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Hi Kahuna1

Opinions do vary – including mine on a regular basis as I try to understand all the complexity and factor in different possibilities that could arise in an unknowable future. So please take my posts as discussion rather than arguing a particular position.

Yes I’m fairly comfortable with the current position. The projection is not good though, based on their current tax and transfer system settings. But with a GDP per capita of $48,000 they have plenty of scope to move. As Knobby put it, there is plenty of wealth, they just have to legislate to bring in more taxes and/or cut back on their promises.

I think it is unlikely that they will continue a fiscal deficit to the point of incurring prohibitive default yields in their debt pricing.

The question for me is what impact does balancing the fiscal positions have on growth. The current deficit is adding a lot of stimulus to offset the deleveraging in the private sector, without it growth tanks. That maybe not such a bad thing as we live on a planet with finite resources, but a change in growth expectations would trigger revaluations.

I think I have my head around how trade surpluses and the foreign reserves derived by these surpluses have acted to be the driver for global credit growth - but I do not understand why you believe deficit financing would be limited to global trade surpluses.

Bigger picture though – I do think global credit creation is slowing since (caused) the GFC and whilst I have argued that US will not in the short term face a larger default yield on their borrowings I do think that scarcity of credit could start to lift debt yields – but subdued until an expectation of growth or inflation re-emerges.

Australia – in contrast to US has a projection that looks good but a starting point with external debt that is not a strong. If the two countries defy their outlooks then Aus underperforms an optimistic outlook whilst the US outperform a pessimistic outlook. Plenty of Risk/Return implications to consider there.

Cheers

<blockquote data-quote="craft" data-source="post: 669660" data-attributes="member: 16447">Hi Kahuna1Opinions do vary – including mine on a regular basis as I try to understand all the complexity and factor in different possibilities that could arise in an unknowable future. So please take my posts as discussion rather than arguing a particular position.Yes I’m fairly comfortable with the current position. The projection is not good though, based on their current tax and transfer system settings. But with a GDP per capita of $48,000 they have plenty of scope to move. As Knobby put it, there is plenty of wealth, they just have to legislate to bring in more taxes and/or cut back on their promises. I think it is unlikely that they will continue a fiscal deficit to the point of incurring prohibitive default yields in their debt pricing. The question for me is what impact does balancing the fiscal positions have on growth. The current deficit is adding a lot of stimulus to offset the deleveraging in the private sector, without it growth tanks. That maybe not such a bad thing as we live on a planet with finite resources, but a change in growth expectations would trigger revaluations.I think I have my head around how trade surpluses and the foreign reserves derived by these surpluses have acted to be the driver for global credit growth - but I do not understand why you believe deficit financing would be limited to global trade surpluses.Bigger picture though – I do think global credit creation is slowing since (caused) the GFC and whilst I have argued that US will not in the short term face a larger default yield on their borrowings I do think that scarcity of credit could&nbsp; start to lift debt yields – but subdued until an expectation of growth or inflation re-emerges.Australia – in contrast to US has a projection that looks good but a starting point with external debt that is not a strong.&nbsp; If the two countries defy their outlooks then Aus underperforms an optimistic outlook whilst the US outperform a pessimistic outlook.&nbsp; Plenty of Risk/Return implications to consider there.Cheers</blockquote>

[QUOTE="craft, post: 669660, member: 16447"] Hi Kahuna1 Opinions do vary – including mine on a regular basis as I try to understand all the complexity and factor in different possibilities that could arise in an unknowable future. So please take my posts as discussion rather than arguing a particular position. Yes I’m fairly comfortable with the [B]current[/B] position. The projection is not good though, based on their current tax and transfer system settings. But with a GDP per capita of $48,000 they have plenty of scope to move. As Knobby put it, there is plenty of wealth, they just have to legislate to bring in more taxes and/or cut back on their promises. I think it is unlikely that they will continue a fiscal deficit to the point of incurring prohibitive default yields in their debt pricing. The question for me is what impact does balancing the fiscal positions have on growth. The current deficit is adding a lot of stimulus to offset the deleveraging in the private sector, without it growth tanks. That maybe not such a bad thing as we live on a planet with finite resources, but a change in growth expectations would trigger revaluations. I think I have my head around how trade surpluses and the foreign reserves derived by these surpluses have acted to be the driver for global credit growth - but I do not understand why you believe deficit financing would be limited to global trade surpluses. Bigger picture though – I do think global credit creation is slowing since (caused) the GFC and whilst I have argued that US will not in the short term face a larger default yield on their borrowings I do think that scarcity of credit could start to lift debt yields – but subdued until an expectation of growth or inflation re-emerges. Australia – in contrast to US has a projection that looks good but a starting point with external debt that is not a strong. If the two countries defy their outlooks then Aus underperforms an optimistic outlook whilst the US outperform a pessimistic outlook. Plenty of Risk/Return implications to consider there. Cheers [/QUOTE]

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