Merged: Is the worst of the Global Financial Crisis behind us?
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.I'm being charged 4.1%- those pricks!
404, I have always respected ur opinion but comparing This to the great depression ? I can see 2 major differences, China is on the verge of becoming a bigger economy ( if not already ) than the US, and the world is not at war.
I guess time will tell
ps even that pessamistic old bugger Greenspan thinks the worst is over
G’day Fooey,
While I don’t think we will see a Great Depression, what I was trying to highlight is that the stock market and the real economies of the world will yoyo for at least 10 years. The fact that the US government has strongarmed the FASB into relaxing standards in the middle of the greatest downturn since the Great Depression will only make in my opinion the yo-yoing worse.
Regarding China, yes it is on the verge, but it is still an export driven economy. Roughly 2/3rds of what it produces is exported to the US and Europe. It will be at least two generations before the Chinese economy will have enough internal demand to be self sustaining. Until then it will be subject to the ups and downs of their most important trading partners. Regarding the size of the Chinese economy, it is still only about 1/10th the size of the US. At its current growth rate it will be about fifty years before it overtakes the US.
While I don’t think we will see a Great Depression, what I was trying to highlight is that the stock market and the real economies of the world will yoyo for at least 10 years. The fact that the US government has strongarmed the FASB into relaxing standards in the middle of the greatest downturn since the Great Depression will only make in my opinion the yo-yoing worse.
Regarding China, yes it is on the verge, but it is still an export driven economy. Roughly 2/3rds of what it produces is exported to the US and Europe. It will be at least two generations before the Chinese economy will have enough internal demand to be self sustaining. Until then it will be subject to the ups and downs of their most important trading partners. Regarding the size of the Chinese economy, it is still only about 1/10th the size of the US. At its current growth rate it will be about fifty years before it overtakes the US.
Grandpa Aerotart
And how big will the US economy be in 50 years?
Me thinks the US will remain the predominate individual economy of the 21st Century...despite the best efforts of its 'leaders'
I am also at a loss to understand how some people think Australia is going to remain largely quarantined from all this international financial turmoil - last I looked we were still part of a globalised economy...a nation who's GDP relies on outbound commodities and inbound tourism to a large extent.
How can it be any other way?
Me thinks the US will remain the predominate individual economy of the 21st Century...despite the best efforts of its 'leaders'
I am also at a loss to understand how some people think Australia is going to remain largely quarantined from all this international financial turmoil - last I looked we were still part of a globalised economy...a nation who's GDP relies on outbound commodities and inbound tourism to a large extent.
How can it be any other way?
2.25 up here
You won't get 2.25% for AUD mortgage debt. I use off-shore private banking with the CBA and get that 4.1%. I haven't noted much better in my travels.
China is on the verge of becoming a bigger economy ( if not already ) than the US,
It will be a long way off yet. China is communist and we all know that it simply does not work. I wouldn't be surprised if China go the way of the USSR and collapse.
A Chinese democracy? took Axl Rose 15 years to burn a record about it, will take them 10 times that to become a free market that can compete with the west.
Even Japan is still a bigger economy than China!
Thread Starter
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I am also at a loss to understand how some people think Australia is going to remain largely quarantined from all this international financial turmoil - last I looked we were still part of a globalised economy...a nation who's GDP relies on outbound commodities and inbound tourism to a large extent.
To promote growth or stimulus, the most effective means( as pushed by the IMF ) is for the RBA to drop interest rates. It would bring the dollar down some and give business good investment opportunity; as well as providing huge extra cashflow or savings for mortgaged Australian housholds.
The main reason they can't do it is because the housing fundamentals are SO strong. The stimulus of cutting the cash rate to well under 3% would create the mother of all Australian housing bubbles.
But on the other hand. A vast amount of Australian security and wealth is tied up in property. A doomsday fall in prices would be politically unacceptable. And interest rates ( amongst other political measures ) would be dropped.
I have had large amounts of Australian property debt in multi-currency loans being charged not much more than 1%. The financial power is colossal- per million dollars of debt the holding costs under a grand a month! You can yield between 30 and 50K on residential property on a million dollars; double for commercial.
It is an apples to oranges example as multi-currency loans have inherent risk. But it a demonstration of the firepower AUstralia still has available to essentially protect the property market ie: drop interest rates to unprecedented lows.
Bo777
You want to elaborate on that comment? I wasn’t always a pilot you know. 
The Green Goblin
GDP isn’t the whole story. Have a look at the gross assets of the two countries. The difference is even more startling.
Gnadenburg
The only thing that has so far cushioned the Australian property market is the lack of inventory or supply, low interest rates and the first home owners grant. This though could flip on its head if unemployment were to get considerably worse and/or interest rates were to rise sharply. Historically low interest rates could also produce a dramatic rise in speculative building which could lead to an oversupply in the market. Don’t think for one minute it couldn’t happen.
Me thinks its time to go back to EC 101
The Green Goblin
GDP isn’t the whole story. Have a look at the gross assets of the two countries. The difference is even more startling.
