get distortian or even worse runaway.

House prices should be allowed to drop but massive wealth destruction that causes house prices to drop 95%, unemployment at 30%  and govenrments to topple with fascists and communists taking control with misery all around has been tried already. The imprtant thing is that governments do not continue the stimulus too long and pay back the debt asap. This may involve raising taxes to the wealthy in the short term. That is the reason Keynsians are hated by people such as Murdoch.


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## trainspotter (25 July 2009)

Current climate suggests hay crop has turned to chaff with the Govt assisting.


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## Knobby22 (25 July 2009)

trainspotter said:


> Consumerism is the answer. Give the population $900 three times and all is fixed. No wait ... they tried this already. Did it work? Nope. Bigger debt and no clear business plan to trade their way out of negative territory.




It did work! Now since we haven't got mass unemployment we can pay the debt off easily and not waste millions on unempolyment benefits and prisons and other problems caused by social unrest.


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## trainspotter (25 July 2009)

WHy would we have massive unemployment? Are you advising me that the $2700 was spent in shops to save the career paths of the minions who will be paying of the 315 billion debt/deficit we currently have? Admittedly it was only 43 billion in the cash splash. Last time I looked there were no marauding hordes causing social unrest? Pay it off easily??? Excuse me ???


----------



## Knobby22 (25 July 2009)

trainspotter said:


> WHy would we have massive unemployment? Are you advising me that the $2700 was spent in shops to save the career paths of the minions who will be paying of the 315 billion debt/deficit we currently have? Admittedly it was only 43 billion in the cash splash. Last time I looked there were no marauding hordes causing social unrest? Pay it off easily??? Excuse me ???




It made Australians more positive and kept them spending. 
Have a look at what's happened in other countries. 
As the revenues start flowing again, as long as the govmint doesn't keep lowering taxes but keeps things the same they will pay it off easily. 
Come back in 3 years.


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## trainspotter (25 July 2009)

*"The impact of this sharper downturn on government revenue certainly means a temporary deficit for a longer period of time because of this very sharp contraction in demand."* Treasurer Wayne Swan 

We are being told Australia will be in deficit for longer than first thought, with reports it could take up _to six years_ to return the economy to surplus.

Treasurer Wayne Swan has put it simply.

"The impact of this sharper downturn on government revenue certainly means a temporary deficit for a longer period of time because of this very sharp contraction in demand," Mr Swan told reporters in Canberra.

Hmmmmmm ... not nice Knobby22

PAY OFF 315 BILLION IN THREE YEARS?? Ummm ... nope ... try 20 years AT BEST. Do the math


----------



## Beej (25 July 2009)

> Originally Posted by jonojpsg
> 
> _As someone pointed out to me a while back, in Oz, the value of your house can decrease by 20% but the bank can't revalue it and demand that you pay up to bring your loan back to an acceptable LVR. This only happens if you have to refinance._






grace said:


> I've read this here and there on ASF but is it actually the case?  I thought most mortgages had a "material change in circumstances" in there, which the Banks have certainly used in the past in commercial property in relation to a material change to the market.  I am told this happened in rural lending with deregulation of the Dairy Industry when there were no defaults on accounts, just a material change in equity due to market conditions at the time.  So, is it true that this doesn't exist in Residential mortgages??




As explained in other threads on this topic, due to most residential mortgages being tightly regulated under the Consumer Credit Code, this cannot and will not happen in the residential space.

Cheers,

Beej


----------



## Uncle Festivus (25 July 2009)

wayneL said:


> *However there are reasons why governments are so interested in propping this one up and it's to do with demographics unfunded welfare/pension obligations in the near future. *





> Shanghai is actively promoting the two-child policy as China tries to defuse *a demographic time bomb* caused by a shortage of young workers after 30 years of tough population growth restrictions. The policy shift in the large coastal city marks the first time since 1979 that officials have actively encouraged parents to have more children. The city government is worried about the rapidly rising number of elderly people and the resulting burden and drag on the Chinese economy.






