here come the drums of a global slowdown..

[Kennethkohsg]

[

If Bernanke keeps lowering rates, subsequent rises will have to be much larger than 0.25% increases. With this kind of hogwash policy 10% rates in few years suddenly look possible..

Next qtr is going to be horrible.. this qtr isnt too bad as traditionally consumer spending etc are quite high.. many US stores also discounting heavily.. BUT sooner or later the producers will have to pass on higher costs to consumers OR risk massive earning downgrades (as a result of higher raw material costs).

***************************
Dear Trendsta,

1. What would you do if you are in Bernanke's position then?

2. Apparently, from Bernanke's present perspective, risks of an economic recession for US is much higher than that of an hyper-inflationary scenario, in the immediate near future.

3. What are the likely spillover effects on the Australian Economy, in this case?

4. Looking forward to learning from you further, please.

5. Thank you.

Cheers,
Kenneth KOH

 

[trendsta]

***************************
Dear Trendsta,

1. What would you do if you are in Bernanke's position then?

2. Apparently, from Bernanke's present perspective, risks of an economic recession for US is much higher than that of an hyper-inflationary scenario, in the immediate near future.

3. What are the likely spillover effects on the Australian Economy, in this case?

4. Looking forward to learning from you further, please.

5. Thank you.

Cheers,
Kenneth KOH

Hi kenneth,
Bernanke's job is a difficult one, and one i would not wish to have.
To me it seems the problem is NOT liquidity.. The problem is people have become aware of risk .. i think i wrote about this somewhere on this forum..

US is cutting rates e.g. from 4.75 to lets say 3% .. when rates were 4.75% you could borrow money for about 5.25% (i.e. people were willing to loan money for .5% above the fed rate).. now that has changed.. even as fed is dropping rates, lets say in their lunacy they drop them to 3%, chances are spread will be 1.5% (currently nearly 2%).. so the rate cut hasnt really done that much.. people are not willing to lend their money and risk potentially losing it, like the many billions written off, even if its backed by assets like houses ...

in short, my view, is there is TOO much money.. Banks all over the world are printing money faster than people are producing real things.. this is what causes inflation..

US is being really silly for ignoring real inflation, and only taking 'core inflation' (i.e. by exculding massive 80% gains in oil and 20-30% increase in food and other raw materials).. This is a dangerous game.. Bernanke is prob waiting for inflation to come out in consumer goods before he does anything.. that will be TOO LATE.. way too late .. it took banks decades to wipe inflation out, and here we are close to that scenario ...

in short, this a bust waiting to happen. Let it bust... just like tech wreck and many before.. Govt should help ease the situation using fiscal policy where possible.. Dont over inflate the problem.. who cares if wall street babies cry .. they deserve it.. this is captalism.

Political and corporate pressure in US is too strong.. it is unlikely they take the bitter medicine and learn from it..

Perception is Australia no longer needs US and is infact a province of China (hehe.. you know what i mean).. If china gets impacted as well, then consequences for aust will be harsher - because of this PERCEPTION..

Again, this is only my humble view.. Its prob better to get other people on this and other forums etc view, to get a better and more accurate picture..

 

[nonrecourse]

Your humble view is spot on

Hi kenneth,
Bernanke's job is a difficult one, and one i would not wish to have.
To me it seems the problem is NOT liquidity.. The problem is people have become aware of risk .. i think i wrote about this somewhere on this forum..

US is cutting rates e.g. from 4.75 to lets say 3% .. when rates were 4.75% you could borrow money for about 5.25% (i.e. people were willing to loan money for .5% above the fed rate).. now that has changed.. even as fed is dropping rates, lets say in their lunacy they drop them to 3%, chances are spread will be 1.5% (currently nearly 2%).. so the rate cut hasnt really done that much.. people are not willing to lend their money and risk potentially losing it, like the many billions written off, even if its backed by assets like houses ...

in short, my view, is there is TOO much money.. Banks all over the world are printing money faster than people are producing real things.. this is what causes inflation..

US is being really silly for ignoring real inflation, and only taking 'core inflation' (i.e. by exculding massive 80% gains in oil and 20-30% increase in food and other raw materials).. This is a dangerous game.. Bernanke is prob waiting for inflation to come out in consumer goods before he does anything.. that will be TOO LATE.. way too late .. it took banks decades to wipe inflation out, and here we are close to that scenario ...

in short, this a bust waiting to happen. Let it bust... just like tech wreck and many before.. Govt should help ease the situation using fiscal policy where possible.. Dont over inflate the problem.. who cares if wall street babies cry .. they deserve it.. this is captalism.