Gnadenburg
The only thing that has so far cushioned the Australian property market is the lack of inventory or supply, low interest rates and the first home owners grant. This though could flip on its head if unemployment were to get considerably worse and/or interest rates were to rise sharply. Historically low interest rates could also produce a dramatic rise in speculative building which could lead to an oversupply in the market. Don’t think for one minute it couldn’t happen.
The Green Goblin
GDP isn’t the whole story. Have a look at the gross assets of the two countries. The difference is even more startling.
GDP isn’t the whole story. Have a look at the gross assets of the two countries. The difference is even more startling.
The average Chinese citizen earns $865 per year vs 33k for the states.
With a population of 300 million vs a billion China have a long way to go to catch the US!
Grandpa Aerotart
But on the other hand. A vast amount of Australian security and wealth is tied up in property. A doomsday fall in prices would be politically unacceptable. And interest rates ( amongst other political measures ) would be dropped.
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The average Chinese citizen earns $865 per year vs 33k for the states.
Quote:
The average Chinese citizen earns $865 per year vs 33k for the states.
That figure of $865 per year probably includes itinerant non-skilled workers in calculating that average. Those in professional jobs earn on average 5000 RMB per month .. that's about $735 per month. Still a lot less than the average US monthly wage, but then again, cost of living in China is no way as high as that in the US.
The average Chinese citizen earns $865 per year vs 33k for the states.
That figure of $865 per year probably includes itinerant non-skilled workers in calculating that average. Those in professional jobs earn on average 5000 RMB per month .. that's about $735 per month. Still a lot less than the average US monthly wage, but then again, cost of living in China is no way as high as that in the US.
I know were I'd rather live
Property values?
We attach too much emphasis to the values of houses. If you only own one house (the one you live in) then its value is of little importance to your retirement wealth. Yes, it may be "worth" $100,000 or $200,000 more than you paid for it (warm fuzzy feeling) but it is producing no income. Any other house you move to is also worth more/less so the gain is on paper only. People like to put their house on their personal balance sheet as it makes them feel wealthy. Aha, we say, but when the time comes to downsize, we can release the capital to earn additonal income in retirement. But the reality is that the 30 year old family home needing modernisation barely gets enough money to buy into a smart 2 bedroomed unit. So I say, who actually cares if the property market is up or down, unless you are a first time entrant?
Obviously, this does not apply to the investment properties you might own.
Obviously, this does not apply to the investment properties you might own.
james ozzie
What do you think was fuelling world growth, particularly in the US and EU up until last year? It was people realising that huge paper profit in their homes by taking out Home Equity Lines of Credit (HELOC) and spending it. The trend was very similar in Aus with many families unlocking the wealth that had accumulated and grown in their homes with Home Equity Loans. Now we are in a position where people particularly in the US can’t do this anymore because of the collapse of the property market there and the reluctance of banks to lend against these properties.
What do you think was fuelling world growth, particularly in the US and EU up until last year? It was people realising that huge paper profit in their homes by taking out Home Equity Lines of Credit (HELOC) and spending it. The trend was very similar in Aus with many families unlocking the wealth that had accumulated and grown in their homes with Home Equity Loans. Now we are in a position where people particularly in the US can’t do this anymore because of the collapse of the property market there and the reluctance of banks to lend against these properties.
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Paul Mason writes in Meltdown that it was the securitization of debt that caused this mess. By debt, he means all debt, not just debt from the housing bubble or HELOC. It's a worthwhile read, along with Chimbu Chuckles' contributions, and 404 Titan's, of course. Accolades aside, the deleveraging has only just begun and will affect every single one of us. No-one will be able to dodge the bullets. There is nowhere to hide. To think otherwise is quaint, but akin to dodging raindrops.
So 404 , I assume you are not disagreeing with me, just lecturing me? Your primary residence is there to keep the rain off your head, it is not an ATM. While it cannot appear as an asset on your income earning capital, its mortgage is most definitely a liability. Those who forget this simple truth get to suffer later on, which is exactly what has been happening. In my own case, I do not know what my house is worth but I do know exactly what I owe on it.
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Nuff said? Yeah right.
The author is a well known housing doomsdayer who had been totally out of phase in his predictions over the last few years on the local market.
Another apples to oranges scenario. The American economy. An industrialized nation, globalization etc etc. Australia. A totally different economy, population growth and future demographics entirely different.
The author is a well known housing doomsdayer who had been totally out of phase in his predictions over the last few years on the local market.
Another apples to oranges scenario. The American economy. An industrialized nation, globalization etc etc. Australia. A totally different economy, population growth and future demographics entirely different.
When did interest rates become controlled by the Govt?
The government and the RBA ( begrudgingly ) will help protect Australian property prices from an American style cataclysm.
The capacity to cut % rates further is provides a colossal financial ability to prevent an Australian housing/economic meltdown. And the RBA would do that if need be- and there doesn't appear to be such a need.