Inflation

sptrawler · 22 January 2022

over9k said:
The RBA has created a debt and housing bubble leviathan that will take a great depression style event to undo.

Only on the East Coast, specifically Sydney/ Melbourne and if interest rates do take off, it will only be the ponzi members in Sydney/Melbourne who will bear the brunt of it.
Australia doesn't need a great depression, only 10 million people live in Sydney/ Melbourne, how many of those are in debt upto their eyeballs and how many of them will default?
It isn't a disaster, it is a localised wealth redistribution, for everyone who can't afford the payments, there will be someone who picks up a bargain on the mortgagee sale, no point being emotional that's the way life is when investing.

againsthegrain · 22 January 2022

sptrawler said:
Only on the East Coast, specifically Sydney/ Melbourne and if interest rates do take off, it will only be the ponzi members in Sydney/Melbourne who will bear the brunt of it.
Australia doesn't need a great depression, only 10 million people live in Sydney/ Melbourne, how many of those are in debt upto their eyeballs and how many of them will default?

Once the fed raises rates we can take example from Turkey what happens to the currency if we don't follow, somebody will get screwed over either way

sptrawler · 22 January 2022

againsthegrain said:
Once the fed raises rates we can take example from Turkey what happens to the currency if we don't follow, somebody will get screwed over either way

We will still be digging up minerals and shipping them, whether the people in Sydney/Melbourne lose their house or not, means zip to the big picture.
Sad but a fact, no different to margin calls that wipe people out, it's just a margin call on your house, the house doesn't produce anything it just provides shelter for your $hit.
Reality has to hit eventually, it's just a matter of when.

over9k · 22 January 2022

sptrawler said:
Only on the East Coast, specifically Sydney/ Melbourne and if interest rates do take off, it will only be the ponzi members in Sydney/Melbourne who will bear the brunt of it.
Australia doesn't need a great depression, only 10 million people live in Sydney/ Melbourne, how many of those are in debt upto their eyeballs and how many of them will default?
It isn't a disaster, it is a localised wealth redistribution, for everyone who can't afford the payments, there will be someone who picks up a bargain on the mortgagee sale, no point being emotional that's the way life is when investing.

Nah, not with you here trawler, it might be worst in the biggest cities but it's still bad elsewhere. Maybe not AS bad, but still bad.

over9k · 22 January 2022

JohnDe said:
It takes more than just one organisation to do that.

Federal governments from the past 20 years have been spending like there is no tomorrow, and then the State governments got involved, I am still flabbergasted with East West Link: Cost of scrapping project more than $1.1 billion
And lets not forget us the citizens that like to mortgage their home for more than it's worth so they can buy a new car and boat. Or the second mortgage for the holiday home with pool and gourmet kitchen.

Everyone is at fault here, just like all great recessions and depressions.

When a flood is coming nothing can stop it, measures can be put in place to slow it and to minimise damage and protect critical infrastructure but that is all. That is what most Reserve Banks have been doing, protecting the critical parts of the economy and minimizing the harm to the people.

The Reserve Bank of Australia (RBA) is Australia's central bank and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by conducting monetary policy to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation's banknotes.

The RBA provides certain banking services as required to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia's gold and foreign exchange reserves.

About the RBA

Overview of Functions and Operations; History of the RBA; Governance and Accountability of the RBA; Structure of the RBA; Reserve Bank Act 1959; Freedom of Information; Archives; International Financial Sanctions and Cash Reporting

www.rba.gov.au

Agreed, but the RBA has contributed massively through running on the official stats mandate. As soon as the politicians fudge the numbers, appropriate policy goes out the window.

There's no way they didn't know better (what the politicians have been up to). No way.

sptrawler · 22 January 2022

over9k said:
Nah, not with you here trawler, it might be worst in the biggest cities but it's still bad elsewhere. Maybe not AS bad, but still bad.