Political and corporate pressure in US is too strong.. it is unlikely they take the bitter medicine and learn from it..

Perception is Australia no longer needs US and is infact a province of China (hehe.. you know what i mean).. If china gets impacted as well, then consequences for aust will be harsher - because of this PERCEPTION..

Again, this is only my humble view.. Its prob better to get other people on this and other forums etc view, to get a better and more accurate picture..

Hi trendsta, don't want to sound like chicken little but I think most of us are going to discover the down side of gearing in the next couple of years. It should be a pretty rough ride as I believe the financial structures set in place namely CDO's and the various reserve banks printing money will see a sesmic shift towards gold and some pretty nasty consequences

 

[Ausprop]

the trouble is, these drums have been roaring for so long that we are all wondering if they are drums or just someone having a loud party. Tho I still keep thinkign of Costello's 'economic tsunami' and you have to wonder...

 

[trendsta]

As predicted earlier, this fiasco will impact other companies with high debt..

Centro close to collapsing today, after reporting difficulties in funding its short term debt. Looks like even debt backed by prime commercial real estate, in a strong ecnomy like australia, isnt safe in investors eyes .. PERCEPTION of risk has gone up.. this is NOT a liquidity problem.. wish central bankers would stop treating it like one and fanning more inflation..

 

[Kennethkohsg]

Tho I still keep thinkign of Costello's 'economic tsunami' and you have to wonder...

&&&&&&&&&&&&&&&&&&
Dear Ausprop,

1. Same thought is also weighing on me too at this point in time;- though other members have simply dismissed Peter Costello's previous warning as a political "scare" campaign and nothing more.

2. So far, the RBA under Glenn Stevens's leadership has failed to publicly confirm/disconfirm about this impending economic tsunami occuring in Australia in the near future.

3. The USA and UK are cutting interest rate becuase of their respective economic slow-down/housing slump whereas RBA-Australia and the Chinese Central Banks are still increasing their respective countries' interest rate, and trying to curb down their hyperinflationary/inflationary pressures, at this point in time.

4. Will need to further monitor the public response and outcome to the auction of the sub-prime CDOs by the American Federal Reserve tonight so see if the recent joint actions by the various Central Banks will effectively address the sub-prime credit crisis/bank-to-bank lending/ market liquidility related issues.

5. For your further comments/discussion, please.

6. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Hi kenneth,
Bernanke's job is a difficult one, and one i would not wish to have.
To me it seems the problem is NOT liquidity.. The problem is people have become aware of risk .. i think i wrote about this somewhere on this forum..

US is cutting rates e.g. from 4.75 to lets say 3% .. when rates were 4.75% you could borrow money for about 5.25% (i.e. people were willing to loan money for .5% above the fed rate).. now that has changed.. even as fed is dropping rates, lets say in their lunacy they drop them to 3%, chances are spread will be 1.5% (currently nearly 2%).. so the rate cut hasnt really done that much.. people are not willing to lend their money and risk potentially losing it, like the many billions written off, even if its backed by assets like houses ...

in short, my view, is there is TOO much money.. Banks all over the world are printing money faster than people are producing real things.. this is what causes inflation..

US is being really silly for ignoring real inflation, and only taking 'core inflation' (i.e. by exculding massive 80% gains in oil and 20-30% increase in food and other raw materials).. This is a dangerous game.. Bernanke is prob waiting for inflation to come out in consumer goods before he does anything.. that will be TOO LATE.. way too late .. it took banks decades to wipe inflation out, and here we are close to that scenario ...

in short, this a bust waiting to happen. Let it bust... just like tech wreck and many before.. Govt should help ease the situation using fiscal policy where possible.. Dont over inflate the problem.. who cares if wall street babies cry .. they deserve it.. this is captalism.

Political and corporate pressure in US is too strong.. it is unlikely they take the bitter medicine and learn from it..

&&&&&&&&&&&&&&&&&&&&&&&&&&
Dear Trendsta,

1. As far as I can see, many investors are still investing in the ASX and the local property markets. This is despite their heightened awareness of the increasing risks associated with higher debt levels.

2. As far as I can infer from the recent joint actions by the various Central Banks in the USA, UK , Switzerland etc are concerned, it appears that their immediate concerns is one of the market liquidity especially in the bank-to-bank lending.

3. It also seems to me that the full impact from the sub-prime credit crisis on the increasing loan defaults and US housing slump has been given a temporary reprieve over the next 5 years, following the US Govt's recent intervention to cap the loans interest rate to existing levels in 2007, for the next 5 years. However, the root cause for the credit crunch crisis will remain very much intact and left much re-resolved, at this point in time.

