The stock market reaction to Westpac’s loss in its New Zealand court case was wonderful.
If you haven’t seen the news, then you won’t know that Westpac has been told it must pay almost $1 billion in back taxes to the New Zealand tax office.
The response from the market? Westpac shares finished 3% higher.
That reader, is something that can only happen in a bull market.
It is perhaps, confirmation the bull market has well and truly begun.
Of course, the market is already up over 40% since the March low. So you could argue the Bull Run has been going for seven months already. Even so, it’s been seven months of high risk investing.
If you had the stomach to go for it then you should have picked up a nice return on blue chips, and an even nicer return on small caps.
However, with the two announcements we’ve seen this week – RBA and Westpac – you’ve now got to look at the market in a different light.
And that is, to repeat what I wrote yesterday, there’s a very strong chance this market could still be pushed much higher.
Look, it’s not without risk. You should never think the stock market is a risk free investment.
But you should recognize the point at which the bulls look to have taken complete control of the market. This week could be that point.
You see, what’s happened is that the market has the excuse it was looking for to go up. Fundamentally, the market and the economy is little different today to how it was last week.
In fact, the only difference is that today interest rates are 0.25% higher than they used to be. As we highlighted in Wednesday’s Money Morning, that’s going to mean an increase in finance costs across the board.
Not just to homeowners, which most people have focused on, but to everyone – businesses too. And those costs will need to be filtered through to the end user – the consumer.
But right now, no-one cares about that. And as an investor, while you shouldn’t forget about it, you should continue to look to benefit from what it will mean to the market. And what it will mean for profit opportunities.
The economic propaganda machine is in full flight at the moment. Rising interest rates and rising financing costs on an indebted population and an indebted private sector is seen as a positive sign.
The justification is that interest rates must “return to normal” because at the moment they are below normal. Look, we’ve got no idea what normal is. But the economic know-it-alls suggest “normal” is somewhere around 4-5%.
Personally we think they’re talking through their you-know-what when they suggest they know what the ideal interest rate is. But we’re happy to play along.
It means though, that this market bull run should still have plenty more fuel in the tank.
The futures markets are now pricing in interest rate rises for November and December. That means by the end of this year you should look for the RBA to have the cash rate at 3.75%.
And by the end of next year the cash rate is likely to be somewhere between the “normal” rate of 4-5%.
So if the market continues to view interest rate increases as a positive sign for the economy, there’s a real chance the stock market will follow suit.
For you as an investor it means beefing up your portfolio in different sectors. But that doesn’t mean you should abandon what you’ve already got, because odds are that will rise too. Let me try and explain what I’m on about…
Over the last ten months in Australian Small Cap Investigator, as well as picking up some great opportunities in LNG and natural gas, we’ve also added a number of stocks that you would call “economically sensitive” or “cyclical.”
In fact, as I look at the portfolio now, there are four stocks that we added as punts on an economic recovery and another two stocks that were economically neutral but had nonetheless been unfairly punished by the market.
That’s roughly 21% of the portfolio that we picked banking on what is happening now. Although to be fair, we didn’t think the Bull Run would start this soon.
We were banking on at least another six months of a stagnant market that would allow us to keep picking up these gems on the cheap.
In other words, while it’s been the resources plays that have given us some of the biggest returns over the last year, looking ahead the way is now open for all sectors of the market, and especially the cyclical stocks to start pulling in some good returns too.
Looking at the sectors it’s hard to find one that you wouldn’t buy into to take advantage of the surge. As you know we’ve got a personal dislike of the banking sector. And quite frankly I believe there are enough other and better opportunities around.
But if you don’t have the same dislike, then as I’ve mentioned before, if you want a punt then go for it. Just beware that when the Bull Run finishes the next time, it’s the banks that are likely to suffer the biggest fall of all.
As for the other sectors, energy and materials equally remain very attractive, and remain the best opportunity for the kind of triple-digit gains we’ve already seen this year.
