Sowing The Seeds Of A New Crisis

[Mofra]

Re: Sewing The Seeds Of A New Crisis

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?

 

[Ageo]

Re: Sewing The Seeds Of A New Crisis

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

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

 

[trainspotter]

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".

 

[Aussiejeff]

Re: Sewing The Seeds Of A New Crisis

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!!!

 

[Temjin]

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:



(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)

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.

 

[Uncle Festivus]

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.

 

[prawn_86]

I won't be paying for it.

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

 

[Buckeroo]

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

 

[trainspotter]

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

 

[Uncle Festivus]

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

 

[Mofra]

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"

 

[boofhead]

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.

 

[Mofra]

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.

 

[Uncle Festivus]

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.

Millions of people are members of the lucrative final salary schemes, which pay out an annual pension based on a member’s final salary.

The schemes have been in deficit for the past year, but it is the first time that the deficit has split into triple figures.

Experts said the deficit would continue to grow and predicted a major company would go bankrupt because of its pension deficit in 2010.

http://www.telegraph.co.uk/finance/personalfinance/6859275/Largest-200-pension-schemes-in-deficit-by-100-billion.html

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.

http://www.telegraph.co.uk/finance/...eturn-to-recession-as-bank-lending-falls.html

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

 

[Uncle Festivus]

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

 

[wayneL]

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.

The massive liquidity surge – principally reported by the investment banks as they exploit dislocated fixed income and currency spreads, but also lifting retail banks – was unlikely to stay stuck on balance sheets for more than six months, he said.

At its most positive, the money was likely to filter consumers in the form of renewed lending and he predicted that household spending was likely to surprise on the upside.

Equally, once some form of retail banking competition returned and placed pressure on rates, the amount of money on balance sheets could easily create the next bubble.

Conte, manager of the European mid and small-cap trust alongside Jim Campbell, said: ‘Governments have almost been schizophrenic about this: they have been telling banks that there can never be a return to so much credit, and then telling them to lend.

‘All logic suggests that the consumer is dead and buried but once balance sheets have been repaired, and banks start competing again, greed will start to creep in,’ he said......................

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

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.

 

[Gringotts Bank]

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.

 

[Junior]

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.

 

[Gringotts Bank]

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.

 

[wayneL]

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.