How much debt do you have?

[Ageo]

The RBA haven't dropped trying to slow inflation, they have no concerns for high inflation anymore. They think the economic climate will regulate inflation itself.

Well im not sure what you mean but i thought when the money supply increases so does inflation? (i.e the purchasing power of your dollar becomes less). So if thats the case then how do you explain this?
http://www.rba.gov.au/Statistics/financial_aggregates.html

over the month of September, M3 grew by 1.4 per cent and broad money by 1.3 per cent. Over the year to September, broad money grew by 14.7 per cent.

You can also download the tables to clearly show the supply of money is continuing upwards? perhaps the RBA isnt concerned with inflation by i can tell you now im freaked out by it.

 

[chops_a_must]

Deflation is the global concern.

Which is why money supply is increasing, to try and counteract that.

 

[chops_a_must]

Curiously it's also sentiment contrary to what most people believe to be prudent right now. Since the majority usually get it wrong when it comes to investing does that make this the safer bet?

What about widespread deflation though?

By your logic, and the logic of the property bulls here, I might as well borrow as much as I possibly can, and buy as much gold as I can get my hands on, because inflation is the worry.

But I doubt the property bulls would consider that. Why not?

 

[Ageo]

Deflation is the global concern.

Which is why money supply is increasing, to try and counteract that.

Well whatever the reason i fear the day they contract that money supply because if they dont we will eventually risk hyperinflation (soon we might see stagflation).


A good article by Frank Shostak (and Aussie)
Speaks about consistent money levels

http://mises.org/story/3197

 

[nunthewiser]

What about widespread deflation though?

By your logic, and the logic of the property bulls here, I might as well borrow as much as I possibly can, and buy as much gold as I can get my hands on, because inflation is the worry.

But I doubt the property bulls would consider that. Why not?

nah you got it all wrong chops , the way of this recession due is ......

borrow as much as you can

buy as much gold as you can

dig the deepest hole that you can and bury said gold

go on dole , grow a mullet , become a bogan

claim bankruptcy

be viewed as a buisness mogul fallen on hard times



i hope this helps

 

[chops_a_must]

Hahahahahaa...

 

[Indie]

What about widespread deflation though?

I'm with you on this CAM.

So far there has been massive asset deflation in the stock market and it's now moving to the property market. It will move into the labour market soon too as unemployment rises. I've bet heavily on this by investing everything in YEN (mostly) and USD.

Inflation only works effectively when you couple printing with circulation. Although the printing presses are working overtime everywhere in the world, the mechanism used to distribute the money is broken, i.e banks. So the money isn't getting to the consumer. Also, credit is money is our financial system and the presses are not printing nearly enough to make up for the massive credit destruction taking place in the financial system. Central banks are cutting like crazy trying to re-inflate the economy but if the banks tighten lending and consumers are reluctant to loan then it makes no difference at all how much is printed. We are also in the process if re-regulating the world financial system as taxpayer money is used to re-capitalize banks. I can't see the same loose lending practices continuing under those conditions so that equals tighter money supply too. This is precisely why the government is not worried about inflation anymore. Any inflation that comes now will be as a direct result of the increased cost of foreign goods and capital due to the rapid depreciation of the AUD. Even this is likely to be minimal as slackening demand and rising inventories will drive down the price of commodities and goods until the bottom is reached and production is reset.

Those taking on debt to hedge against inflation in this environment are going to have their heads handed to them - IMO.

 

[arco]

Indie

How are you investing in Yen? (cash or?)

rgds - arco

 

[Indie]

Indie

How are you investing in Yen? (cash or?)

rgds - arco

I've never played the forex market so I simply have accounts with a bank (CBA) that are in YEN and USD and use cash. I have invested six figure sums so I get the wholesale rate when I convert. YEN attracts no interest, but the appreciation has been very good so far. USD attracts a small amount of interest. I just take a bit of profit now and then which is my philosophy when I invest in anything. Gotta keep increasing the living standard and enjoying life.

I'm opening a Interactive Brokers account to invest some more in YEN with leverage and I'm hoping to see a spike up in the AUD before I find a suitable entry point. However, I will probably only leverage 5/1 or so I can have some breathing space if the market turns against me temporarily and I need to wait for the tide to turn. Gotta watch the margin calls.

 

[Prospector]

The amount of debt you have is irrelevant; good debt and bad debt. All of our debt is good debt and can be written off. HECS debt is also good debt, because it educated you, although cant be written off and is very frustrating. Someone with no debt but rents is most likely worse off then someone who has a PPOR debt.