We’ve just added two new energy plays to the Australian Small Cap Investigator portfolio, so while you can look to get high double-digit percentage returns in the lower risk cyclical small cap stocks, the really big winners will still come from the same place as always…
The resources sector.
But don’t forget, the stock market is risky. Even in a bull market you’ve got to remember you can’t afford to just buy and hold.
Monitoring your stocks is just as important today as it was a year ago.
Other Stuff on the Markets
The S&P/ASX200 jumped 1.55% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 61 points. In Europe the FTSE100 gained 0.90% and the CAC40 added 1.34%.
The price of gold in Australian dollars is trading at $1,164.20, while in US Dollars it is trading at $1,055.00. And the price of silver in Aussie dollars is $19.62 and in US Dollars it is $17.77.
The Aussie dollar gained versus the US dollar and eased versus the Japanese Yen, trading at USD$0.9059, and JPY78.91.
Crude oil closed overnight at USD$71.69.
For the biggest movers on the market yesterday click here…
{ 36 comments… read them below or add one }
You could say a bull market is one that is up 20%, so we have been in a bull market for a while, even if it is part of a bear market bounce.
However this level of bullishness is starting to look more like the “blow-off” phase of the run. Look out!
Kris – You got back to basics and you did it well. Agree with all of that, but the next seven months won’t be the picnic that the last seven were. Investors won’t just be able to buy the index and prosper.
Isn’t it odd, PF, that the mainstream media is failing to pick up on, and pursuing, the contradictory actions of the RBA and the Treasury? There can be little doubt that borrowing to stimulate while raising rates, instead of cutting stimulus and cutting rates further, is damaging to individuals, business, and generally the country. So, why no stink about it anywhere in the main media?
its the old saying “give with one hand ..then take back with two hands “
Agree, but if our mainstream media fails to point out the travesty of what this is doing to us individually and collectively as a country, I will write them off in my books as a captured propaganda machine of the Australian politburo of the politico – bankster alliance.
The RBA is maquarading as an independent body, and everybody is pretending as if it were true, and no doubt they will try to portray this travesty as a mere accident, or unintended and unfortunate misjudgements, or whatever. But if I can see what is happening, then surely they can, too, and I am not buying it. It is purpuseful and it is malicious – they are robbing the people individually through rate rises, and then putting them collectively into more and more government debt to make up for the cash grab through borrowed stimulus money. Plus, in the process they choke off the export and tourism dollars, robbing us of overseas, real income streams.
I cannot help but feel that we are potentially seeing our own version of what Wall Street and Washington had done to the American people.
Incidentally, there is an excellent interview with Jim Willie on current issues and development, covering the dollar and oil, the rising gold price, inflation and defletion at Max Keiser’s latest edition On The Edge. The link is here:
http://maxkeiser.com/
For those interested, they are also off and racing over at King World News, including Part III of the Jim Willie interview series on Systemic Risk. The link is here:
http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Broadcast_Gold+.html
For those with an interest in gold, you might want to make a point of listening to the interview with Adrian Douglas over at King World News. Among others, Douglas makes an astute observation about every ounce of gold having been sold in the form of current contracts some 20 – 100 times. That means that there is heaps of paper gold around, and anybody who does not have control of the physical metal risks default on the metal, or even the total loss of their capital.
etch, you asked in the previous thread about how to protect oneself against inflation. In my response I mentioned two versions of how inflation so-called can manifest. One version is the usual, year by year loss of the purchasing power of money, and any savings held in cash and cash equivalents, and the other one is SUDDEN Devaluation of your country’s currency, which happens overnight and people have no time to react to it. Anybody interested in hearing more about this form of loss to the purchasing power of one’s savings, should listen to a wiley old cyote in the person of Hugo Salinas Price over at King Worl News, this weekend.
And about how the insiders on Wall Street screw the good people, you might check out these two links.
http://www.youtube.com/watch?v=OqZUbe9KIMs
http://www.youtube.com/watch?v=3DA6EY-iPjM&NR=1
I just wish that we had some similar investigative reporting about what really goes down behind the scenes here in Australia:
how could
“”SUDDEN Devaluation of australias currency, for example which happens overnight and people have no time to react to it.”"
ever happen?
