Hats off to Barnaby Joyce for having a crack. Maybe when his political career is finished, and he’s yesterday’s nobody, we could offer him a job writing newsletters. He certainly knows how to write a good headline!
If you missed it, in an interview with the ABC Barnaby Joyce said:
“We’re going into hock to our eyeballs to people overseas. And you’ve got to ask the question how far in debt do you want to go? We are getting to a point where we can’t repay it.”
ABC reporter, Stephen Long’s response? Well, here it is:
“The polite way to describe that comment – nonsense. It’s not true, plain and simple. The credit ratings agencies don’t always get it right; the global financial crisis showed that. But they’ve got a lot of experience in rating sovereign debt.”
And then the little reporters scurry off to interview the usual suspects: Standard & Poor’s, Fitch Ratings, and Citigroup.
Hmmm, the ABC relies on two ratings agencies that rated subprime mortgage debt as triple-A, and an economist from a bank that was partially nationalised by the US government.
Not surprisingly they give the Australian government coffers the stamp of approval.
You can click here to read the transcript, but the gist of it is blah, blah, blah… Australia did better than everyone else, etc…
According to Citigroup economist Josh Williamson, asked whether Joyce’s comments were irresponsible he answered, “Absolutely.”
So, is Joyce’s comment nonsense? Well, it is in the sense that governments have one advantage that no one else has. And that is the ability to print extra money to pay off debts.
As we’ve mentioned before, if you crank up the Canon inkjet printer and run off a few thousand $50 notes, you’ll find yourself in the Slammer before you know it.
The fact is, most governments are too sneaky and dishonest to openly default on debt. Their first response is always to inflate the money supply to devalue the currency. That way, while the debt is repaid it’s done with a devalued currency.
But that’s the disappointing part about the mainstream media’s response to Joyce’s claims. It doesn’t take much effort to look beyond his statement to see there’s at least an ounce of truth in what he’s saying – not that he’s the first to say it of course.
And the other disappointing point is Josh Williamson’s comment that “We have an excellent debt to GDP position.” Because that’s only true of the government debt.
The household debt to GDP position, and income to household debt position is nowhere near as good. In fact it’s terrible.
And worse is that unlike government’s, households can’t simply print out extra $20 notes to pay off their debt. So the real problem isn’t the possibility of the government defaulting on debt, it’s the scale of the household debt default when that happens.
Of course, we frequently hear the argument that inflation is the friend of debtors. That over time the amount of debt reduces when adjusted for inflation.
We have to say, that’s one of the biggest furphies going around. Along with the idea that a house is a hedge against inflation.
As we’ve written before, in all cases inflation is bad for you and your wealth. Inflation is never good. At the extreme, ask Weimar Republic Germans, or Zimbabweans, or even look at your own position.
Has inflation really helped you out over the last twenty years? Didn’t think so.
The simple reason is that inflation forces you to work harder.
Let’s be honest. No one wants to work. We work because we have to. But imagine how much better it would be if there was no inflation. Or if there were periods of deflation to counteract the inflation.
Inflation devalues the dollar in your pocket which means you have to keep working harder and longer. Your ability to devote more time to leisure lessens the more inflation eats away at your income and your savings.
I mean, if your dollars weren’t devalued and prices didn’t rise then your savings would really grow, and without much effort either. Whereas now, as an investor you have to run just to stand still.
Look at the risks you need to take as an investor. Even a 10% or 12% annual return from taking big risks on the share market probably isn’t enough to beat inflation. And I mean the real cost of living increases not the phony numbers the Australian Bureau of Statistics (ABS) come up with.
And as for the idea that a house is a hedge against inflation, well, that’s more twaddle. It’s no such thing. In fact, in an inflationary environment houses become nothing more than a ‘White Elephant.’
If you want to know the origin of that phrase, just head over to the Lazy Researcher’s Handbook.
You see, inflation appears to help by showing a correlation with rising house values. Yet there’s no evidence that there’s a causal relationship.
Just on that point, we’ve seen plenty of people say, “Look at the chart, inflation has gone up over the last thirty years, so have house prices, therefore housing is a hedge against inflation.”
Not so fast. You can’t take two data sets, compare then and then just announce a correlation.
If it was that easy then you could compare house prices to a chart of your editor’s age over the last thirty years. You could conclude because both have risen that your editor is a hedge against inflation!
What utter nonsense.
Inflation inflicts greater harm on the homeowner due to higher maintenance costs.
Fuel bills go up, electricity bills go up, replacing furniture, fixtures and fittings all go up. And generally just keeping the home in good nick incurs higher and higher costs. The cost of moving goes up, the cost of downsizing to a smaller home goes up, and so on.