4. For your further comments/discussion, please.

5. Thank you.

Cheers,
Kenneth KOH

 

[trendsta]

&&&&&&&&&&&&&&&&&&&&&&&&&&
Dear Trendsta,

1. As far as I can see, many investors are still investing in the ASX and the local property markets. This is despite their heightened awareness of the increasing risks associated with higher debt levels.

2. As far as I can infer from the recent joint actions by the various Central Banks in the USA, UK , Switzerland etc are concerned, it appears that their immediate concerns is one of the market liquidity especially in the bank-to-bank lending.

3. It also seems to me that the full impact from the sub-prime credit crisis on the increasing loan defaults and US housing slump has been given a temporary reprieve over the next 5 years, following the US Govt's recent intervention to cap the loans interest rate to existing levels in 2007, for the next 5 years. However, the root cause for the credit crunch crisis will remain very much intact and left much re-resolved, at this point in time.

4. For your further comments/discussion, please.

5. Thank you.

Cheers,
Kenneth KOH

Hi kenneth,
Many investors are still investing… But many have already left, hence the preceived notion “liquidity crisis”. Today Centro was a classic example. An aust top 200 company backed by prime real estate assets finding trouble raising short term debt to cover its loans of those assets..result drops 70% in one day! This is an example on investors leaving, no one left to lend money. Share prices in property sector smashed because investors have left… Funny thing is LPT at the moment don’t even have high levels of debt, especially when compared to residential property, and have higher yields and have had considerable net asset growth.

The central banks are trying to reduce the borrowing rates, by cutting base rate..but the problem is banks are reluctant to lend that money and further down the money supply chain the problem gets worse.. The banks etc are pricing in high levels of risk. Even if central banks cut rates to 1%, chances are it will still end up costing 4-5% for you and me, who are at end of that money supply chain. The central banks can reduce rates (and fan inflation) but can they guarantee me, you, or any other investor that if we lend our money the asset price wont fall? Can they gurantee that the company rated AAA is in fact secure in meeting its debt obligations?

I don’t think this is a sub-prime issue. Its about debt and risk/return.. Debt was very cheap.. many trillions were borrowed around the world in last 5 years .. the investors didn’t take any risk into account… also many investors thought good times will always last .. now risk is starting to appear.. sub-prime failed first, now other types of debt are falling over..

Here is another sign: today BHP stops its multi-billion buy-back program. Why? Because it does NOT want to raise DEBT to pay for RIO… Its bid has been cash and shares, NO DEBT .. does this sound odd, given that only half a year ago players were looking to raise 10 of billions of dollars in debt to buy companies.. or in fact BHP with a very low debt levels, and top credit rating, is reluctant to raise debt ?

 

[trendsta]

inflation going strong ..

===============================

Bloomberg:

Dec. 17 (Bloomberg) -- Wheat rose above $10 a bushel for the first time, leading other grains and oilseeds higher in a food price spiral that threatens to derail global economic growth.

Chicago wheat futures jumped as much as 30 cents, or 3.1 percent, to $10.095 a bushel as dry weather threatened crops in Argentina, renewing concern that the world's farmers may not be able to grow enough to meet rising demand for bread, pasta and livestock feed. Rice also advanced to a record, while soybeans gained to the highest in 34 years and corn to a nine-month peak.

Rising prices of food and fuel are stoking inflation and making it more difficult for the world's central bankers to lower interest rates. Kellogg Co., the largest U.S. cereal maker, General Mills Inc., Nissin Food Products Co. and Kikkoman Corp. are among companies that have raised prices.

``We are seeing a broad-based increase in cost pressures,'' Brian Redican, senior economist at Macquarie Group Ltd., said in an interview from Sydney today. ``The increase in soft commodity prices is really the next stage in that process.''

The price of wheat has more than doubled in the past year as adverse weather reduced output from Australia to the U.S. and Canada. Dry, warm weather may hurt yields in Argentina, the fourth-largest exporter, forecaster Meteorlogix LLC said Dec. 14.

``Global supply is really tight at this time,'' Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, said by phone. ``Saying there's a near-term top in the price is a very dangerous thing to do.''

A smaller Argentine crop may reduce global wheat inventories that the U.S. government says will drop 11 percent by May 31 to 110.1 million metric tons.

`Fear Factor'

Wheat for March delivery, the most-active contract, rose the exchange-imposed daily limit of 30 cents before trading at $10.05 a bushel, up 2.6 percent, in after-hours electronic trading on the Chicago Board of Trade at 5:10 p.m. Sydney time.

