Merged: Is the worst of the Global Financial Crisis behind us?
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Interest rates in Australia are forecast to double in the next 12-18 months
What is the bet that Malcolm is going to be dumped after the ute gate fiasco and Joe will take over....meanwhile the economy is going quite well as opposed to what some have predicted.....
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I guess one 'sure fire' indicator of the state of the Aust economy is Qantaslink restarting their pilot cadet scheme. Think about it...what would this signify?
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If interest rates double in the next 12-18 months, there will be a catastrophe in the first home owner area. Just about everyone who has taken out a loan in the last 12 months will not be able to meet their mortgage payments. Given that the RBA has taken the action they have (lowering rates) to stimulate the building industry, i doubt they will raise rates to that extent because it will undo a lot of the good work that has been done with stimulus packages etc.
Having said that, if inflation looks like getting out of control then anything is possible.
V
Having said that, if inflation looks like getting out of control then anything is possible.
V
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With Interest rates being at a 49 year low of 3.00%, and Australian house prices being the highest in the developed world, it doesn't take a genius to figure out what is going to happen soon. Are 6.00% interest rates out of the question? We had them last year!
Many first home buyers will not be prepared for a doubling of their interest bill, but the Govt will have no choice but to raise rates.
LL in answer to your question, the Liberal party probably did say that, but they are in good company.
The ABC: Days of low interest rates near an end - ABC News (Australian Broadcasting Corporation)
Bloomberg: Australia Central Bank Shift Makes Rate Rise Likely ?Next Step? - Bloomberg.com
and others....
Don't say you weren't warned.
Many first home buyers will not be prepared for a doubling of their interest bill, but the Govt will have no choice but to raise rates.
LL in answer to your question, the Liberal party probably did say that, but they are in good company.
The ABC: Days of low interest rates near an end - ABC News (Australian Broadcasting Corporation)
Bloomberg: Australia Central Bank Shift Makes Rate Rise Likely ?Next Step? - Bloomberg.com
and others....
Don't say you weren't warned.
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Australian house prices being the highest in the developed world
What about other parts of Europe...Monaco....Rome...Paris....
How about the US...NewYork for starters?
Australian prices highest in the developed world...I doubt it.Not even in Double Bay or Toorak.
Grandpa Aerotart
James Ozzie - Yes Senator Fielding was shown a graph, actually probably several, that showed the data from 30 years of satellite atmospheric temperature recordings for all of the world, all day every day. Accurate to .1 of a degree C - that shows the world did indeed warm a little up to the late 90s but has been cooling since - for 10 years - while atmospheric CO2 concentrations continued to rise.
Consensus of millions of scientists? You REALLY need to read the IPCC Science Report, as opposed to the Summary For Policy Makers...one says we are not sure and one says we're all doomed. I have read both - You?
And then there are the literally 1000s of scientists with PHDs in relevant fields who say its a fraud.
We could look at the drought we have recently had - every level of govt from Local to Federal as well as the BOM saying it was the worst on record - but look at the BOM rainfall records for all of Australia going back 120 years and you see it actually wasn't - just another drought - made to seem worse because of population increase in the 25 years since the last dams were built.
Why would they lie?
Notice how they, socialist state govts, have approved desal plants in QLD, NSW, Vic, SA and WA (built before the libs got back in)? Desal plants cost 3x what a dam costs and produce 1/3rd the fresh water. They require MASSIVE amounts of electricity to drive them - that electricity must come from coal fired power plants because the socialists/greens won't build nuclear power plants and (VERY expensive) wind farms don't produce usable electricity for enough of the time that they require almost 100% backup base load power from coal/gas fired power stations.
Why would they do this?
Well state (labor) pollies need somewhere to retire to after they get booted out of power and labor unions need somewhere to invest there members pension funds - what better than to invest in labor govt mandated monopolies.
You and I of course pay a LOT more for electricity and water. In fact it is privatisation of both by stealth.
And then we get to carbon trading - the next MASSIVE bubble to follow on from all the others.