You only have to look the popularity of reverse mortgages. Old timers borrowing money in their old age because they’ve spent so much on maintaining their home for the last thirty-odd years. And because high taxes have robbed them of the chance to save, they’ve got no other choice than to put themselves into hock just to cover the weekly shopping.
Or another example. The relish with which a twenty or thirty year old home is advertised as a “renovate or detonate” property. How is that either an investment, or a hedge against inflation?
It isn’t.
That’s house price inflation for you.
Then at the extreme look at the number of Victorian stately homes in the UK that are falling apart. Lords of the manor having to rent out their 500 year-old ancestral home to bucks parties and corporate dinners because they can’t afford to repair the leaky roof.
Or if they’re really strapped for cash they have to flog it to National Trust and then live out their days in the Gatehouse because they can’t afford the heating bills or maintenance costs.
And they can’t sell them to private owners, because no one else is foolish enough to lumber themselves with such a White Elephant.
As I say, that’s the extreme, but the reality is, housing isn’t a hedge against inflation.
In fact if you compare it to something else which is claimed to be a hedge against inflation – Gold – they have nothing in common.
Gold is divisible, a house isn’t – you can’t sell it brick by brick and get the same proportional return.
Gold is transportable, a house isn’t – unless it’s some crappy weatherboard home no one wants and you’re prepared to pay for transport costs. Or, unless your home is a caravan! But then of course, according to Saul Eslake and his crew at the National Housing Supply Council, if you live in a caravan you’re homeless anyway, so that doesn’t count.
Gold is durable, a house isn’t – see the examples above.
Gold can be hidden from the government if they try to confiscate it like the US government did in the 1930s. Try hiding a house! Good luck with that one.
Plenty of people will tell you Gold isn’t a hedge against inflation anyway, that it’s a hedge against political instability. We’re prepared to consider that argument. But we’ll also say that if Gold isn’t a hedge against inflation, then housing most certainly isn’t either.
The fact is, while Barnaby Joyce may not be 100% correct, he isn’t 100% incorrect either. Record high household debt levels have indebted the Australian population.
So even though the odds of the Australian government ‘honestly’ defaulting on its debt obligations are near to zero, the odds of Australian households being forced to default under the pressure of the White Elephant of housing is better than evens.
Cheers.
Kris.
{ 68 comments… read them below or add one }
Kris – Admittedly, I am only half-way through this article, but here are some facts:
1. House prices more or less have kept up with inflation.
2. Inflation erodes the value of your savings held in cash and cash equivalents that are not real assets.
3. Inflation also erodes the burden of debt. In fact, this is how governments default on onerous and unpayable debt, but inflating its burden away.
Now, there are a few caviats an order, such as not losing out on the income front while paying off a debt in an inflationary environment, but those facts are basic and undeniable. If so, what on earth are you on about? 1 + 2 + 3 = 6 in my books. In yours they seem to come to naught. Can you tell which one of us is right?
He’s not a Joyce by any other name?
Isn’t land divisible?
Isn’t land durable?
Give me land… lots of land!!
Whilst I agree house price inflation is an unnecessary nonsense, it might be helpful to acknowledge that it affects different interest groups differently, and others hardly at all.
Most house owners who die have owned the house they used to live in for a long time. If their houses are sold to wind up their estates they will fetch tidy prices, probably more in every case than was paid to buy them. It’s difficult to see how crazy house prices have any effect at all on house owners who die.
People in mid-life who sell their first home to buy a replacement should expect the changeover to cost them some money, but they should find, if they buy and sell wisely, that the high price fetched for their own home goes a long way towards offsetting the high price of the new one. The state of the market should not have much affect on this class of people if buying and selling are done at about the same time.
First home buyers are probably amongst the first most likely to notice high house prices… but only in terms of the terminally devalued aussie mini dollar that can scarcely buy anything any more. Yet even for this class of people the house prices are cushioned by government grants so poorly designed and generous that they contribute to inflating the housing market. It would not hurt first home buyers to be forced into adopting the economies older people can tell you about. Instead of buying a new big home that has everything, first home buyers years ago often had to settle for a house in a different location, probably without footpaths and even a garage… and if they still could not find a house they could afford they were prepared to save up and wait until they could afford one. So perhaps even first home buyers are not much worse off than they were years ago. Except that their expectations have risen.
Is there anyone I have missed who matters?
whitlam ‘75 government got sacked cos he was sending australia broke…………………………………………………..
maybe he’s been giving “DUDD” the wrong advice nowdays
We need a commodity backed currency to stop the erosion of our wealth. We currently live in a world that revolves around central banks, debt and inflation. All of which leads to us working harder and longer (as Sayce said) to compensate us for the inflation tax.