My understanding is that sudden devaluation can happen in two ways:
1. By legislative fiat – by government that decrees the exchange rate relative to to gold, or the senior currency.
2. By sudden loss of confidence in the currency in the marketplace, resulting in holders of the currency dumping it en masse – lots of sellers and no buyers, similar to the way it happens in the share market.
Currently, neither is very likely for the AUD.
Having said that, if for example, we the AUD becomes the object currency in a new Carry Trade from the USD, as many are suggesting it has already started (see Inside Business this weekend), then our currency could collapse against the USD in a matter of days or just a few weeks if, and when, that trade reversed and the hot money suddenly was pulled out of the country. This is what happened not very long ago, when we dropped like a stone to 60 something cents from near parity with the USD.
To be the object currency in a carry trade could prove a devastating experience for our economy, as well as to our asset prices. Prices, jobs, and everything, including loans and debts would be artificially and temporarily pumped up, creating bubbles all over, only to be dropped like a stone when all that hot money was pulled out, as that would mean the sale of assets, bonds, and cash deposits that served as a basis for loans, etc.
This is one of the risks that the RBA is creating by increasing the interest rate differential between ourselves and the rest of the world, and especially the US, where the white shoe boys on Wall Street, can borrow virtually free, and get 4 – 5% interest over here. The higher our interest rates climb, the more attractive it will be for overseas depositors to poor money into Australia, but when the US Fed decides, or is forced, to raise interest rates over there, all this hot money will be sucked back out of the country, dumping our shares, and any assets they were sitting in, etc. And if Joe and Jane Local took out a huge loan to buy shares, or a house, during this inflated period, they will see the value of their assets evaporate while their huge debt will stay the same. DANGER, DANGER, DANGER.
All the while, our exporters will find it very hard to compete with other countries because of the higher AUD, and similarly we will attract less tourist dollars for the same reason.
thanks for the explanationCb however wouldnt the us interest rates have to go higher than australias int rate for above to happen ?
the stradgey above could make the usa some very quick big bucks at our expense of course
That is exactly right, etch. As soon as the USD makes a move, for whatever reason, including the FED’s decision to start raising rates, the AUD will start plunging and then all hell breaks lose as all that money rushes back to the exit, trying to beat the currency risk. The critical part here is that WE WILL NOT BE IN CONTROL of when it will happen. We will just have to wear the consequences the best we can at the time.
But at that time you would also see gold soar in AUD to high heaven, just like we saw the same thing when the AUD plunged last time. It will be a narrow window, and probably time to take some real money off the table, and maybe buy back later on a dip. Hard to know in advance. Will just have to keep a close eye on the way things evolve at the time.
I have just gotten around to reading the article by Dr. Steven Kates in the October 9 edition of the DR “Why Rates went up in a Recession.”
Dr Kates not only applauds the RBA’s rate rise, but also argues that it should be raised still higher until our politicians get some sort of message about not taking on any more debt, and private individuals are forced to save again, because, of late, apparently, our savings rate has slipped again into the negative.
May I suggest a couple of things here:
The good doctor has rocks in his head. First, he conveniently ignores the massive compulsory savings program we all participate in through compulsory super. All those billions are there looking for good investments, so it is fallacious to argue that we are not saving to support investment. Plus, the nation is already tapped out with debt, and every rate rise is not only felt keenly by most people and businesses, but also reduces our ability to save. As it is, we are struggling to make payments on the interest of the debt we carry, plus the never ending political and bureaucratic scams of taking money out of our pockets at every step. As etch put it, even with the stimulus, they are giving with one hand and taking with two.
My suggestion for the DR and the MM spruiking squad would be to put their collective heads together and think through the perillous situation our nation is being put into by our schizophrenic leaders and decision makers, and work out a consistent, well founded line of thought on what to do from here. As it is, they are all over the place, with contradictory positions taken up ad hoc, depending on their individual moods on the day, and only magnify the confusion about what is good, and what is bad policy, taking the world and our place in it, as it is and as we are, as givens.
cb – You may not want rate rises, and you may not think that they are justified, but happen they will.