U.S. consumer prices rose the most in more than two years last month, reinforcing the Federal Reserve's concern that inflation will erode confidence in the economy. The consumer price index increased 0.8 percent in November, up from 0.3 percent the previous month, the Labor Department said Dec. 14.

Inflation in Europe last month rose at its fastest annual pace since May 2001, increasing 3.1 percent as food costs soared.

``People need to eat and that's part of the fear factor in this environment,'' Brett Cooper, senior client adviser, commodities, with broker MF Global Australia Ltd., said. Prices for wheat may extend gains, he said. ``There's people saying potentially $11 or even $13.''

Soup Kitchens

Higher food prices are forcing some Italians to eat at soup kitchens and threatening unrest in China, where a stampede at a supermarket sale of cooking oil killed three people in November.

Sara Lee Corp. said Dec. 13 it will increase bread prices for a second time since September. Nissin Food will raise prices on its famous Cup O' Noodles for the first time since 1990 from Jan. 1 because of a rise in wheat prices, it said on Sept. 5.

Kikkoman, Japan's biggest maker of soy sauce, said last week it will raise prices for the first time in 18 years because of increasing crude oil and raw material costs.

AWB Ltd., Australia's largest wheat exporter, said international buyers are shying away from prices, in a statement to the Australian Stock Exchange today.

``International buyers are reluctant to lock in significant tonnage at the current prices as their flour margins are negligible,'' Melbourne-based AWB's David Johnson said in the statement. AWB ``expects the international wheat market to remain extremely tight for the first half of 2008.''

India Tender

India's State Trading Corp. will close bids today to buy 350,000 tons of wheat as India, the world's third-biggest importer of the grain last year, seeks to replenish reserves.

Soybeans may lead gains among non-energy commodities next year because of shortages of acreage and rising demand for biofuels, Goldman Sachs Group Inc. said in a report Dec. 11.

Soybean futures for March delivery rose as much as 17.25 cents, or 1.5 percent, to $11.9225 a bushel on the Chicago Board of Trade, the highest since June 1973, and were at $11.8375 at 5:16 p.m. in Sydney. Prices gained 73 percent this year after U.S. farmers planted the fewest acres in 12 years in favor of corn.

Corn for March delivery rose as much as 5 cents, or 1.1 percent, to $4.4325 a bushel in Chicago, the highest since Feb. 26, when the price climbed to a 10-year peak of $4.5025. The contract stood at $4.4125 at 5:05 p.m. in Sydney.

Rough rice futures for March delivery rose as much as 3.5 percent to a record $13.92 per 100 pounds.

 

[Kennethkohsg]

Hi kenneth,
Many investors are still investing… But many have already left, hence the preceived notion “liquidity crisis”. Today Centro was a classic example. An aust top 200 company backed by prime real estate assets finding trouble raising short term debt to cover its loans of those assets..result drops 70% in one day! This is an example on investors leaving, no one left to lend money. Share prices in property sector smashed because investors have left… Funny thing is LPT at the moment don’t even have high levels of debt, especially when compared to residential property, and have higher yields and have had considerable net asset growth.

&&&&&&&&&&&&&&&&&&&&
Dear Trendsta,

1. I guess this is due to the very nature and fundamental difference between investing in residential properties as opposed in investing in commercial properties, as I understand from Jan Somer's book.

2. While the demand for residential properties is "inelastic" and with 70% of the residential properties being owners-occupiers, we do not expect as heavy a price correction as encountered in investing in commerical properties as a result of the triple whammies at the mercies of the declining business cycles/negative market sentiments/perceptions, "non-affordable"/fast-declining rental yields and price falls for commercial properties.

3. Despite its low debt level, the LPT/Centro is now seeing a heavy fall in its share prices, due to negative market sentiments. Will it soon be further followed by a declining rental yield? .... and subsequently, also a falling price for the commercial property concerned?

4. Only TIME will tell in due course.'

5. If this is indeed the case that the many investors have already left the market en masse recently as what you are presently suggesting, we can soon expect the ASX as well as other LPTs and commercial properties pricing across the various Australian States, to fall heavily in the near future.

6. However, I do not think that this is indeed the case that is actually happening in Australia at this point in time.

7. Just as RAMS was badly sheared upon its recent public listing on the ASX and has been bought over by WESTPAC recently, I suspect CENTRO to be an isolated case too.

8. This is probably due to its own inherent risks in its debt servicing/re-structuring, amidst the present on-going unfolding of the global credit crunch crisis.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Hi kenneth,

The central banks are trying to reduce the borrowing rates, by cutting base rate..but the problem is banks are reluctant to lend that money and further down the money supply chain the problem gets worse.. The banks etc are pricing in high levels of risk. Even if central banks cut rates to 1%, chances are it will still end up costing 4-5% for you and me, who are at end of that money supply chain.