The property market is a bubble and those with enough skepticism have predicted it to peak in Q1 2010. Today’s housing figures show although the average loan size rose, the number of loans taken out fell 5.5% in December and declined 6.1% in November. Higer prices fuelled by poor lending policies combined with less buyers will see property prices eventually drop.
The fall of the Australian property market will represent a serious problem for the banking system and the wider economy. I suggest we learn from the mistakes of the US and UK before its too late.
excellent points SD -
“”"We need a commodity backed currency to stop the erosion of our wealth. We currently live in a world that revolves around central,federal resrve banks, debt and inflation.”"”
but how can they ever be KICKED OUT ????????? how?
Dave…”Instead of buying a new big home that has everything, first home buyers years ago often had to settle for a house in a different location, probably without footpaths and even a garage… and if they still could not find a house they could afford they were prepared to save up and wait until they could afford one”…
I believe that you have hit it on the head!
SD… what do you think the recent secret meeting by bankers in Sydney & the Nth America were all about…a new world currency..namely Gold.
IF ?? “”"…a new world currency..namely Gold. “”"
comes in wat r the implications of it ?????????????
There’s a fair amount of posting on this site about Reserve banks and commodity backed currencies. Do yourself a favor and try and download a documentary called ‘The Money Masters’. I’m not all the way through it yet but it looks at the history of reserve banks and also goes into why a gold backed currency is not the answer to our problems. It’s from the early 90s – from what I can gather – but it’s one of the best financial documentaries I’ve seen, and I’ve seen quite a lot lately.
I’d be interested to hear Kris’ comments on this too.
Nick, why would they opt for gold? Why would they have their hands sown into their own pockets? They want to have those free, so that they can keep putting them into ours, don’t you think?
SD @ 5:
But Australia is DIFFERENT …
We are the lucky country, and so house prices will continue to rise ad finitum
good to see everyones had dinner…………..
now to answer me own
Q6- but how can they ever be KICKED OUT ????????? how?
A- never …maybe when the sun expires & only then –ho-hum
cb…I believe china is a latent “problem”
If the most desired commodity in this country is housing, why not base the currency on it? Why bother with gold?UN:F [1.7.3_972]
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Sum up the hedonic values (as per RD-Rismark methodology) of all dwellings in the country – this is how much money you can have in circulation. Every year, valuer-general values all occupied properties in the country, as it already does. Built and sold 2% more homes – can have 2% more dollars!
Housing as a commodity is not that different from precious metals – only a small %% can be added each year.
Oops, forgot to close the bold tag
Nick – sorry, I don’t quite follow you. Kindly elaborate. Ta.
Hey CB,
Simply because you decide to call something ‘facts’ doesn’t make it so let’s deal with each one…
Kris – Admittedly, I am only half-way through this article, but here are some facts:
1. House prices more or less have kept up with inflation.
2. Inflation erodes the value of your savings held in cash and cash equivalents that are not real assets.
3. Inflation also erodes the burden of debt. In fact, this is how governments default on onerous and unpayable debt, but inflating its burden away.
1) Says who? What evidence do you have of this? No, looking at a graph from 1980 doesn’t count. Look at a graph from 1550. Don’t worry I’ll give you a link soon.
2) Agreed.
3) You’re showing your arrogance here by not reading the article before posting because Kris covered that… re: Castle with a leaky roof.
Links:
1) 400 Yr Graph Real Estate History…
http://www.netspar.nl/events/pensiondays/feb16/prespieteichholtzoutput.pdf
This more specifically dealing with asset price bubbles address at a 2003 RBA conference… Read SECTION 3.
http://www.rba.gov.au/publications/confs/2003/simon.pdf
Yes, we can have property crashes too… just like the rest of the world.
Ignorance is bliss…
JJ
cb…China wants to be the reserve currency hence it’s surreptitious accumulation of gold reserves. The banksters don’t quite want this to happen. Central banks have been buyers of gold rather than sellers of recent times. The floating exchange system as it now exists is going be folded. We are moving toward a one Western world currency, and one Western world central bank of central banks.
Because all Western world federal budget deficits are out of control and there is no practical method to reverse this condition in the foreseeable future, there is no other alternative. That means the two major Western World currencies will be Gold and the SDR (type entity).
For definition of SDR go to http://www.investorwords.com/5779/SDR.html
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anyone read the afr today?