It appears that we will have either a 0.25% or a 0.50% rise prior to Xmas and then they may wait a while to see how that effects the market. You just have to put yourself into the best possible position to cope with that, and additional rises in 2010.
It is really a case of what will happen, as opposed to what you would like to happen.
Sorry to be the bearer of bad tidings.
PuntPal – I’m such a generous guy I am giving you a German study into the Aussie house prices over recent decades. It explores the effect of relaxed credit lending and the effect of new banks into our market.
What they don’t take into account is that is also the time when households went from living on one breadwinners wage to having two bread winners. I am also seeing a gradual trend amongst women to prefer the old model of stay at home mums where finances allow, so that will change the dynamics if it becomes the preferred option for the majority of women.
This study tends to support your argument, save for the social and financial implications of working women.
I thought that it was interesting reading. I confess I couldn’t follow the equations though.
PuntPal – sorry that link is – http://mpra.ub.uni-muenchen.de/15212/1/MPRA_paper_15212.pdf
I know, PF. It is inevitable, and will be something to behold:
The good old Australian way of scr!wing the good people – nice and slow. If they won’t lay off, we can expect that sooner or later, our goose will be cooked, too. You can’t rip off the people like this indefinitely. Something will have to give.
cb – I understand how you feel, but if we were property owners in the US or the UK we would have lost more in equity.
That does not matter much to a long term owner occupier though, as the low interest rates in those countries mean that you can afford to hold and wait. It only hurts those who have to sell in those countries.
Thanks PF – will have a look now.
cb, I find it amazing you are so wound up about this one interest rate rise… what really is your concern?
You seem to suggest that fiscal policy and monetary policy are working in opposite directions, so therefore one of the policies is wrong…I think you are right on that, but its the fiscal policy that needs to go.
This stimulus package has been the most over-rated policy in the history of Government. We have poured fuel on the fire to keep us warm, with no plan on how to keep warm once this fuel burns out.
The RBA’s rate rise, as I said hours after they made the call, was intended to warn the Government that they are fuelling a housing bubble to such an extent that its crash (or slow decline) will be catastrophic if the madness doesnt end right now.
In terms if your accusation that the MM and DR crew are all over the place with their position, you must be kidding right?
Give me one example of where the same person has contradicted themsleves. If Kates cotnradicts Sayce, well thats a different issue because you would expect people to differ on some isssues (I would be concerned if they didnt).
Its not like all the bulls are on the same page, they run with whatever they can cling to
Well, yes. I have been writing from the point of view of long term investors, exporters, and generally any person or business who uses borrowed money, which is probably most of us who are economically active. If we were to suffer liquidity loss of some form or another, then it should have been cutting stimulus, not raising rates. Assuming that rate rises are more or less offset by borrowings to stimulate, we have a situation where we are just going into more and more public debt to maintain cashflow through the economy, instead of cutting the borrowing and leaving same money, instead in our pockets. It is a bankster ruse, nothing less. If the Treasury and Rudd are not in cahoots with the RBA and banking interests on what they are doing, then why isn’t Rudd criticising the RBA’s decision? Like this, the more the RBA takes out of our pockets and hurts export and tourism incomes through higher rates, the more Rudd will have to borrow to stimulate.
It is madness, nothing less. Or worse, downright greedy and criminal. But what about all this acceptance in the media that rates are going to rise? Why isn’t somebody, just one main source, pointing out the absurdity and the ripping off of the people, by what the RBA and the politicians are doing to the country?
PuntPal,
- About self-contradiction, see PF’s question to Sayce in the previous thread, which still has not been answered. One day, Sayce was arguing that rates should have never been taken down this low, and the next day he was arguing that it was wrong for the RBA to raise.
So, which one is it? There is a tension here, and it needs an explanation.
