PuntPal I answered your post on the next thread.

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.

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.

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.

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!

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?

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!

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.