> Japan is the grayest country in the world, with 21.5 percent of its population 65 or over. Not only is the Japanese population aging, it's also shrinking, from 127 million today to a projected 89 million by 2055, the result of a plunging fertility rate. This unfortunate combination is causing the country to lose its edge and dynamism. Older workers are less innovative; older, more "mature" markets attract less investment. Older populations live off savings, rather than generating new capital. And, as the number of working-age citizens diminishes, pension funds will be exhausted and tax revenues and government budgets will be squeezed.
> The demographic transformation will in effect become a guillotine, cutting off policy options as Japan tries to deal with the needs of an elderly population






> India and China account for one third of the world's total population older than 65 years of age and issues related to population ageing in the two countries will be “accentuated'' in the coming decades, according to the latest report of National Institute of Aging.






> The long-term economic health of the United States is threatened by $53 trillion in government debts and liabilities that start to come due in four years when baby boomers begin to retire. The "Greatest Generation" and its baby-boom children have promised themselves benefits unprecedented in size and scope. Many leading economists say that even the world's most prosperous economy cannot fulfill these promises without a crushing increase in taxes ”” and perhaps not even then.
> 
> A USA TODAY analysis found that the nation's hidden debt ”” Americans' obligation today as taxpayers ”” is more than five times the $9.5 trillion they owe on mortgages, car loans, credit cards and other personal debt.
> This hidden debt equals $473,456 per household, dwarfing the $84,454 each household owes in personal debt.
> ...




abc


----------



## wayneL (25 July 2009)

Knobby22 said:


> The Austrians always say doom is coming. If there predictions varied a bit I might have more respect. Follow this blog for others that have made the prediction.
> 
> http://www.debtdeflation.com/blogs/
> 
> ...




Knobby,

You have a misunderstanding of Austrian theory ad have grossly misrepresented what Austrians say, even to the point of contradicting yourself.

Go and do some research so we can have a sensible discussion...

...until then.


----------



## trainspotter (25 July 2009)

Thanks Uncle Festivus. I wonder what our lousy $9,000 per man woman and child actually equates too in real terms once you factor in interest component and taxes? And this was prior to the budget prediction of 188 billion dollars. TWICE as much as Keatings catastrophe.

Mr Rudd was questioned several times on ABC1's Lateline before he put a figure on it - Australia's debt will peak at $300 billion. Nope ... according to the latest figures it is over 315 billion dollars and climbing. Not helping the Aussie dollar finished today just under 82 cents compared to USD. Balance of trade will plummet through the floor if it remains so high !

Oh my ... are they storm clouds on the horizon? Nope, just the interest amortising at an alarming rate.


----------



## Beej (26 July 2009)

trainspotter said:


> Thanks Uncle Festivus. I wonder what our lousy $9,000 per man woman and child actually equates too in real terms once you factor in interest component and taxes? And this was prior to the budget prediction of 188 billion dollars. TWICE as much as Keatings catastrophe.
> 
> Mr Rudd was questioned several times on ABC1's Lateline before he put a figure on it - Australia's debt will peak at $300 billion. Nope ... according to the latest figures it is over 315 billion dollars and climbing. Not helping the Aussie dollar finished today just under 82 cents compared to USD. Balance of trade will plummet through the floor if it remains so high !
> 
> Oh my ... are they storm clouds on the horizon? Nope, just the interest amortising at an alarming rate.




a) That $315B figure is an ESTIMATE of what the GROSS debt might be in 4 years time! There is something like $100B floating around in things like the future fund and other commonwealth government assets, so the net debt figure is projected to peak at a much lower number. Additionally the economic picture is now looking rosier meaning there is a chance that the projected debt figure will be revised down-wards due to more revenues and less expenditure on the dole act than has been estimated in those forward estimates.

b) So in terms of amortisation/interest payments etc, we are CURRENTLY paying SFA - so your last statement is actually wrong. In net terms the commonwealth at this point in time would still have zero net debt, and a gross debt in the order of < $50B.

Beej


----------



## trainspotter (26 July 2009)

Thanks for pointing this out to me Beej. Read it and weep. Kruddy himself has admitted it 300 BILLION DOLLARS. "Projected" or not. WHAT IF it is worse than their modelling? Also LESS revenues from tax dollars due to unemployment "Projected". Out of the mouths of babes.

http://www.abc.net.au/lateline/content/2008/s2574225.htm     .... in his own words.

The future fund is to protect the superannuation entitlements for ALL government employees and CAN NOT be used to pay of debt !!! WHAT other Govt assets have we left to sell??? Should it be used to pay off debt? Then what? We rent it back?