And we have Mr Rudd - someone so captured by his ideology that he writes great long missives on what has caused the GFC and gets it spectacularly wrong. The GFC was caused by 30 odd years of less than great US Govt policy that facilitated, in fact almost demanded, gross mismanagement in the banking sector.
Then we have the current suckers rally going on - why suckers rally?
The US Govt lent the big banks (Goldman Sachs etc) 100s of billion at interest rates approaching zero - they were supposed to lend this money on in order to 'free up the credit markets and grease the wheels of the economy'. The banks DID NOT do that - instead they invested the money through their Trading arms and the huge banking profits reported this last week (that surprised everyone - well not everyone - the banks were not surprised) are a result of that. So this stock market rally/bubble has been caused by the same thing/people that got us in trouble in the first place - vast amounts of cheap money looking for something to do.
What do you suppose happens when the banks decide they have made as much money as they can and pull all those 100s of billions out of the market - to pay back the TARP etc to the US Govt - oh and their bonuses of course?
Remember what happened last year with oil - for all the same reasons?
That is exactly like a Booky lending free money to a broke gambler.
Housing stimulus?
Studies show that the first home buyers scheme has increased the average house bought under that scheme by first home buyers by about 50k. That is what happens when you start throwing 'free' money around. First home buyers would have been 30k better off without the first home buyers grants. And that ignores the fact that prior to the GFC an average house in Australia was 7-8 x average wages - compared to the US/Canada/EU/UK etc where it was around 3-4 x and plenty of other 'western countries' where it was less than that. In the US house prices (30 state averages) have dropped 30-40% in the last year from that 3-4 x average wages. It appears the average house in Australia has gone up several % just in the last financial quarter - sustainable?
In Japan in the early 90s when there bubble finally burst house prices decreased 80% and have never recovered to date. That financial collapse was followed by a 'building decade' remarkably similar to what Rudd is doing right now - it didn't work - for the same reasons it won't work in Australia.
Green/left wing Ideologically driven programs like pink batts, wind farms and desal plants won't put Australians in a better position to pay down national debt when things get better - something along the lines of another Snowy River scheme - dams and water infrastructure that balances the water resource between the wet north and dry southern states, as an example, would.
So instead of getting cheaper water/power etc we are set to face massive increases of electricity/water bills at the same time as unemployment continues to rise, interest rates go up and taxes increase.
How else do you think they are going to pay back the govt debt - you did realise the Govt handouts were not free didn't you? They have to be payed back - by you!
That is how the system works - your taxes get wasted supporting big govt - Corporate taxes in the boom times provide the surpluses and when they disappear in downturns (or after they have been chased offshore by Carbon taxes) Govts BORROW money - and you get to pay it back with increased taxes.
So to answer the thread question do I think the worst of the GFC is behind us?
No - not while the same feckless morons are running things.
Consensus of millions of scientists? You REALLY need to read the IPCC Science Report, as opposed to the Summary For Policy Makers...one says we are not sure and one says we're all doomed. I have read both - You?
And then there are the literally 1000s of scientists with PHDs in relevant fields who say its a fraud.
We could look at the drought we have recently had - every level of govt from Local to Federal as well as the BOM saying it was the worst on record - but look at the BOM rainfall records for all of Australia going back 120 years and you see it actually wasn't - just another drought - made to seem worse because of population increase in the 25 years since the last dams were built.
Why would they lie?
Notice how they, socialist state govts, have approved desal plants in QLD, NSW, Vic, SA and WA (built before the libs got back in)? Desal plants cost 3x what a dam costs and produce 1/3rd the fresh water. They require MASSIVE amounts of electricity to drive them - that electricity must come from coal fired power plants because the socialists/greens won't build nuclear power plants and (VERY expensive) wind farms don't produce usable electricity for enough of the time that they require almost 100% backup base load power from coal/gas fired power stations.
Why would they do this?
Well state (labor) pollies need somewhere to retire to after they get booted out of power and labor unions need somewhere to invest there members pension funds - what better than to invest in labor govt mandated monopolies.
You and I of course pay a LOT more for electricity and water. In fact it is privatisation of both by stealth.
And then we get to carbon trading - the next MASSIVE bubble to follow on from all the others.