Glen Stevens came out and basically said the RBA will no longer target just inflation but asset prices too, i.e. house prices. This is nothing new – he has been strongly commentating on house prices since the GFC.
Second article was Wayne Swan decrying that state governments must immediately increase land supply and therefore housing supply.
Looks like the future for property investment is turning south
dave-
only martyrs will succeed ,, some of my admired heroes, JFK, MLK, RFK……
the things too big…. u can never beat coersion,clique,big money,power,corruption.watever….& then bullets
that guy in front of the RBA HAS BRAVADO (great kudos to him)
you would need a million of him to do something
but he’s not even a pimple in the ocean
if he pushes too far who knows?
GB – Yes, finally he is starting to talk openly about the bee in his bonnet. And now that it is out and he is not challenged over it, he can go ahead and prick the damn bubble that he considers housing to be, since it would not burst on its own. Anyhow, the result will be the same: economic devastation. Some here will jump for joy over it, that will be the day most Australians will rue not long after. That would be my expectation, anyhow.
Dave – placing restrictions on anyone just because they belong to a particular group, class, or ethnicity, colour, creed, etc. is gross discrimination and a violation of individual, human rights under any decent system of morality. Rather, the solution is to place restrictions on certain practices and enterprises, regardless of who participates in them. Let us try to keep this perspective, or will fall off on the other side of the horse just as badly as those with whose actions and agendas we disagree.
And even though it is true and understandable that activities requiring collective action will tend to bring together individuals with common interests or from similar backgrounds, the principle in question must be adhered to. Otherwise, we would end up stigmatising innocent members of families, cultural and racial groups who should not be. That would be my understanding of it, anyhow.
To give you an example, I have a very good friend from a Hungarian Jewish background. He is a great guy with a faultless character and sense of fairness. About ten or so years ago he got a scholarship and studied as a PostDoc Fellow at one of the universities in Israel. While at the university, ha made friends with both Jewish and with Palestinian fellow students, which was quite in character for him to do. It did not take him long to start feeling distressed about the whole situation in Israel on account of how the Palestinian people were being treated in their own ancestral homeland. Worse, his Jewish colleagues started to distrust and marginalise him for his open friendship with Palestinian students. He was so disgusted by the whole experience that he left early.
Now, when you take an individual Jewish person with those sorts of morals and enlightened convictions, you would not want to lump him together even in thought with the Zionist fanatics. That would be clearly wrong and a gross injustice. The point, once again, is that we must discriminate, and judge every person on the basis of what they do, not on the basis of what group, colour or culture they might belong to. I hope that you see my point, and I trust that on reflection do not find it disagreeable.
What does the laughter mean in this video clip of Obama?
http://www.youtube.com/watch?v=q20cnn8vOfg&feature=player_embedded
Who needs jokes for a laughter when we have porkies like these, right? If Obama is being openly laughed at for pushing the alarmist line, what does it say about the intelligence level of Rudd, Wong, Gillard & Co., who keep pushing the same lines? Do they seriously believe that they will avoid similarly being laughed at themselves one day?
http://www.youtube.com/watch?v=VOmeKr5J-do&feature=related
lol CB – Rudd is a dudd and Wong is wrong…
The funny part is i think they MUST know it – but they dont care as the truth is not a factor in the leftist psychy. All that matters is their agenda
Anybody who doubts this fact need only read a truly remarkable and fascinating book called
THE LIBERAL MIND:
The Psychological Causes of Political Madness
By Lyle H. Rossiter, Jr., M.D
Have a read about it here:
http://www.libertymind.com/
cb might be glad to know that I agree with everything he said @21, even though it frustrates me that maintaining such high ideals prevents us from acting against a group that seem to be our enemies. I too have known individual jews I would describe as good people and even my friends, but for all I know the one I knew as a young man might by now have been recalled to Israel for his military service where, with the help of fellow jews he is probably acting more like a thug bullying Palestinians.
When people go to war it’s certain always that some innocent people will be wrongly accused of the crimes perpetrated by those they associate with. That’s one of the sort of considerations that restrains good people from going to war, whilst all around them, evil flourishes.
cb concluded: ‘The point, once again, is that we must discriminate, and judge every person on the basis of what they do, not on the basis of what group, colour or culture they might belong to.’ Sounds fair, and if we had the resources governments spend on the CIA, ASIO, and like organizations we might eventually get around to judge every person amongst our potential enemies. But we don’t have those resources. It seems most Australians are not even interested in identifying the ones who are spoiling our world, let alone then doing something effective about it. The prophets who, 10 and more years ago, warned that we had almost run out of time to save Australia were right. It is evidently now too late!