My last statement said "Oh my ... are they storm clouds on the horizon? Nope, just the interest amortising at an alarming rate."

This basically means the storm is on the horizon (It will be with us soon enough petal, just wait) AS in it is on it's way and the % is ticking. This is not my opinion by the way, I am repeating what Kevin Rudd has admitted for all to see. The 6000 word essay in the paper the other day predicting "DOOM AND GLOOM" aslo helped confirm my "unfounded" thesis. Pfffffffffffftttttttt !!!!!

*KEVIN RUDD: Well, Tony, there seems to be a political spin rule on your part to go back to this time and time again. The Treasurer made this absolutely plain in the Budget papers. I said before the figure was $300 (billion) as the Liberals' was $275 (billion). Add $22-billion of non supportive savings, they come to a similar figure. The key thing, though, is this - let me just add this point. This comes to some 13.8 per cent of GDP by the time it reaches its peak at around by 2313, 2014, and then comes down to something like 3 per cent of GDP across the decade.*


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## MrBurns (26 July 2009)

Beej said:


> As explained in other threads on this topic, due to most residential mortgages being tightly regulated under the Consumer Credit Code, this cannot and will not happen in the residential space.
> 
> Cheers,
> 
> Beej




This will only happen if the borrower starts to default, the issue of negative equity will only be raised if the borrower has supplied other assets as collateral then the bank might move in to cover ther backside before it gets worse.

There no point calling in a mortgage with negative equity if the payments are still being made, the bank only crystallizes their loss.


----------



## MrBurns (26 July 2009)

trainspotter said:


> Thanks for pointing this out to me Beej. Read it and weep. Kruddy himself has admitted it 300 BILLION DOLLARS. "Projected" or not. WHAT IF it is worse than their modelling? Also LESS revenues from tax dollars due to unemployment "Projected". Out of the mouths of babes.
> 
> http://www.abc.net.au/lateline/content/2008/s2574225.htm     .... in his own words.
> 
> ...




The party has to end sometime, there is no such thing as a free lunch, we cannot avoid what has happened elsewhere and so on and so on, it's all true but it's taking it's sweet time as Rudd puts off, and compounds the gravity of, the day of reckoning to suit his political timetable.


----------



## Uncle Festivus (6 August 2009)

This is only relevant in the context that China has been promoted as the bright beacon of hope leading the world out of recession, but at what cost? The implications for Australia are already showing up as surpluses of commodities, both in LME stockpiles and on the ground in China. 

And this from a China bull?



> An unprecedented external demand shock, stemming from rare synchronous recessions in the developed world, devastated the export-led Chinese growth machine. That triggered sackings of more than 20m migrant workers in export-intensive Guangdong province. Long fixated on social stability, Beijing moved to arrest this deterioration. The government was determined to do whatever it took to restore rapid growth.
> 
> Yet there can be no avoiding the destabilising consequences of these actions. Surging investment accounted for an unprecedented 88 per cent of Chinese GDP growth in the first half of 2009 - double the average contribution of 43 per cent over the past decade. At the same time, the quality of Chinese bank lending most assuredly suffered from the rash of credit disbursements in the first half of this year - a trend that could sow the seeds for a new wave of non-performing bank loans. Just this week, Chinese regulators told banks that new loans must be used to bolster the real economy and not for speculation in equities and real estate.



http://www.ft.com/cms/s/0/42d38b2c-7bd6-11de-9772-00144feabdc0.html?nclick_check=1


----------



## Buckeroo (6 August 2009)

Uncle Festivus said:


> And this from a China bull?




Well, that's what you get when you have a Bull in a China shop?

Cheers

Ian


----------



## Mofra (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



trainspotter said:


> Gen Y has NO IDEA of such matters. They have been borne into a land of milk and honey with nightingales droppig grapes onto the palms of their hands. (very soft hands I must say) In other words they have never EXPERIENCED the tough times. Nuffin to do with "Up yours" and "I want it now" ethos. "Ooohhh the boss didnt like my eyebrow pierced and the tattoo on my neck" they squeal ... Well if you are in the line of retail in the public eye in Myer, it was probably not a good idea to get this done. MAYBE OK if you work in a GOTHIC BONG SHOP.



Nah, no generalisations there at all 

What with their cheap housing, free university and low unemployment rates, they...

...oh wait, that wasn't gen Y at all.