At the end of the day it is a house, it isnt making any export dollars, it isnt puttiing goods in stores, it does nothing but absorb money.
The banks will get a hit if prices fall below book value, shares will get a hit as people dump their portfolios to save their house, but I think you really dwell on it way too much, life goes on look at the U.S 10 years after the subprime disaster.
We will be but a small speed bump that wont even register on a World scale.
There will be some once in a lifetime bargains though, as it will be one of the once in lifetime events that happen evey 7 to 10 years IMO. Lol

divs4ever · 22 January 2022

over9k said:
Agreed, but the RBA has contributed massively through running on the official stats mandate. As soon as the politicians fudge the numbers, appropriate policy goes out the window.

There's no way they didn't know better (what the politicians have been up to). No way.

the numbers in certain areas have been fudged for decades at least since 1990 in one important department so i suspect the fudging is elsewhere as well and maybe continuing in selected areas

however it only takes a little observation to see how the masses are really doing ( those who overspend those who MIGHT be maintaining a balanced budget ) a second hint can be seen in the shopping malls , a less easy assessment is the industrial properties

remember all these sectors are interconnected , even in a resource driven economy like Australia

divs4ever · 22 January 2022

sptrawler said:
At the end of the day it is a house, it isnt making any export dollars, it isnt puttiing goods in stores, it does nothing but absorb money.
The banks will get a hit if prices fall below book value, shares will get a hit as people dump their portfolios to save their house, but I think you really dwell on it way too much, life goes on look at the U.S 10 years after the subprime disaster.
We will be but a small speed bump that wont even register on a World scale.
There will be some once in a lifetime bargains though, as it will be one of the once in lifetime events that happen evey 7 to 10 years IMO. Lol

it does create employment and demand , but yes i mostly agree even allowing some houses will be used for short term migrants ( like international students ) now you might have to dig deep for the data but i suspect the sub-prime disaster is still bubbling along underneath with SOME still trying to pay out that mortgage , although i suspect others would have sold into the bubble ( much to the relief of smaller banks)

divs4ever · 22 January 2022

over9k said:
Nah, not with you here trawler, it might be worst in the biggest cities but it's still bad elsewhere. Maybe not AS bad, but still bad.

it MIGHT be a glimpse of hope for some small towns though , and some of those small towns have been doing in tough for more than a decade , so bad for them is just another day

sptrawler · 22 January 2022

divs4ever said:
it does create employment and demand , but yes i mostly agree even allowing some houses will be used for short term migrants ( like international students ) now you might have to dig deep for the data but i suspect the sub-prime disaster is still bubbling along underneath with SOME still trying to pay out that mortgage , although i suspect others would have sold into the bubble ( much to the relief of smaller banks)

The difference between the U.S subprime and us is, in the U.S the loan was against the house, here the loan is against the person.
So in the U.S once the house value dropped below the loan value the borrower just handed the house over to the bank, it was called jingle mail the sound of the house keys in the envelope.
In Australia the borrower owns the debt, when the house is sold, the borrower still owes the shortfall, unless it has insurance to cover that eventuality.
So the banks still have exposure here, but nothing like the subprime loans.
That is also why the European banks suffered so much in the GFC, the yanks were bundling up these crap house loans in big packages and onselling them to the EU banks as CDO's, which actually had no underpinning collateral, Australia was fortunate our banks were too small to get involved.

Smurf1976 · 22 January 2022

divs4ever said:
the list is getting longer , the RBA , BoM ( Bureau of Meteorology ) Treasury , and several more and sadly most are tax-payer funded

What’s the issue with recording and forecasting the weather?