And we have Mr Rudd - someone so captured by his ideology that he writes great long missives on what has caused the GFC and gets it spectacularly wrong. The GFC was caused by 30 odd years of less than great US Govt policy that facilitated, in fact almost demanded, gross mismanagement in the banking sector.
Then we have the current suckers rally going on - why suckers rally?
The US Govt lent the big banks (Goldman Sachs etc) 100s of billion at interest rates approaching zero - they were supposed to lend this money on in order to 'free up the credit markets and grease the wheels of the economy'. The banks DID NOT do that - instead they invested the money through their Trading arms and the huge banking profits reported this last week (that surprised everyone - well not everyone - the banks were not surprised) are a result of that. So this stock market rally/bubble has been caused by the same thing/people that got us in trouble in the first place - vast amounts of cheap money looking for something to do.
What do you suppose happens when the banks decide they have made as much money as they can and pull all those 100s of billions out of the market - to pay back the TARP etc to the US Govt - oh and their bonuses of course?
Remember what happened last year with oil - for all the same reasons?
That is exactly like a Booky lending free money to a broke gambler.
Housing stimulus?
Studies show that the first home buyers scheme has increased the average house bought under that scheme by first home buyers by about 50k. That is what happens when you start throwing 'free' money around. First home buyers would have been 30k better off without the first home buyers grants. And that ignores the fact that prior to the GFC an average house in Australia was 7-8 x average wages - compared to the US/Canada/EU/UK etc where it was around 3-4 x and plenty of other 'western countries' where it was less than that. In the US house prices (30 state averages) have dropped 30-40% in the last year from that 3-4 x average wages. It appears the average house in Australia has gone up several % just in the last financial quarter - sustainable?
In Japan in the early 90s when there bubble finally burst house prices decreased 80% and have never recovered to date. That financial collapse was followed by a 'building decade' remarkably similar to what Rudd is doing right now - it didn't work - for the same reasons it won't work in Australia.
Green/left wing Ideologically driven programs like pink batts, wind farms and desal plants won't put Australians in a better position to pay down national debt when things get better - something along the lines of another Snowy River scheme - dams and water infrastructure that balances the water resource between the wet north and dry southern states, as an example, would.
So instead of getting cheaper water/power etc we are set to face massive increases of electricity/water bills at the same time as unemployment continues to rise, interest rates go up and taxes increase.
How else do you think they are going to pay back the govt debt - you did realise the Govt handouts were not free didn't you? They have to be payed back - by you!
That is how the system works - your taxes get wasted supporting big govt - Corporate taxes in the boom times provide the surpluses and when they disappear in downturns (or after they have been chased offshore by Carbon taxes) Govts BORROW money - and you get to pay it back with increased taxes.
So to answer the thread question do I think the worst of the GFC is behind us?
No - not while the same feckless morons are running things.
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......wot CC sed.....
to the GFC an average house in Australia was 7-8 x average wages - compared to the US/Canada/EU/UK etc where it was around 3-4 x and plenty of other 'western countries' where it was less than that. In the US house prices (30 state averages) have dropped 30-40% in the last year from that 3-4 x average wages. It appears the average house in Australia has gone up several % just in the last financial quarter - sustainable?
to the GFC an average house in Australia was 7-8 x average wages - compared to the US/Canada/EU/UK etc where it was around 3-4 x and plenty of other 'western countries' where it was less than that. In the US house prices (30 state averages) have dropped 30-40% in the last year from that 3-4 x average wages. It appears the average house in Australia has gone up several % just in the last financial quarter - sustainable?
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Alan Kohler- Today: 05 Aug 09
Chimbu- exceptionally well said (and written).
In the State of Queensland they will be extracting an extra $1,000 per annum for every man, women and child as extra tax revenue to service the borrowings only- no redemption on the Debt.
Not to mention flogging off any asset that yields a quid- the Coal rail haulage network and ports I find amazing, given that they were integral parts of diversifying the Consolidated Revenue stream- that once delivered/set Qld apart from other States as far as fiscal strength and stability. A result that will deliver more and more dependence on Canberra/GST.