Back to case in point, it may not be as simple as picking the next economic crisis if governments worldwide have set the precedent for direct intervention and heightened regulation at the first sign of trouble. In the war for hearts and minds the Keynesians may not just have won the recession this time.


----------



## knocker (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mofra said:


> Nah, no generalisations there at all
> 
> What with their cheap housing, free university and low unemployment rates, they...
> 
> ...




Yes I recall the free education, however that was late eighties early nineties, full blown recession. Also you had to work hard to get there, none of this buying a degree ****. Gen Y are the biggest bunch of self indulged shirkers. All they are interested in is blowing the dole on tattoos drugs and mobile phones.


----------



## Mofra (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



knocker said:


> Yes I recall the free education, however that was late eighties early nineties, full blown recession. Also you had to work hard to get there, none of this buying a degree ****. Gen Y are the biggest bunch of self indulged shirkers. All they are interested in is blowing the dole on tattoos drugs and mobile phones.



Ah late 80s & 90s = HECS era, no freebies (unlike the Baby Boomers, the most lazy, self-indulgent pack of slack whiners this fair land has ever produced).

If only people could act a little more like those wonderful gen X types - the happy medium, and quite handsome lot to boot 

Might have to watch what you say the gen Y's though - not nice to upset the people who may choose your nursing home


----------



## knocker (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mofra said:


> Ah late 80s & 90s = HECS era, no freebies (unlike the Baby Boomers, the most lazy, self-indulgent pack of slack whiners this fair land has ever produced).
> 
> If only people could act a little more like those wonderful gen X types - the happy medium, and quite handsome lot to boot
> 
> Might have to watch what you say the gen Y's though - not nice to upset the people who may choose your nursing home




Um no. From recollection Hecs came in 1990. I completed my degree 1988 and honors 1989. All free. And I doubt any gen y will choose my nursing home lol In fact I reckon most gen X will be outliving gen y  unfortunately. lol


----------



## Mr J (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



knocker said:


> Gen Y are the biggest bunch of self indulged shirkers. All they are interested in is blowing the dole on tattoos drugs and mobile phones.




How's the nursing home going?


----------



## Buckeroo (6 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mofra said:


> Ah late 80s & 90s = HECS era, no freebies (unlike the Baby Boomers, the most lazy, self-indulgent pack of slack whiners this fair land has ever produced).
> 
> If only people could act a little more like those wonderful gen X types - the happy medium, and quite handsome lot to boot
> 
> Might have to watch what you say the gen Y's though - not nice to upset the people who may choose your nursing home




Wow, you have much to learn grasshopper and that silver platter of yours will soon be empty.

Cheers


----------



## wayneL (17 August 2009)

Stumbled across this again today and figured this is as good a place as any to stick it (maybe it should be in the politics thread:

Abraham Lincoln's greatest ever quote that Lincoln didn't actually say:



> You cannot bring about prosperity by discouraging thrift.
> You cannot strengthen the weak by weakening the strong
> You cannot help the poor man by destroying the rich.
> You cannot further the brotherhood of man by inciting class hatred.
> ...




(They were written in 1916 by the Rev. William J. H. Boetcker and popularly attributed to Lincoln because they were alongside a bona-fide Lincoln quote)


----------



## stocksontheblock (17 August 2009)

Uncle Festivus said:


> Has it worked? At what cost? Who pays for it? Who will lend the money eg Net Long-Term TIC Flows was neg $20B for May? As usual, the beer & skittles mob have very little factual data to back up their claims, other than hope & rhetoric based mostly on the opinions of people who have comprehensively gotten it wrong from the start. The starting point for enlightenment for anyone wanting to know the real facts can be found from the Wardens Of Liquidity & Debt themselves -




I've just picked up on this topic, and with so much to make comment for/against, I have to first ask of UF to detail the "at what cost?" part.

I would be very keen to know his thoughts on the cost factor. I know you dont simply mean cost as in money, yet if the Gov't stimulus has a price on its head, then what would have been the price should the market's of been left to their own devices. Are you suggesting the price would be less?

For the record, I understand all theory and what it means for both sides, yet I am trying to understand, for instance, peoples thoughts on what the price will be (stimulus) and would have been (markets).


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## Mofra (18 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Buckeroo said:


> Wow, you have much to learn grasshopper and that silver platter of yours will soon be empty.