- I happen to disagree with your suggested approach. If we need stimulus, then the RBA should not raise rates before stimulus is cut. Otherwise, the nation is simply replacing money taken from our pockets through higher rates with borrowed money by politicians to stimulate.
- And, if you are right that the RBA is telling something to the politicians about stimulus spending, then they should pick up the phone and say it, instead of hurting the economy like they are doing.
Glenn Stevens especially must stop talking out of both sides of his mouth, testifying publicly that the stimulus should not be withdrawn, while he is raising rates because the stimulus is providing excess liquidty. He cannot have it both ways, although it serves very well the banking interests to see us all loaded up with debt, instead of keeping rates low, or even cutting them lower, if necessary.
And, yes, I am somewhat fired up about what is going down. Because if we are at a point in the so-called recovery that we can afford or need to raise rates, then we should first cut stimulus, instead of going into more and more debt as a nation. Plus, the raising of the rates, while stimulus presumably still needed, places our exporters and tourism industry at a disadvantage relative to our competitors.
Given these additional disadvantages to the other one of unnecessarily loading us up with debt, it should be a no brainer as to whether we should cut stimulus, or raise rates.
Anyhow, up to this point I have been undecided whether bankster interests were as pernicious and against the good people over here as they clearly have been in the US and the UK, but now I see unmistakeable evidence that they have it in for us and that our goose will also be cooked in good time. You might find it comforting, PuntPal, that this is putting me into the bear camp. We are going to crash, because the course has been set by those in power for a crash. It was close to a miracle that it did not happen the first time, but we are now quite obviously set back on track by the RBA.
You cannot hurt the export dollars and increase the debt servicing burden like this indefinitely. As to when it will happen will depend on how far and how fast rates are going to go, but about the direction of the course set there can be little doubt.
cb – I hate to do this but I’ll have to disagree with you and support PuntPal on this. The debate was never about WHETHER rates would rise, the debate was about WHEN they would rise.
I would have liked to see the RBA wait a bit, but perhaps my own opinions are tainted by my own vested interests. The RBA has no option but to raise rates to keep the “heat” in the economy in check. We can still write loans at around 5.00% (I am guessing as I haven’t seen all of the new rates yet) and long term bank professional packs are around 5.30% to 5.35% so they are still great rates. If you aren’t getting those rates or close to it, then phone your bank and ask them to “SWITCH” to another product. It is much cheaper than refinancing. I make money out of refinancing people, so that is genuine advice.
That is why I said be prepared. We are powerless to stop 99.9% of change, so the best option is to prepare for it and ensure that you are least affected.
A controlled residential market and rising rates are a “fate accompli” for the next year or two, so look at your options and select the most logical for your circumstances.
I feel as though I’m writing a Dorothy Dix column here. Sorry if your offended but handing out free unwanted financial advice is listed as one of my duties on my job breakdown card.
cb, you said:
- I happen to disagree with your suggested approach. If we need stimulus, then the RBA should not raise rates before stimulus is cut. Otherwise, the nation is simply replacing money taken from our pockets through higher rates with borrowed money by politicians to stimulate.
——————————————
My whole argument is that we don’t need stimulus – stimulus does nothing but delay the invetible, allocate resources away from productive (real and self-sustaining) industries and cater for special interests and lobby groups.
If the economy was going to slow down in 2008 and jobs were going to be lost, then ‘let it happen’ has always been my position (same with DR and MM). I consider myself to be quite compassionate towards those less fortunate, yet throwing billions of dollars at an economy to avoid a neccesary correction has nothing to do with compassion…its all about politics and reputations.
You say that Stevens should have told Rudd he didnt agree with the stimulus..I bet you he did. I reckon Henry did too – yet both of them have to tow the Government line in public. Can you really expect them to undermine Rudd in public? Rudd has shown what he does to people that get in his way (ask the former Telstra chairman about that).
We are living in a command and control economy, dominated by short term politcal populist policies and covered by a media that is nothing short of corrupt. The policies of the Government are useless, but not as useless as the scrutiny applied to these policies by so called journalists.