It also beggars belief that being a Great Tourism destination "apparently", they sold the remaining Gvt Share in BACL (BNE Airport) and the other Intl Gateway being Cairns (along with Mackay) to build hospitals (which morphed into refurbs), no longer able to fund basic public services.
Thought the following would add to the thread- Alan Kohler article today ex Business Spectator via ninemsn site:
Rgds
S28- BE
In the State of Queensland they will be extracting an extra $1,000 per annum for every man, women and child as extra tax revenue to service the borrowings only- no redemption on the Debt.
Not to mention flogging off any asset that yields a quid- the Coal rail haulage network and ports I find amazing, given that they were integral parts of diversifying the Consolidated Revenue stream- that once delivered/set Qld apart from other States as far as fiscal strength and stability. A result that will deliver more and more dependence on Canberra/GST.
It also beggars belief that being a Great Tourism destination "apparently", they sold the remaining Gvt Share in BACL (BNE Airport) and the other Intl Gateway being Cairns (along with Mackay) to build hospitals (which morphed into refurbs), no longer able to fund basic public services.
Thought the following would add to the thread- Alan Kohler article today ex Business Spectator via ninemsn site:
Rgds
S28- BE
Alan Kohler: How house prices are saving Australia
5/08/2009
By Alan Kohler, Business Spectator
Reading central bank statements is a bit like cracking the enigma code – you need a guidebook at the ready so you can look up the phrases and see what they mean in plain English.
A lot of people have taken yesterday's statement by the Reserve Bank as an announcement that there will be no more rate cuts and that the next move will be up. That’s not quite correct, although it might be what happens.
Governor Glenn Stevens wrote: "the present … setting of monetary policy is appropriate…" Translation: "We can now do whatever the hell we like."
For six months the Governor has either been announcing a cut or saying that "the outlook for inflation allows more scope for easing of monetary policy if needed". In central bank speak that’s an "easing bias", now we have a "neutral bias". In other words, they’re sitting tight.
So why are Australia’s interest rates now stuck higher than anyone else's in the world, apart from China, India, Brazil and a few basket cases like Iceland?
It's not because of China, or the stimulus, which everyone else got - it’s because the value of our houses didn't fall, or at least recovered the small amount that was lost last year. The bursting of a world housing bubble was the main reason for the global financial crisis, and in most countries house prices are still falling.
In Australia, amazingly, they're going up. Yesterday the ABS reported an astonishing 4.2 per cent rise in the June quarter (see Business Spectator’s report here). We happily joined in the house price bubble between 2003 and 2007, and we're still bubbling away.
Related stories:
Welcome back Mr Keynes
V6-shaped recovery
A warning from Mr Stevens
An interview with Saul Eslake, outgoing chief economist of ANZ
Australians have been whacked by the same drop in share prices, depressed by the same grim headlines as everyone else in the world, and then cheered up by the same stimulus antidepressants and petrol price reductions. The big difference is house prices.
The result has been stronger consumer confidence and retail sales and lower unemployment.
So it's a circular saw: our houses have kept their value, but the price of hanging onto that wealth is higher mortgages rates and kids who never leave home because they can't afford to buy a house.
The importance of housing was underlined this morning by the fact that stocks on Wall Street were held up because a home construction index went up.
Last night I sat next to Professor Nouriel Roubini at a CFA Society dinner in Melbourne, at which he explained why he’s still pessimistic.
Roubini is often called Dr Doom (he prefers Dr Realistic, he says) because he became famous for predicting the crisis. In his speech he said that in 2006 he predicted a 50 per cent drop in housing construction in the United States and a 20 per cent fall in house prices, and everyone called him a lunatic.
He was wrong: housing starts fell by more than 80 per cent and prices by 27 per cent (and still falling).
Now he says the US recession will end in the fourth quarter of 2009, but there is a risk of a "double dip" and even if that doesn’t happen, growth will be weak – about 1 per cent.
He was asked what he thought about the prospects for Australia. He said growth here would be 2 per cent, not 1 per cent like the US, but not the V-shaped recovery the Government is officially forecasting.