Yep, real silver platter growing up in a shoebox in Melborune's West & joining the armed forces at 18. Feel sorry for the private schoolkids who never had the luxuries I enjoyed.


Back on topic - does anyone else find it a little scary that Wayne Swan is forecasting 6 years ahead (in terms of how long it will take to bring the budget back to surplus) when most market commentators don't put much faith in any treasury forecast longer than 2 years ahead? 
Exactly how much faith should we be placing in the economic leaders of this government?


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## Ageo (18 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mofra said:


> Exactly how much faith should we be placing in the economic leaders of this government?




If you want my truthful answer its.....................................


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## trainspotter (18 August 2009)

Naaaaaaaaahhhhhhh ....... I'm not worried at all. They have it totally under control and are the best thing that has ever happened to this country. I am glad the Labor Governement has spent all this money to save Australia from "recession".


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## Aussiejeff (18 August 2009)

*Re: Sewing The Seeds Of A New Crisis*



Mofra said:


> Yep, real silver platter growing up in a shoebox in Melborune's West & joining the armed forces at 18. Feel sorry for the private schoolkids who never had the luxuries I enjoyed.
> 
> 
> Back on topic - does anyone else find it a little scary that Wayne Swan is forecasting 6 years ahead (in terms of how long it will take to bring the budget back to surplus) when most market commentators *[size=+1]don't put much faith in any treasury forecast longer than 2 years ahead?[/size]*
> Exactly how much faith should we be placing in the economic leaders of this government?




Strewth!

Atm 2 days seems too far ahead!!!


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## Temjin (19 August 2009)

wayneL said:


> Stumbled across this again today and figured this is as good a place as any to stick it (maybe it should be in the politics thread:
> 
> Abraham Lincoln's greatest ever quote that Lincoln didn't actually say:
> 
> ...




What??? So you are telling me that there is no such thing as free lunch, that is despite what the mainstream economists say so with their monetary policies and stimulus packages that are based on their broken window glass fallacy?? 

P.S: btw, great quotes there. Not surprisingly, no one learnt anything from that quote, or rather, denial it, citing this is a new economy and old wisdom do not necessary matters anymore.


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## Uncle Festivus (19 August 2009)

stocksontheblock said:


> I've just picked up on this topic, and with so much to make comment for/against, I have to first ask of UF to detail the "at what cost?" part.
> 
> I would be very keen to know his thoughts on the cost factor. I know you dont simply mean cost as in money, yet if the Gov't stimulus has a price on its head, then what would have been the price should the market's of been left to their own devices. Are you suggesting the price would be less?
> 
> For the record, I understand all theory and what it means for both sides, yet I am trying to understand, for instance, peoples thoughts on what the price will be (stimulus) and would have been (markets).




There wouldn't have been a 'cost' if 'they' didn't meddle in the markets in the first place. Although the moral hazard problem can be traced back a couple of decades now, it only really took hold during/after the tech bubble bail out of Greenspan and rates too low for too long mistake.

The argument of 'too big to fail' is a con - it was really 'too much to lose' by corporates with their collective snouts in the derivatives trough.

As in the thread title, all that it's done is sow the seeds of a new crisis somewhere down the track,  for someone else to deal with, while the vested interests make a buck on the way out/down? I won't be paying for it.


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## prawn_86 (19 August 2009)

Uncle Festivus said:


> I won't be paying for it.




How do you plan to avoid this? Arnt you already payng for it through your taxes?


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## Buckeroo (19 August 2009)

prawn_86 said:


> How do you plan to avoid this? Arnt you already payng for it through your taxes?




The Liberals have a new plan for paying off the debt - they are going to find out who voted for the Labor party & increase only their taxes. If they can't pay, then they'll take it out of their hides!!

Cheers


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## trainspotter (19 August 2009)

I was just wondering about the RBA's stance on interest rates and Glenn Stevens says that one of the reasons for interest rates to rise back to "normal" levels is that unemployment was set to rise to 8.5%. AS it appears that unemployment is now ranging around the 7% mark it might be necesarry for rates to increase (his philosophy not mine) So the stats that I have seen is that employers have decided to cut back hours on their staff instead of sacking them and the "work for the dole" scheme is really a "job" for 10,000 recipients ... is this purely statisitcal manipulation at it's best? Most people I know are hanging on by their fingernails and could not afford an increase in rates of any sort.