David – i didnt think i’d ever say this – but i actually agree with most of what you said @ 26! ;p
Of course you are referring to Jews, whereas from my standpoint the exact same truth is applicable to Muslims…
Hell, if we had to apply such generalisations on the desirability of groups entering Australia, based for example on statistics of their involvement in criminal activity, then we’d very quickly put a stop to our overly generous intake of refugees from the third world!
But, as CB rightly points out, this would be unfair to those individuals who do not have the undesirable traits of their group.
just a little more on the “secret bankers meeting ” in sydney.
http://www.news.com.au/business/top-banker-jean-claude-trichet-cuts-aussie-trip-short/story-e6frfm1i-1225828556336
again I agree with cb…
Zionists don’t make all jews bad
Jihadists don’t make all Muslems bad
Charismatic Christians don’t make all christians bad.????
It was interesting to hear on the radio this morning that the ABS has (like all real estate, banks and housing invested firms) told the government that they need to do more to help first home buyers. Apparently its now the stamp duty that is not allowing FHB into the market…. the simple fact that houses are too expensive for what they are never seems to occur to these guys. Its every other reason you can this of except houses are over valued bricks and mortar. Once again the solution – throw more money at the industry…. seriously guys if like cb said, we should not place restrictions on industry groups to their detriment, then its fair that they should not have policies put in place that prop up and increase their income at the expense of others. Some might say… i have heard of this idea… its called a free market where shifts in price/demand/supply etc are allowed to take a natural course. You hardly need a degree from Harvard to invest in a product that has been essentially guaranteed by the government!!! a product in what is supposed to be a free market.
Well put AC!
going back to absolute basics – cb, PF Dave Kidd etc
the argument of supply and demand is fine and these should be the determining factors on how a market shifts.
If the government has not intervened in the housing market do you still thing it would be in the position it finds itself today?
If yes then why?
If no, then i have another question. Without government interference the housing market should have fallen to reflect a necessary correction in cost. (a correction that would have been a lot gentler than the one we now face i might add) Should house prices have corrected then the supply/demand theory worked. there was a high demand when houses were going up in price… once the correction begins there is less demand and prices continue to correct. all these things can and should have happened without there being a shortage of housing. all this simply proves is that an industry with an excellent marketing team and very little morals can create over demand for a product.
Ah, yes, good points. We should not forget about the Western world’s countless missionaries who like the plague spread out all around the world in poorer countries to bribe people into changing their religion and belief system, “so that they can be saved.” What a blight on the landscape they must be, but hey, they are doing some good work, too, feeding the poor, etc., so their belief pushing is excused and overlooked. We sure live in a colourful world.
Jon – if you are still with us, you should find the following news item reassuring for the safety and purchasing power of your cash holdings:
“Feb. 9 (Bloomberg) — Nobel laureate Joseph E. Stiglitz said the prospect of a default by the U.S. or the U.K. is an “absurd” notion constructed in financial markets.
Both nations “deserve to keep the Aaa rating” and “the likelihood of a default is so small, particularly in the U.S. because all we do is print money to pay it back,” he said in response to questions after a speech in London yesterday. “The notion of a default is so absurd, it’s another reflection of the absurdities in the financial markets.””
By the way, how are you doing with your shorts?
David Kidd,
Your anti-Semitic rant is ignorant and offensive. You carelessly say “Having more enjoyable things to do with our time, we did not prove that exhaustively”. Can I suggest that you do take some time to research the topic before denigrating an entire religion. And I don’t see how spreading hate of Jewish people helps make this a better world.
Yet even if you believe you are correct, placing restrictions on a particular group is gross discrimination, as CB says. I could just as easily argue that America, the banks, debt and inflation are mainly controlled by white males, or people over 5 ft tall, or people with brown hair, and suggest restrictions on each of those groups. Surely if restrictions are valid, they should be placed on everyone.
Sorry, the reference is:
http://www.businessweek.com/news/2010-02-08/stiglitz-says-u-s-u-k-default-is-absurd-investor-notion.html
cb – it doesn’t mean the bubble will be pricked but i agree it probably will happen
What is important is to note what the RBA does. They increase rates when inflation increases and rates are always above inflation.
For example, if the inflation rate is 4% then we would expect to pay about 8% interest….
So rates being rates the RBA will simply increase rates when house prices increase and rates will always be above price rises
Therefore, a 4% increase in prices you will pay 8% rates – the time of double digit price increases just died with Glen Stevens. He will make sure prices only rise with inflation from now on
Maybe house prices will be included in the CPI measurement???
All i know is the RBA is attacking prices and the government is attacking supply
Dangerous times indeed…
we have historically low rates and yet 7% of Victorians are basically insolvent. Geez what happens when the boom comes back and rates inch up?