Doesn’t every country, or at least anyone who isn’t broke or at war, do that as a relatively inexpensive but useful service funded by taxpayers?

divs4ever · 22 January 2022

they sold the CDOs in Australia to councils and NGOs , so don't worry we got a share of the pain ( from the GFC ) as i hear it most in Australia were lobbed at 'sophisticated investors ' ( aka big piles of money advised by financial advisers and tax consultants )

but i guess we will find out next time when our insurance companies beg for mercy ( like AIG did in the GFC )

i suspect the mortgagees will all end up in the same place just through different processes ( in most nations ) i will be watching with curiosity how the Muslim communities cope , just in case they have a better system

unless mortgage insurance has changed a bit , it seems it is only there to protect the lender from a major harm

i have watched carefully how 'income protection insurance' has played out ( or resisted paying ) on a buddy who had multiple Super funds and personal insurance , so can imagine what happens during mortgage stress ( after all the second mortgage provider normally requires such extra insurance )

Smurf1976 · 22 January 2022

sptrawler said:
So if for example the RBA feels fuel or electricity prices are a spike and not a permanent trend, they wont be counted in the CPI calculation from what I understand.

Trouble is, just about every individual and business has at least some expenditure on fuel and/or electricity and any increase in cost is absolutely real there.

Same goes for many things, paying is non-optional in practice.

sptrawler · 22 January 2022

Smurf1976 said:
Trouble is, just about every individual and business has at least some expenditure on fuel and/or electricity and any increase in cost is absolutely real there.

Same goes for many things, paying is non-optional in practice.

That's ecactly what I was getting at, just because the authorities say that cpi or inflation is running at x%, means very little at street level, it depends what is in their sample basket.
Much the same with wages, there may not be wage inflation somewhere in Australia, but it sure as hell isn't in W.A.
Wages here are going stupid.

divs4ever · 22 January 2022

Smurf1976 said:
What’s the issue with recording and forecasting the weather?

Doesn’t every country, or at least anyone who isn’t broke or at war, do that as a relatively inexpensive but useful service funded by taxpayers?

you haven't bought land in a dubious area , i guess

i don't need to go far to find a major shopping area built in a flood plain ( and i do NOT mean those 'one in one hundred year ' zones )

the same with 'record temperatures ' and ' record rainfalls ' or even cyclones coming down to Southern QLD ( and Northern NSW )

now if you don't build to cyclone-resistant standards when you should ( despite official regulations )

and actually QLD has a very expensive super computer that does all that modelling ( as do several nations ) now of course these computers might not be used for the purposes they are claimed to be designed for

November 2021 | TOP500

top500.org

from 2010

Rank	System	Cores	Rmax (TFlop/s)	Rpeak (TFlop/s)	Power (kW)
51	Vayu - Sun Blade x6048, Xeon X5570 2.93 Ghz, Infiniband QDR, Oracle National Computational Infrastructure (NCI Australia) Australia	11,936	126.4	139.9
88	HP Pod BL2x220, X5660 2.8 Ghz, Infiniband QDR, HPE iVEC Australia	9,600	87.2	107.5
146	CSIRO GPU Cluster - Supermicro Xeon Cluster, E5462 2.8 Ghz, Nvidia Tesla s2050 GPU, Infiniband, Xenon Systems Commonwealth Scientific and Industrial Research Organisation (CSIRO) Australia	4,608	52.5	143.3	94
163	SOLAR - Sun Blade x6048, Xeon X5570 2.93 Ghz, Infiniband QDR, Oracle Bureau of Meteorology / CSIRO HPCCC Australia	4,600	49.6	53.9	220

now you can bet these have been upgraded but slid down the lists and some would have been replaced by cloud access .. but how were our weather forecasts in 2010 ( considering QLD had it's own lesser ranked computer to assist No 163 )

divs4ever · 22 January 2022

sptrawler said:
Wages here are going stupid.

of course they are , more people are productive over there , good workers get good wages in sensible companies

Smurf1976 · 22 January 2022

divs4ever said:
you haven't bought land in a dubious area , i guess

I haven't but even if I did, how would that be the fault of the BOM?

They record and forecast weather.

If governments, land developers and property owners collectively make decisions to build in bad locations which are prone to flooding, burning or otherwise being destroyed by nature then that's not due to weather forecasting.