Another thing .... if rates are sert at 4.25%, why are people paying 17.25% on their credit card? Why are we not up in arms over this infraction? :eek


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## Uncle Festivus (20 August 2009)

prawn_86 said:


> How do you plan to avoid this? Arnt you already payng for it through your taxes?




I plan to buy 10 negatively geared investment properties when the market crashes and pay no tax at all


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## Mofra (20 August 2009)

Uncle Festivus said:


> I plan to buy 10 negatively geared investment properties when the market crashes and pay no tax at all



Stamp duties lead a chorus of "guddays"


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## boofhead (20 August 2009)

trainspotter said:


> Another thing .... if rates are sert at 4.25%, why are people paying 17.25% on their credit card? Why are we not up in arms over this infraction? :eek




Two things. One exercise would be to trace the source of the funds the c/c companies use. I don't know that answer. A higher interest rate should be an incentive to not use debt so much. Economic history has some interesting stories about too much debt.

Second point is people should probably save more money instead of using debt or using less debt and delaying some purchases. This would have a negative for the economy but could take a little sting out of inflation. Remember the Chinese and their power of savings enables them to capitalise on world economic downturns. I'm sure many people have made some healthy returns in the stock market trading in the last 6 months.

To the main topic - yes Labor has drastically increased debt levels but I'm sure those in the industries it propped up are happy to hold on to their jobs. The Coalition had some policies that helped to increase the fuel for the bushfire that is the GFC. It helped fuel inflation. It expended plenty on projects that didn't really have much positive long term effect. They should have kept more for a rainy day. I guess they knew that putting more money in the hands of the majority of voters, the same people that spend most of their money they buy votes.


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## Mofra (20 August 2009)

trainspotter said:


> Another thing .... if rates are sert at 4.25%, why are people paying 17.25% on their credit card? Why are we not up in arms over this infraction? :eek



a.  Credit Card write offs are horrendous; cost of funds including delinquencies is higher than almost any other credit cost
b.  The people most likely to be paying interest on their Credit Cards are those who have the lowest levels of financial literacy
c.  The banks can get away with it
d.  I'm holding bank shares so shaddup :

In any case, store cards & buy now, pay later schemes are much worse (barely a step below payday lenders). Their rates can be up to 36%, and if there is $1 left of the balance at the end of the interest free period, often the _entire amount of the maximum interest payable on the whole purchase amount is applied retrospecively_.


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## Uncle Festivus (23 December 2009)

Phew, that was close, we nearly had an Global Economic Crisis, but thanks to the man of the year and shiploads of money, the end of the world has been averted. Now we can all get some sleep. Pity about Ireland UK, Greece, Japan and a few other insignificant countries having to forego future payments for ealth and retirement funds, which are tens of billions, trillions in some cases, in deficit.....



> Britain’s largest private pension schemes are more than £100 billion in    deficit for the first time, it was disclosed yesterday.
> 
> The 200 schemes include the pensions of some the country’s best known    companies, such as British Airways, Shell and BT.
> 
> ...



Now, over in the parallel universe, the real economy, ie the one where you strip out government subsidies and stimulis schemes etc, the next leg of the global depression is about to start in earnest - possibly several measures worse than the preview we have just had?



> *The contraction of bank lending and the M3 money supply in the US and Europe    over recent months has become a serious concern and raises the risk of a    slide back into recession, according to one of Britain's most celebrated    economists. *
> 
> Professor Charles Goodhart, a former top official at the Bank of England now    at the London School of Economics, said policymakers have neglected the    flashing danger signal of the monetary data.
> "What has happened to all the monetarists? Growth in money holdings and    lending has plummeted. Thirty, or 40, years ago they would have been    forewarning doom and destruction at this juncture, and casting anathemas at    the authorities," he wrote in a consultant report for Morgan Stanley.
> ...