Roubini explained that he's relatively optimistic about Australia because of the rise in commodity prices, the fact government finances were in good shape, the better performance of the financial system, and above all the strength of house prices – which he attributed to the fact that Australians can’t just walk away from their mortgages as Americans can (in the US they are "non-recourse loans" and home-owners are just popping the keys in the mail to bank and heading for the local trailer park).
Nouriel Roubini is now so famous his life is a misery: he spends eight months of the year travelling the world, living out of a suitcase and not sleeping much. He was in good form last night despite getting three hours sleep after a visit to a foreign land called Kalgoorlie the day before.
His basic message last night was that deleveraging the world’s debt has barely begun and that now we have "a runaway fiscal train wreck" as well. Governments everywhere are "dammed if they do, dammed if they don’t" (that is, exit their stimulus policies and fix their budgets).
If they do, there’ll be a new, deeper recession. If they don’t, there’ll be inflation. Meanwhile, the sharemarket is being lifted by a "wall of liquidity".
But he’s actually quite optimistic about the medium term. He’s Dr Realistic, remember.
5/08/2009
By Alan Kohler, Business Spectator
Reading central bank statements is a bit like cracking the enigma code – you need a guidebook at the ready so you can look up the phrases and see what they mean in plain English.
A lot of people have taken yesterday's statement by the Reserve Bank as an announcement that there will be no more rate cuts and that the next move will be up. That’s not quite correct, although it might be what happens.
Governor Glenn Stevens wrote: "the present … setting of monetary policy is appropriate…" Translation: "We can now do whatever the hell we like."
For six months the Governor has either been announcing a cut or saying that "the outlook for inflation allows more scope for easing of monetary policy if needed". In central bank speak that’s an "easing bias", now we have a "neutral bias". In other words, they’re sitting tight.
So why are Australia’s interest rates now stuck higher than anyone else's in the world, apart from China, India, Brazil and a few basket cases like Iceland?
It's not because of China, or the stimulus, which everyone else got - it’s because the value of our houses didn't fall, or at least recovered the small amount that was lost last year. The bursting of a world housing bubble was the main reason for the global financial crisis, and in most countries house prices are still falling.
In Australia, amazingly, they're going up. Yesterday the ABS reported an astonishing 4.2 per cent rise in the June quarter (see Business Spectator’s report here). We happily joined in the house price bubble between 2003 and 2007, and we're still bubbling away.
Related stories:
Welcome back Mr Keynes
V6-shaped recovery
A warning from Mr Stevens
An interview with Saul Eslake, outgoing chief economist of ANZ
Australians have been whacked by the same drop in share prices, depressed by the same grim headlines as everyone else in the world, and then cheered up by the same stimulus antidepressants and petrol price reductions. The big difference is house prices.
The result has been stronger consumer confidence and retail sales and lower unemployment.
So it's a circular saw: our houses have kept their value, but the price of hanging onto that wealth is higher mortgages rates and kids who never leave home because they can't afford to buy a house.
The importance of housing was underlined this morning by the fact that stocks on Wall Street were held up because a home construction index went up.
Last night I sat next to Professor Nouriel Roubini at a CFA Society dinner in Melbourne, at which he explained why he’s still pessimistic.
Roubini is often called Dr Doom (he prefers Dr Realistic, he says) because he became famous for predicting the crisis. In his speech he said that in 2006 he predicted a 50 per cent drop in housing construction in the United States and a 20 per cent fall in house prices, and everyone called him a lunatic.
He was wrong: housing starts fell by more than 80 per cent and prices by 27 per cent (and still falling).
Now he says the US recession will end in the fourth quarter of 2009, but there is a risk of a "double dip" and even if that doesn’t happen, growth will be weak – about 1 per cent.
He was asked what he thought about the prospects for Australia. He said growth here would be 2 per cent, not 1 per cent like the US, but not the V-shaped recovery the Government is officially forecasting.
Roubini explained that he's relatively optimistic about Australia because of the rise in commodity prices, the fact government finances were in good shape, the better performance of the financial system, and above all the strength of house prices – which he attributed to the fact that Australians can’t just walk away from their mortgages as Americans can (in the US they are "non-recourse loans" and home-owners are just popping the keys in the mail to bank and heading for the local trailer park).