Perhaps I'm missing your point but I'm not seeing how the BOM is causing inflation?

qldfrog · 22 January 2022

sptrawler said:
The difference between the U.S subprime and us is, in the U.S the loan was against the house, here the loan is against the person.
So in the U.S once the house value dropped below the loan value the borrower just handed the house over to the bank, it was called jingle mail the sound of the house keys in the envelope.
In Australia the borrower owns the debt, when the house is sold, the borrower still owes the shortfall, unless it has insurance to cover that eventuality.
So the banks still have exposure here, but nothing like the subprime loans.
That is also why the European banks suffered so much in the GFC, the yanks were bundling up these crap house loans in big packages and onselling them to the EU banks as CDO's, which actually had no underpinning collateral, Australia was fortunate our banks were too small to get involved.

The story about leaving the house and the mortgage behind was not true USA wide, some states yes, others no.....
Another reason not to judge US as a whole
Another factor many Australians do not realise is that in many parts of Europe, loan interests are NOT variable;
so you buy a house in France at 100k Euro with a 1.5% loan (currently) on 20 or 25y, any inflation will be a major win for these borrowers..
the high inflation in the 70s/80s in France allowed a whole generation a painless access to property...
Compare this to Australia where we were supposed to pay nearly 18% interest on HL;
even much later , my first heavily discounted HL rate in the late 90s was >8% thanks to Aussie HL, some of the banks were still above 10%
so HL in europe: inflation is great for the borrower. here it is a killer

divs4ever · 22 January 2022

Smurf1976 said:
I haven't but even if I did, how would that be the fault of the BOM?

They record and forecast weather.

If governments, land developers and property owners collectively make decisions to build in bad locations which are prone to flooding, burning or otherwise being destroyed by nature then that's not due to weather forecasting.

Perhaps I'm missing your point but I'm not seeing how the BOM is causing inflation?

insurance ratings for one .. the key word is RECORD , if the historical data is flawed , well best of luck

higher costs ( like insurance premiums ) do nothing helpful to inflation , whereas a better informed builder/buyer can get an early jump on efficiencies ( stuff like double-glazing , home insulation , window tinting and much more like concrete stumps in ground that retains excessive moisture for long periods )

less buildings needing repairs from avoidable damage , means more workers building new constructions ( and less resources wasted )

i noticed earlier in the week the old high school has been renovated ( despite efforts by some to just sell it for residential ) but the gut buster was the old 'home room' building which should have been bulldozed before it even saw a full year of use they probably quintupled the value by putting solar arrays on the roof ( because it tilted north ) ... will be interesting to see if it is blown flat in the next real cyclone , all the surrounding trees were removed ( and they provided a wind break from the South and West ) but i guess the kids will enjoy vibrating class rooms as a bonus ( i can't believe that garbage survived 50 years )

frugal.rock · 22 January 2022

sptrawler said:
The company has 831 unfinished contracts around Australia and records show a $28m dollar loss in the 2020 financial year.

It begs the question, why wasn't it shut down, prior to going belly up, by legislation?

Surely a loss that big rings alarm bells, that for the company to continue, it essentially must operate as a Ponzi scheme to have a reasonable survival chance, and possibly was (Ponzi), before even reporting that loss?

As they say, consumers have more protection buying a toaster than a house... or subsiding cracking unit...etc
Sad.

Inflation

sptrawler

againsthegrain

sptrawler

over9k

So I didn't tell my wife, but I...

over9k

So I didn't tell my wife, but I...

About the RBA

sptrawler

divs4ever

divs4ever

divs4ever

sptrawler

Smurf1976

divs4ever

Smurf1976

sptrawler

divs4ever

November 2021 | TOP500

divs4ever

Smurf1976

qldfrog

divs4ever

frugal.rock

Similar threads

Inflation

So I didn't tell my wife, but I...

So I didn't tell my wife, but I...

Similar threads

Privacy & Transparency

Privacy & Transparency