That is why I post on MM and other blogs, because I am sussing out whether the internet and its ability to connect those outside the sphere of power and influence could be enough to bring about the changes needed.
If we had a more balanced and intelligent media, things would be different – much different!
PuntPal – You are suggesting that if all stimulous and government interference were to be withdrawn, the ship would right itself.
It wouldn’t – it would run aground and sink, which is a politically unpalatable outcome for a government who cannot see a viable opposition at the moment. If they just keep everything rolling along and steer the ship back into calmer waters they will have done their job, and that is ensuring they win the next election.
Can you not see the political reality of the situation?
You are right PF, I did go a bit far saying ‘let is happen’. The last thing I want to see is people on the streets and battlers battling more than ever.
I see the political reality and obviously the Government has a role in cushioning the impact of severe economic downturns, but that is different to actively ’stimulating’ the economy.
But you say that without the stimulus, the ship would have sunk…lets be specific – what would have happened? Well, we will never know. This is the luxury the stimulators have – they can claim anything they want, but really there is no accurate way to see how bad things would have got.
But as it is, we have spent a ridiculous amount of tax payer’s money so that we can avoid even the mildest recession. Surely our response has been disproportionate?
But the way people look at it, they would rather the Government overreact and shield them from any adjustment to the way they live. They don’t make the logical connections between Government spending and taxes in the future.
Now I know analogies are helpful and I use them all the time, but I think you have used an analogy to gloss over what is taking place. ‘Calmer waters’ are NOT just around the corner. We have NOT had the correction we needed, property assets are still overvalued, consumers are still spending like its 2007 and the Oz banks that everyone is praising are just lucky for the all the help the Government has given them. We will see how great our financial sector is going this time next year.
The First Home Buyers Grant boost is the classic example of how insidious the stimulus package has been. Naïve 25 year olds have used the $7K extra to leverage up an extra $50K on their mortgage for their first home. So when we enter the period of debt-deflation, the same people who think they have been helped will realise that Government help is never what it seems.
Finally, the worst aspect of the Government stimulus approach is that people have not learnt their lessons. That’s the point of a downturn, to show people that they have to be a little bit prudent once in a while and to punish the reckless.
But when I talk to people who know I have been predicting doom for well over a year now, they rub it in my face that I was wrong. They tell me “I told you we are the lucky country”. They tell me they are about to buy their second house (even those these people are tradies on no more than 80K a year).
I just worry that when the day of reckoning of comes, the carnage will be so much more severe than it needed to be and who knows what crazy policies these morons will come up with then!
PF, please do not apologise for disagreeing with me. If I am wrong, then I definitely want to know about it, or risk doing myself harm with having the wrong ideas and perceptions about what is happening. Why have I turned so gloomy?, so bearish? Because I have just seen confirmation in the actions of the movers and shakers that they will not hesitate doing the economy great harm for no legitimate reason. Yes, rate rises could be expected, but the way they are doing it is very destructive.
1. I do not believe that we are overheating. Ask almost any small business owner and will tell you that much. Plus, wage rises, let alone a real increase in income and take home pay, are nowhere to be seen, while many expenses, government fees, insurance, you name it, all keep going up. Where is the overheating? Who has the money?
2. Rates are historically low, but how much business are the lenders actually writing? I have contacted my bank, believe me, trying to move onto a slightly better package. They did not want to hear from me. I have also been chasing lenders through half a dozen brokers over the past two years, trying to buy residential and commercial, and with what result? ZERO. And I have a spotless credit history.
3. If there is excess liquidity in the system, then it is nuts and very destructive to mop it up through rates, instead of cutting out the debt binge on the nation’s credit card. I explained why in other posts, so I will not repeat the arguments here.