Nouriel Roubini is now so famous his life is a misery: he spends eight months of the year travelling the world, living out of a suitcase and not sleeping much. He was in good form last night despite getting three hours sleep after a visit to a foreign land called Kalgoorlie the day before.
His basic message last night was that deleveraging the world’s debt has barely begun and that now we have "a runaway fiscal train wreck" as well. Governments everywhere are "dammed if they do, dammed if they don’t" (that is, exit their stimulus policies and fix their budgets).
If they do, there’ll be a new, deeper recession. If they don’t, there’ll be inflation. Meanwhile, the sharemarket is being lifted by a "wall of liquidity".
But he’s actually quite optimistic about the medium term. He’s Dr Realistic, remember.
Last edited by Section28- BE; 5th Aug 2009 at 06:07. Reason: Read Chimbu Chuckles whole post.........
Doom and gloom, doom and gloom...
Here's a bit of trivia that will cheer some...
Due to the financial crisis apparently Gore TV couldn't pull off the IPO ...after several years of red ink and sacking employees they pulled the pin. Oh well, better luck next time...Seems Gore got a nice pay increase though...
Wonder if it will affect the programming tie-up with Sky...less global warming stories perhaps ?......
Current Media, the San Francisco cable television company co-founded by former Vice President Al Gore, canceled plans for an initial public offering on Friday, citing the bad economy...
Gore's Current Media scraps IPO plan
Here's a bit of trivia that will cheer some...
Due to the financial crisis apparently Gore TV couldn't pull off the IPO ...after several years of red ink and sacking employees they pulled the pin. Oh well, better luck next time...Seems Gore got a nice pay increase though...
Wonder if it will affect the programming tie-up with Sky...less global warming stories perhaps ?......
Current Media, the San Francisco cable television company co-founded by former Vice President Al Gore, canceled plans for an initial public offering on Friday, citing the bad economy...
Gore's Current Media scraps IPO plan
It appears the average house in Australia has gone up several % just in the last financial quarter - sustainable?
And if things get dire as the houseless doomsdayers here predict. The RBA/Government will protect the Australian housing market. And they will cut interest rates further- making recent pricing sustainable.
Housing shortage, high building costs, rental vacancies 1%, positive immigration, better lending practices blah-blah.
Plus the little things- like 1 million Australian expats overseas ( recent reports suggesting their average wage could be as high as 250K AUD per year ). Some are returning and many are sustaining the market. 30% of first home buyers on house and land packages are living at home. They aren't renters they are taking up new housing from the limited pool.
I reckon it has a bit to go. And is not a bad place to invest. I'm buying another place this week. A nice waterfront apartment in Sydney to add to the portfolio.
Are the doomsdayers dumping their Oz property?
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Is the worst of the GFC behind us?
Not on your Nelly! Just looked at the chicken guts to get a good economic reading just like the so called forecasters who never saw it coming and now see it going. Chook looks stuffed to me!
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With Interest rates being at a 49 year low of 3.00%
Australian house prices being the highest in the developed world
Ok, I admit, maybe HK is not developed 
( not being a w@nker, the prices mentioned are modest by HK standards )
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At a Aviation Conference that was reported in the Australian today, dear ex leader, yes folks he is still there, stuck like sh$t to a blanket, one G. Dixon stated that world aviation is down by 13% but Asia Pacific is down by 19% which is a concern for you all, however like the most of you it is still impossible to find a parking space due to the small aircraft carrier size 4WD's that infest most shopping centres, their owners still happily filling them with new goods, and their kids decked out, in the latest must have high tech runners, you have to wonder what recession. I have yet to see a beggar on the Gold coast, the shopping centres flat chat, the streets clogged with the latest cars, ditto the club carparks, boats that make the Queen Elizabeth obselete sailing in and out of Southport, and try to get a parking space at the airport, infact try to get on a JQ aircraft out of OOL, not easy. Either the recession has bypassed southeast QLD, or it exists only in pockets not always visable to the naked eye. This current govt. scares the pants of me, they are like my wife at a sale (its ok she doesn't read prune) totally out of control, and you have to worry about your kids and grandkids who will be paying for this for years to come, yer it sounds good all this spending on unwanted gyms, green jobs???? whatever they are, but this is all being paid for by borrowed money, and sooner or later.............. as we all found out when we got our first credit card. As a retiree it has been sh%t, and certainly not something I was prepared for, but hey we are not starving, but at least most of you will be able to make up your super in years to come, if your tax to pay off govt debt allows it!