 

[prawn_86]

Someone with no debt but rents is most likely worse off then someone who has a PPOR debt.

lol, check the property threads for that hornets nest...

 

[Prospector]

lol, check the property threads for that hornets nest...

We did the number crunching on that maybe five years ago. And buying a house was just ahead. Renting in today's market is a nightmare; and it takes a very disciplined person to put the 'savings' from renting into a savings account and not spend it. It is indeed a hornet's nest!

 

[theasxgorilla]

What about widespread deflation though?

By your logic, and the logic of the property bulls here, I might as well borrow as much as I possibly can, and buy as much gold as I can get my hands on, because inflation is the worry.

But I doubt the property bulls would consider that. Why not?

I thought liquidity was the issue? And access to credit?

Central banks and govs have lowered interest rates and printed money because they're trying to address the above issues and would rather deal with inflation than deflation.

What makes you think they won't succeed?

 

[MRC & Co]

Well im not sure what you mean but i thought when the money supply increases so does inflation? (i.e the purchasing power of your dollar becomes less). So if thats the case then how do you explain this?
http://www.rba.gov.au/Statistics/financial_aggregates.html

Inflation is an increase in prices.

Do you need to increase the money supply for prices to increase? If crude becomes a scarce resource globally, will this increase the money supply in Australia?

I struggle to see how higher unemployment and a decrease in economic growth (disposible income included) are going to drive us to 'stagflation'..........unless of course the Chindia phenomenon can decouple from the Western world. Something highly unlikely from what is currently being seen IMHO.

An increase in the money supply obviously means there is more in circulation, which can be spent/invested etc to drive up prices. Doesn't necessarily mean they are going up if other forces are pushing them down. Inflation is no longer a worry I believe. The 'invisible hand' will regulate it on it's own.

 

[nunthewiser]

Indie

How are you investing in Yen? (cash or?)

rgds - arco

http://www.hsbc.com.au/1/2/personal/savings/multi-currency

worth a look

even earn intrest on the balance regardless of currency

tellem gero sent ya so i can collect my steak knives

 

[chops_a_must]

I thought liquidity was the issue? And access to credit?

Central banks and govs have lowered interest rates and printed money because they're trying to address the above issues and would rather deal with inflation than deflation.

What makes you think they won't succeed?

I don't think liquidity or access to credit is the issue. Solvency is.

They haven't succeeded thus far, and the markets certainly aren't worrying about inflation. Probably because no matter how much they print, it can't keep up with the de-leveraging.

 

[lioness]

I have 700K debts on 2 properties worth 1.8 million where the one negatively geared has 440K debt.

My partner and my income combined are 400K.

We have no credit card or personal loan debts.

I have 100K in shares also but don't wish to sell for capital loss situation.

Should I be worried?

 

[numbercruncher]

I have 700K debts on 2 properties worth 1.8 million where the one negatively geared has 440K debt.

My partner and my income combined are 400K.

We have no credit card or personal loan debts.

I have 100K in shares also but don't wish to sell for capital loss situation.

Should I be worried?

My tarot cards say you should be afraid, very , very afraid .....

They also say you should go to your GP for an immediate checkup ...

Goodluck !

 

[gav]

The amount of debt you have is irrelevant; good debt and bad debt. All of our debt is good debt and can be written off. HECS debt is also good debt, because it educated you, although cant be written off and is very frustrating. Someone with no debt but rents is most likely worse off then someone who has a PPOR debt.

Unfortunately, this is not always the case. My g/f spent 5yrs at Uni. After one year of finishing Uni cannot find a full time job that pays above minimum wage, and now has a HECS debt. At the moment she works 3 part time jobs on those low wages, but on weekends and evenings when the pay rate is a bit better. Now she has applied to go back to uni to study something that will give her more of a chance to get a job when she finishes. I never went to Uni, and on Monday I start a new job earning roughly double what she would if she accepted any of those full-time jobs (although I've been on minimum wage for nearly 2yrs now).

As for ppl renting saving less, I find it the complete opposite. Many people I know around my age on good incomes who have gone out and bought a house are not only struggling to meet the repayments, but they somehow manage to afford to buy expensive cr@p that will look pretty in their new house... (alot of the time its interest free from Harvey Norman) Even on minimum wage, I have still been able to put a little bit away each week. I am renting and find that I have more incentive to save, where as they think "well I have a house, I just need to meet the minimum payments and dont need to save"

I am not saying this is the case all the time, just the majority for ppl around my age that I know.

 

[gav]

My partner and my income combined are 400K.

Holy crap! May I ask what u do for a living?