4. But even more worrying is to see the RBA in action. Glenn Stevens has shown himself untrustworthy and duplicitous. I would not trust his motives as far as you can throw him. Why? He talks out of both sides of his mouth. There is either too much liquidity in the system, or there is not. If there is, then he should speak out against the debt binge stimulus. But, NO, he says instead that stimulus is fine, while he is raising rates. Well, what is that? He cannot have it both ways. Or maybe he can, and is having it both ways: Stimulus is indeed fine, as it gives him the opportunity to raise rates. But why would he want to do that, instead of speaking out against the debt binge? It just doesn’t add up, PF. Sorry. And if we have someone like that in charge of a debt dependent economy, our goose is getting cooked. That is the only conclusion I can draw, so, yes, I am negative and bearish. In sum, it is not the rate rise itself, as this will not do all that much harm all by itself, a few more like it, but what this rate rise means, what it potentially portends, is what spooks me.
5. But don’t worry, if the RBA will not lead us quite over the edge, the politicians will. They seem hellbent on yoking us with “the GST from hell,” which will be an unbelievable burden on an already weighed down economy.
I agree with what you say, PuntPal, but the correction you way we need to have could have been too disruptive, and much can be lost that is valuable through uncontrolled crashes and the turmoil they create. Jobs and even industries, for example, that go belly up without help, can be lost, never to return again, whereas if they get a little help for a while, they have a chance to survive the storm and flourish again, providing employment and income, in this country. We have lost enough jobs to China and India as it is, so I for one, I am not against short term borrowings and stimulus.
What I am against, and very much so, is what is being perpetrated now, continuing the debt binge stimulus AND the RBA raising rates on businesses and people. That is nothing short of disgusting.
As to whether there really is a tension between the politicians and the Treasury and the RBA, I don’t know, but my my instinct tells me that Glenn Stevens might have suspect motives and allegiances at best, and that him and the politicians, rather than being at odds with each other behind closed doors, are doing what they are doing in cahoots.
You can call me distrustful and suspicious.
cb – I agree that some industries/businesses that are viable should be protected from external shocks and credit crunch…temporarily – but that is not what is happening. They gave out $900 to millions of people and just hoped it got channelled into the right industries. For all we know they spent that money supporting overseas jobs. It wasnt about protecting jobs – it was about manipulating GDP figures so that Swan and co. can brag like they were yesterday.
Even when you do target support for industries – which ones get the support. Thats right, the ones with the most lobbying power and these are usually the ones that are propped up in good times and bad.
If we are going to stiumlate to support industries, then it needs to be done in a more tranparent way. Maybe some form of industry government body that assesses claims for support against a criteria.
The problem right now is that money can be dished out to anyone and its justified in the name of the GFC.
I do not disagree PuntPal. Stimulus and low rates have kept us afloat in heavy seas and stormy weather, so I am not so fussed about short term stimulus, when it looks like it is needed, and arguably we did need it very badly at the time.
What I do object to, is the raising of interest rates, instead of cutting stimulus, if such is no longer needed. Why? Because it impoverishes the nation and pushes us all into more and more debt. Just listen to the section: AM with Tony Eastly, at this link:
http://www.abc.net.au/rn/breakfast/
The number of people who already cannot feed their families, pay the rent or service the mortgage is only going to increase with every rate rise. If I were to sum up my position on this question with an analogy, this would be a good one:
If stimulus is keeping us afloat, rate rises can only push us under.
And the reason I have turned so pessimistic is that the process of pushing us under has started and it is deliberate. If I can see it, then so do the movers and shakers. And if they see what they are doing, you have to ask: Why are they doing it? Ignorance is no excuse, and if that is what it is, then it is criminal ignorance.
But, of course, the simplest questions to ask is the familiar one:
Who benefits, and who loses? Or, Who benefits at whose expense?
Depending on how well one answers those questions, one will be getting closer, or further away, from the truth – the truth about why we are getting rate rises while at the same time we are still trying to hold off an economic collapse by borrowing and going into more and more debt.
cb – I was sorry that the increase would adversely affect you. I hope that you are able to shield yourself from the increase, although from a recent post that appears unlikely.
PuntPal I answered your post on the next thread.
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