> *Fitch Ratings has given its bluntest warning to date that Britain and France    risk losing their AAA status unless they map out a clear path to budget    discipline over the next year.  *
> 
> Public debt in both Britain and France will reach 90pc of GDP by 2011, higher    than the 80pc (net) level when Japan lost its AAA rating earlier this    decade.
> 
> http://www.telegraph.co.uk/finance/...-and-France-risk-losing-their-AAA-rating.html


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## Uncle Festivus (28 January 2011)

> Japan’s credit rating was lowered to AA- as persistent deflation and political gridlock undermined efforts to reduce a 943 trillion yen ($11 trillion) debt burden.
> Bond futures fell on concern the downgrade will push up the cost of borrowing for Japan, where public debt is about twice the size of gross domestic product. Vice Finance Minister Fumihiko Igarashi said this week the government must fix its finances to avoid a debt crisis that could trigger a “global depression.”



And the US & the UK are in better economic condition to not be downgraded also?



> Will we look back at 2010 and 2011 as the period when we planted the seeds of the next financial crisis?



Story


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## wayneL (8 August 2011)

wayneL said:
			
		

> OK I'm in two minds whether this "recession" is starting to recover or whether it is going to get worse.
> 
> My firm opinion is that massive Keynesian stimulus to promote recover sets us up for the next Apocalypse. The healthiest thing for the future health is for gu'mints to butt the f~~~ out and let the market do its job.
> 
> ...




Just for s#1ts and giggles, I thought I'd bump this thread to see who was in fairyland and who had their head screwed on.


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## Gringotts Bank (8 August 2011)

To compare the vibe back in 2008 to now, there's a massive difference.  
In 2008 it was fear, panic.
Now there's some sense of doom and inevitability.  People realise that no amount of financial bail outs, paper shuffling or deal-making will fix things.  Why?  Because such things aren't real!  Paper shuffling is not real!  

Australia is unbelievably well-placed, however.  There was mention of this in the Wall St Journal on the weekend, just can't find the link.


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## Junior (8 August 2011)

Australia is well placed, insofar as we are resource and agriculture rich.  

IMO the biggest danger is that china crashes, commodity prices plummet, and the Aus govnt make the same mistakes as EU/US by bailing out banks, providing stimulus, dropping int. rates too far etc. which, as we know, means you end up with a high level of public debt and ongoing budget deficits.

Our housing market and level of private debt is too high, and I hope the govnt allows this to be consolidated and reduced over the coming years, rather than simply replacing out with public debt.


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## Gringotts Bank (8 August 2011)

Junior,

I don't think china will crash soon, because it has too much positive momentum.  I figure china crashing will happen 2012/2013.  By that time we will have begun transforming Australia into a clean energy economy with world-beating technology to boot.  We will be the envy of all nations.  I honestly believe that.  No spin.


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## wayneL (8 August 2011)

Gringotts Bank said:


> To compare the vibe back in 2008 to now, there's a massive difference.
> In 2008 it was fear, panic.
> Now there's some sense of doom and inevitability.  People realise that no amount of financial bail outs, paper shuffling or deal-making will fix things.  Why?  Because such things aren't real!  Paper shuffling is not real!
> 
> Australia is unbelievably well-placed, however.  There was mention of this in the Wall St Journal on the weekend, just can't find the link.




"Vibe"... hahah yes. But what has changed fundamentally since then... apart from vastly increased fiat and a few things around the edges with BS derivatives?

Maybe the realization that Helicopter Ben et al don't have a magic wand, never have and never will. The business cycle prevails eventually, the depth and length of which is decided by really ####ing dumb decisions to delay the inevitable.

This whole fiasco has been an exercise in keeping up appearances, a farce of monumental scale that even Mrs Bucket couldn't have screwed up worse.

The Austrians were right all along, yet will get no recognition for it.

"Australia is unbelievably well-placed" - I agree it is unbelievable : Relatively well placed might be a better description, but Oz will not escape The Grapes of Wrath IMO.


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## wayneL (8 August 2011)

Gringotts Bank said:


> Junior,
> 
> I don't think china will crash soon, because it has too much positive momentum.  I figure china crashing will happen 2012/2013.  By that time we will have begun transforming Australia into a clean energy economy with world-beating technology to boot.  We will be the envy of all nations.  I honestly believe that.  No spin.




I have marked this post on my calendar and will be back in 2013 for your comments.


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## sptrawler (8 August 2011)

Well if this takes hold in the U.S. you can forget your clean energy, it will be new L.C.D t.v's all round to replace the plasmas and would you like roof insulation with that. LOL

http://www.nytimes.com/2011/08/08/b...ca-over-mortgage-bonds.html?_r=1&ref=business


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