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Not sure when..... but a finacial Tsunami awaits.....so far my business and our folks are yet to see it, and we are allbusy as for the next 9 months.......but geeez I am watching for it!
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but a finacial Tsunami awaits.
Tea leaves....your clairvoyant.....your astrologer....
or is a finacial Tsunami different to a financial Tsunami....
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Teresa,
Of course ,people are spending money.Those with a bit of cash have been able to get things at good prices.Even the poor have to shop to live also.
There is only a small percentage that suffer through a reccession and these are the ones that lose their jobs,or the high flyers that didnt have the money in the first place.
Sorry ,forgot about the people who have retired.
Now we wait for the first home owners payout to end,and interest rates to rise and all hell will break loose.
Of course ,people are spending money.Those with a bit of cash have been able to get things at good prices.Even the poor have to shop to live also.
There is only a small percentage that suffer through a reccession and these are the ones that lose their jobs,or the high flyers that didnt have the money in the first place.
Sorry ,forgot about the people who have retired.
Now we wait for the first home owners payout to end,and interest rates to rise and all hell will break loose.
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I just look around at what I can see, a-la Mr P lynch (of Fidelity fame). IMHO, there are an enormous number of people who have no "rainy day" plan. No money in the bank (certainly not 8 months of salary worth, as recommended by Susie Ortman), no term deposit/share portfolio/convertible cash. They are the "cash-flow' people. They are, and will be, fine- as long as the cash flow is unimpaired.
If they lose their jobs, they are screwed. If the economy slows more than what we currently see, they are screwed. Some of them are employees, some are small business people. But to a man, they are loaded with debt. Debt secured, and serviced, by cash flow. Not assets.
I hope it works out, but I think the gap between total disaster and a 'blip', is very, very, very small indeed.
If they lose their jobs, they are screwed. If the economy slows more than what we currently see, they are screwed. Some of them are employees, some are small business people. But to a man, they are loaded with debt. Debt secured, and serviced, by cash flow. Not assets.
I hope it works out, but I think the gap between total disaster and a 'blip', is very, very, very small indeed.
Have people forgotten what happen on the 2nd April 2009. The importance of this change in the US accounting standards is breathtaking in its scope for hiding the truth.
When, (not if) these losses are realised, we will see a repeat to late last year and early this year, i.e. a lack of confidence in the banking and financial sector and credit drying up. As market economies rely on credit to grow, economic growth will stall and the recession will probably deepen. The US followed by Europe lead us into this mess. They are the only ones that will lead us out of it.
Regarding CC post pointing to the obvious similarities to the Great Depression, here is a comparison. The comparisons are startling. My guess is that we are reaching the middle stages of a “W” shaped recovery except the last arm of the “W” will be very flat, as it was during the 1930’s.
WASHINGTON (Reuters) - The U.S. Financial Accounting Standards Board on Thursday 2nd April agreed to give banks more flexibility in applying mark-to-market accounting to their toxic assets.
The action by FASB, an independent accounting standards-setter, came after Congressional pressure to help banks that have been forced to record billions of dollars in lower values for distressed assets because of frozen markets. (Boohoo. No one stopped them recording the enormous mark-to-market profits when the times were good. Politicians in their arrogant wisdom have pressured the Financial Accounting Standards Board to relax prudent accounting standards to support the bottom line of insolvent banks. Brilliant.)
Investor groups opposed the change, saying it would let big banks conceal the real value of their toxic assets. (And surprise surprise, the US banks are now back in the black. Hidden away though from shareholders and the general public is the fact all these banks are sitting on huge mark-to-market losses which at some point must be realised.)