I am glad i have no debt!!!
http://www.news.com.au/money/money-matters/black-marks-for-being-in-the-red/story-e6frfmd9-1225828989992
Gotta love how the RBA is being pulled in both directions. We are adding jobs like its going out of fashion and our credit growth is falling along with severe mortgage stress rising
Damned if you do (bubble pops), damned if you dont (inflation takes hold)
http://www.theage.com.au/business/jobless-fall-signals-higher-rates-20100211-nthc.html
Thanks, GB, all that is very thought provoking, and I will need some time to absorb it all. And, yes, I was wondering about how they are going to factor in asset price increases into the equation, but as you say, maybe they will just tinker around, again, with the CPI.
Another thing I have been mulling over has been this, that when new money is being generated at some cracking pace of 15% or so per annum, which is three or four times higher than GDP, the excess money will have to go somewhere in the economy, so it will either show up in higher consumer prices if that is where it is spent, or in houses, if that is where it goes, or the stock market, if that is where it is invested, or indeed some other asset class, such as the metals.
Now, housing being only one possible asset class among many that can be blown up into a bubble by all this excess money creation and liquidity, why target only housing and consumer prices, but not these other asset classes? Any suggestions?
GB, a very nice irony for the RBA to be in.
Glenn Stevens is a very contradictory beast at the moment. Firstly, he gets cold feet and doesn’t raise interest rates (I suspect he $hat himself when he saw that home lending finance fell) because he’s worried about a housing crash. Then he gives a speech that tells us that central banks should be looking to contain asset price bubbles, despite the fact that he didn’t have the balls to follow his own recipe a few days earlier. And now unemployment is falling, which suggests a possible rate rise.
As GB said, I reckon it’s a case of damned if he does, damned if he doesn’t. My guess is that he’ll err on the side of avoiding pricking the housing bubble at the expense of higher inflation. After all, what else would you expect from a gutless central banker who talks a big game but then runs scared when it’s time to act on his pronouncements. I’d be very surprised if he increases rates in March.
Dave, I have been thinking about Drew’s comments and it occured to me that the origins of Christianity itself, and perhaps somewhat more arguably that of Islam, both go back to the monotheism of the Jewish faith. Indeed, it would be absurd to deny that Jesus, and his disciples, if they existed at all, were all Jewish. Even so, it would be an even greater absurdity to therefore blame all the misdeeds of Christendom on the Jewish people. And especially, that we find among historical Christendom’s shameful sins the prosecution of the Jewish faith.
I trust that you see the mess and the absurdity of such a simplistic blame game, not to mention the sickening injustice it would entail. So, once again, we come back to the need to differentiate, to distinguish between those who are doing wrong and those who are not, irrespective of background, class or crede.
In order to prosecute crimes and wrongs, we need not make any reference to coincidental characteristics of any group of people, but simply focus on their actions, and that can, and indeed must include cases where those coincidental characteristics happen to be overwhelmingly present, as in the case of the money men who we believe are behind much of the scam that we have been whingeing about. What do you think?
It is intersting and i need to think about it some more.
With the RBA targetting prices in property then this market is not going to be able to get the returns needed. You cant really use the share market because its too risky and can only go so far before shares become expensive – just look at what happened over the last few months. Commodities – maybe – but only so far because growth in commodity prices will only lead to inflation.
So really if they target prices they take out property. Commodities are already targeted by inflation and the share market isn’t viable
A quick logical argument i can think of is new money will no longer expand at 15%. Credit is going to contract as there is no place for the excess money to go.
Unless the 15% of new money goes to the governments??? NBN???
Ralph – quite so. But do you think that he should go ahead with the increases anyway? Come hell or high water? Do you think that America is better off in any sense of the word with their bust and the attendant devastation, instead of living with with high inflation for a while?
On the subject of high inflation, it seems to me that the money printers cannot have it both ways. They cannot print three or four times more money relative to GDP and not have the excess money showing up in higher prices somewhere in the system. It is a dumb expectation, and an internally inconsistent one at that.
mel gibson’s a great ambassador
Well, GB, that is just it. That is where the debt is being pushed at the moment, onto the government, which, ehm, is our national credit card. Anyhow, as you say the private market is pretty much saturated and it is probably going to shrink, or stagnate at best, from here on for quite a while. But our credit card has hardly been used, and with the elections coming up and robber barrons keen to see us borrow to build some monumental white elephants to drown us down the track, it is a fair guess that the government is going to continue with its splurge, and so the printing presses might be kept at speed for a while.
But, as you know, I have some conspiracy demons lurking not far behind my shoulder, so I would have absolutely no courage to stand firmly behind any of these scenarios.
i agree cb, the government is going to take on the excess or credit supply will contract
As for america: i think they are better off now that they have had a property crash. They have high unemployment that will reduce over time and they have a future ahead of them that includes affordable property prices. A good flushing out of the system
Maybe thats where the excess supply goes – back to the american property market?
And so the cycle continues….
Hi Ralph – I’ll just leave you with one thought.
This is an election year.
AC – lets see what Ken Henry proposes.
Dave, I am glad that Drew and cb have pointed out the problems with your post about Jews controlling America.
I would also note that a Google search for ‘Jews control America’ is not, as you suggest, ‘as good a place as any’ to find accurate information on this topic. Try Googling ‘aliens control the world’ or ‘women are the devil’, and see how compelling and accurate the results of those searches are.
My point is that people say crazy things, particularly on the internet, and you should not simply accept everything you read, particularly when those things involve spreading hatred against a particular group.
Of course your search for ‘Jews control America’ will bring up crazy hateful web pages! What else would it bring up? If you actually want to get some more balanced views on this issue, you might try searching for ‘Israel Palestine debate’ or ‘Middle East politics’ or even ‘persecution of Palestinians’ or (I think these ones might be particularly helpful for you) ‘persecution of Jews’ and ‘Jewish conspiracy theories’.
Lol, GB, talking of flushing, my impression has been that the great American flushing you talk about was a flusing out of the people’s money earned through hard work, straight into the pockets of the robber barrons on Wall Street. And, instead of it being a flushing that clenses and refreshes, it has been a flushing that has indebted and empoverished an entire nation, one of the world’s richest.
So, I see it quite differently, as you can tell. To my mind, it looks like the predators and parasites have just soiled their own nest, and the scary thing is that therefore they now are headed to other hunting grounds. And, as you know, my chief fear that we are going to be next. Nothing I can see to look forward to in that.
Yes, Peter, it is an election year. That means we can expect all sorts of surprises.
Politically, I reckon Rudd has his b@lls in a vice to some degree. All mainstream figures report that the economy is going gangbusters. So this means that the gov’t is going to have to keep to its self-imposed austerity constraint of limiting increases in expenditure to 2%. That is going to be f***ing difficult for Rudd, the economic conservative that he is. But he’ll have to at least pay some sort of lip service to it to retain some sort of economic credibility. The tables have been turned – Rudd is the big spender while Abbott is demanding that ‘this reckless spending must stop’. I’m sure he’s feeling a bit of pressure. But if it comes down to house prices falling and Rudd pulling out the national credit card, I think the credit card will probably win.
I don’t think Stevens will be too afraid to raise rates in an election year. He did it in 2007 to show that he wasn’t in Howard’s pocket and I reckon he’ll do it again if he wants to. In a funny sort of way, raising rates in an election year (even better in an election campaign) is a badge of honour for the RBA as it shows their ‘independence’. But being the guy who pricks the housing bubble? I reckon that’s something he’s very worried about.
my comments were more long term than short term. I think the yanks will take years to get over it but they will eventually
And i agree, the new hunting ground is Asia. It can be seen in nearly every article – HK property prices up 50% this year, China has empty shopping malls and buildings, South Korea over heating etc….
Maybe the solution is stop protecting the creditors and default on global debt. That way the excess liquidity sloshing around trying to find a home is destroyed
cb@42asked ‘What do you think?’
I think what you say is fine but ask: What are you doing about it?
As for Drew @ 35 feeling offended by what he calls my Anti-semitic rant I say good. Now he knows how I feel when I hear almost daily reports of the atrocities the ones he supports perpetrate upon their neighbours.
cb – personally, I reckon the RBA should sit on rates for a little bit. The stimulus is quickly fading, credit seems to be contracting, the FHOG boost has ended and retail confidence seems to be a little flat. It seems to me that the man on the street is generally cautious. I think the screws are being tightened, but another rate rise would probably tighten the screws a little too quickly. As it is, I reckon there is probably more likelihood of a rate cut in the near term, particularly if housing finance figures continue on the trend they are on.
Ralph – I would agree with that. Also, you remarked earlier:
“The tables have been turned – Rudd is the big spender while Abbott is demanding that ‘this reckless spending must stop’.”
To which I can only say: Now, how telling is that?! Here we all go, on our merry merry-go-round.
China released its inflation figure today and its down from last month. The commentators loved it and have concluded that China has contained inflation and growth with continue to boom without consequence….