The action by FASB, an independent accounting standards-setter, came after Congressional pressure to help banks that have been forced to record billions of dollars in lower values for distressed assets because of frozen markets. (Boohoo. No one stopped them recording the enormous mark-to-market profits when the times were good. Politicians in their arrogant wisdom have pressured the Financial Accounting Standards Board to relax prudent accounting standards to support the bottom line of insolvent banks. Brilliant.)
Investor groups opposed the change, saying it would let big banks conceal the real value of their toxic assets. (And surprise surprise, the US banks are now back in the black. Hidden away though from shareholders and the general public is the fact all these banks are sitting on huge mark-to-market losses which at some point must be realised.)
Regarding CC post pointing to the obvious similarities to the Great Depression, here is a comparison. The comparisons are startling. My guess is that we are reaching the middle stages of a “W” shaped recovery except the last arm of the “W” will be very flat, as it was during the 1930’s.
DJIA during the Great Depression and until direct US involvement in WW2
• DJIA reached a high of 381.17 on the 3-9-29
• The DJIA declines to 333.27 by the 18-10-29 or looses 12.56%.
• Crash starts 21-10-29 and falls to 198.69 by the 13-11-29 or looses 47.87% from its high on the 3-9-29.
• Market starts to revive. From the 13-11-29 to the 17-4-30 the DJIA rises to 294.07 or 48.00% from its 13-11-29 low.
• From the 17-4-30 the market starts its long and by far more dramatic fall. By the 8-7-32 the DJIA has fallen to just 41.22 or looses 85.98% from its 17-4-30 high or 89.19% from its all time high on the 3-9-29.
• Between 11-7-32 to 5-3-37 the DJIA rises from 41.22 to 194.14 or 370.98%
• Second market crash starts on 8-3-37 and lasts until 31-3-38. In this time the market declines to 98.95 or looses 49.03% from its 5-3-37 high.
• From 31-3-38 to 7-12-41 the market is stagnant until Japan bombs Pearl Harbor.
• DJIA reached a high of 381.17 on the 3-9-29
• The DJIA declines to 333.27 by the 18-10-29 or looses 12.56%.
• Crash starts 21-10-29 and falls to 198.69 by the 13-11-29 or looses 47.87% from its high on the 3-9-29.
• Market starts to revive. From the 13-11-29 to the 17-4-30 the DJIA rises to 294.07 or 48.00% from its 13-11-29 low.
• From the 17-4-30 the market starts its long and by far more dramatic fall. By the 8-7-32 the DJIA has fallen to just 41.22 or looses 85.98% from its 17-4-30 high or 89.19% from its all time high on the 3-9-29.
• Between 11-7-32 to 5-3-37 the DJIA rises from 41.22 to 194.14 or 370.98%
• Second market crash starts on 8-3-37 and lasts until 31-3-38. In this time the market declines to 98.95 or looses 49.03% from its 5-3-37 high.
• From 31-3-38 to 7-12-41 the market is stagnant until Japan bombs Pearl Harbor.
DJIA during the Great Recession 2007 - ????
• New high of 14164 on 9-10-07.
• Market starts to decline on 10-10-07.
• By the 12-9-08 the DJIA has declined to 11421.99 or lost 19.36%.
• The crash starts from the 15-9-08.
• Market finally bottoms on 9-3-09 at 6547.05 or 53.78% below high reached on 9-10-07.
• Market starts to revive on the 10-3-09. By the 5-8-09 the DJIA was at 9280.97 or had climbed 41.76% from its low on the 9-3-09.
• New high of 14164 on 9-10-07.
• Market starts to decline on 10-10-07.
• By the 12-9-08 the DJIA has declined to 11421.99 or lost 19.36%.
• The crash starts from the 15-9-08.
• Market finally bottoms on 9-3-09 at 6547.05 or 53.78% below high reached on 9-10-07.
• Market starts to revive on the 10-3-09. By the 5-8-09 the DJIA was at 9280.97 or had climbed 41.76% from its low on the 9-3-09.