In the same article is said that bank lending total 1.4 trillion yuan. Thats a whopping 16 trillion annualised. The chinese want last years total lending to fall below last years 9 trillion so no wonder that stopped bank lending in Jan.
However, the reason the GFC brought america, england and europe to its knees was not inflation – it was excessive credit but once again credit growth is simply ignored.
Dave – to tell the truth, probably not much. I have seen too many revolutions and too many organised this and that to have faith in any of them. I live and let live – besides talking a lot, and spending way too much time on this forum and generally the internet. One day, I know, I will have to shake this addiction to being informed and to understand.
Ralph, I found your comment rather intriguing that Glenn Stevens is probably frightened of being the one pricking our bubble(s). No doubt he will be cursed for it well beyond the grave for it, but I just find it difficult to believe that the man would care. I would like to believe what you believe, however, so feel free to mess with my head.
GB – oh, yes, the good old concoctions of fact and stats will keep pouring forth as demanded by demand. In a fiat currency system, where credit creation and money printing are used as an excuse for encouraging growth, the only way to ease the burden of debt is to keep doing the same thing, ever inflating the value of that debt away.
There is no other way to deal with debt, unless you do the decent thing and you write it off from time to time in recognition of the fundamental nature of the system you have (remember the meaning of the Jubilee), or face an inevitable and catastrophic collapse.
As is our fate, the new slavery could well turn out worse than the old.
How so? Well, after tasting freedom and prosperity, the new poverty could be much harder to bear.
Ralph @ 53
You know that it is always a matter of great concern for me when we agree.
Please stop that.
Amazing! -The first ever global depression will go down in history horribly misunderstood. What a pathetic bunch of ignorant fools we have become. Consumer junkie credit card morons. Perfect little victims.
Its like a game of Monopoly. In America, the richest 1% now hold ALMOST 1/2 OF ALL UNITED STATES WEALTH.
A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives.
ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them.
The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year.
THE RICHEST 1% INCREASED THEIR AVERAGE BOTTOM LINE WEALTH AGAIN. On average, they are now worth over $4,000,000 each. That’s an all time high. As a group, they are now worth well over $17,000,000,000,000. THAT’S WELL OVER SEVENTEEN TRILLION DOLLARS. Another all time high. Which by the way, is much more than the entire middle and lower classes combined. Also more than enough to pay off our national debt, fund the Iraq war for a decade, repair our infrastructure, and bail out the US housing market.
Still think that our biggest problem is China? Think again. Its the 1% club. That means every big name celebrity, athlete, executive, entrepreneur, developer, banker, and lottery winner. Along with many attorneys, doctors, and politicians. If they are rich, then they are part of the problem. Their incredible wealth was not ‘created’, ‘generated’, grown in their back yard, or printed up on their command. It was transferred FROM US TO THEM. Directly and indirectly. Its become near impossible to spend a dollar without making some greedy pig even richer. Don’t be fooled by the occasional loss of a millionaire’s fortune. Overall, they just keep getting richer. They absolutely will not stop. Still, they have the nerve to pretend as if they care about ordinary people. ITS A LIE. NOTHING BUT CALCULATED PR CRAP. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME.
Where did you get that rousing piece from, etch? I must say it does not seem to match your more regular posts. Nevertheless, it seems a pretty accurate summary of our position, and I like your call to the people to wake up.
What do you suggest people do exactly, if and when they do wake up? In other posts you have said that nothing can or should be done when I was attempting to find a way of using the information that most of our problems are controlled by jews… and unfortunately I have not seen you propose anything else likely to work, as yet.
Sorry EC, I must have overlooked your post @52. You wrote: ‘I am glad that Drew and cb have pointed out the problems with your post about Jews controlling America.’ But of course the problems caused for us by Jews controlling America are far greater than any my post could generate.
You mention some of the rubbish that can be found by doing Google searches, but it’s worth pointing out that by including everything relevant in its search results, Google gives us the opportunity to sort out and discard the rubbish ourselves instead of letting some probably biassed big brother do the sorting for us. If we were seeking info likely to be unfavourable to jews you can understand why we would not want a jew deciding which articles we should read.
EC went on: ‘Of course your search for ‘Jews control America’ will bring up crazy hateful web pages! What else would it bring up?’
My search did indeed find some crazy hateful web pages, and I have never heard a good explanation of why it is people get so worked up with hatred for jews. But my search also found more sane, well researched articles that closely aligned with my experience of more than 10 years of noting the doings of jews throughout the world. I suppose when someone finds that something written agrees with things he has seen reported elsewhere over many years, it is natural for that someone to conclude that what is written is credible.
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