The central banks can reduce rates (and fan inflation) but can they guarantee me, you, or any other investor that if we lend our money the asset price wont fall? Can they gurantee that the company rated AAA is in fact secure in meeting its debt obligations?

&&&&&&&&&&&&&&&&&
Dear Trendsta,

1 From what I know, bank-to-bank lending is one of critical liquidlity issues arising from the recent credit crunch crisis.

2. It is not that the banks do not have the funds to lend out. It is simply their unwillingness to lend to one another, that is causing the banking crisis/market liquidity related problems.

3. Consequently, I suspect it is not a case of inadequate money supply in circulation bu, rather, t one of lack of banking confidence amongs the major banks/lending institutions to lend to one another, as a result of the subprime credit crisis.

4. Hence the recent collective joint actions by some Central banks in the US, UK, Switzerland etc, to publicly auction off some of the CDOs internationally.

5. Cutting the interest rate and guaranteeing the safety of our banking deposits or/and asset investment returns are totally 2 different saprate issues altogther.

6. For your further comments/discussion, please.

7. Thank you.

Cheers,
Kenneth KOH

 

[trendsta]

&&&&&&&&&&&&&&&&&
Dear Trendsta,

1 From what I know, bank-to-bank lending is one of critical liquidlity issues arising from the recent credit crunch crisis.

2. It is not that the banks do not have the funds to lend out. It is simply their unwillingness to lend to one another, that is causing the banking crisis/market liquidity related problems.

3. Consequently, I suspect it is not a case of inadequate money supply in circulation bu, rather, t one of lack of banking confidence amongs the major banks/lending institutions to lend to one another, as a result of the subprime credit crisis.

4. Hence the recent collective joint actions by some Central banks in the US, UK, Switzerland etc, to publicly auction off some of the CDOs internationally.

5. Cutting the interest rate and guaranteeing the safety of our banking deposits or/and asset investment returns are totally 2 different saprate issues altogther.

6. For your further comments/discussion, please.

7. Thank you.

Cheers,
Kenneth KOH

Hi kenneth,

I think we are agreeing here .. bank-to-bank lending has dried up, but not because of insufficient money/cash.. the price banks are willing to lend to one another at has increased .. as you mentioned its not because banks dont have money .. in other words there is money but yield has gone up due to increased RISK ..

 

[trendsta]

it looks like phase two of this whole fiasco is finally happening - corporate earning downgrades... Big bonuses etc will also dwindle, maybe as a result top end (not prestige) resi property finally takes a breather??

Looking for phase 3 now.. any sign of corporate cost cutting resulting in umemployment.. probably in 2-3 months time..

 

[Aaron Sice]

i've said it a gazillion times, and i'll say it again.

when the ASX200 dips below it's 200 day moving average for more than 1 month, the RBA lifts rates by 0.25% to inject the money back into the market.

it's called "wealth confiscation". no one was present in parliament the day the bill was passed to create the RBA.

ive watched it so many times over now i can project it a month in advance with basic fibonacci and gann timing models.

 

[Kennethkohsg]

Dear BlueCard,

1. Care to further elaborate on your concept of "wealth confiscation" and provide us specific examples thtrough the relevant supporting case studies, please?

2. I look forward to learning from you further, please.

3. Thank you.

Cheers,
Kenneth KOH

 

[trendsta]

i've said it a gazillion times, and i'll say it again.

when the ASX200 dips below it's 200 day moving average for more than 1 month, the RBA lifts rates by 0.25% to inject the money back into the market.

it's called "wealth confiscation". no one was present in parliament the day the bill was passed to create the RBA.

ive watched it so many times over now i can project it a month in advance with basic fibonacci and gann timing models.

Hi bluecard,
This is something completely new to me, and was definitely not aware of anything like this. Please explain further. I am very much interested in hearing your views on this.

In an article in AFR, it mentioned that RBA foreign reserves? are nearly exhausted due to massive injections into the banking system since august. And it may have to RAISE rates and sell bonds to keep up australias massive debt (largest in the world per capita). Im not sure exactly how australias massive deficit is funded.

However, from the article it seemed as though Australia is very vunerable to any debt crisis, and it could really impact our economy hard due to our debt binge.. Also it mentioned that aussie banks have to keep borrowing offshore because unlike previously when debt was covered by deposits, the debt levels are soo huge deposits don’t cover those debts, and even the major banks have to source money offshore.

On another note, business lending rates are going up.. Even major banks have passed on the increasing costs. This will be a massive cost to businesses (especially smaller ones).

Euro zone injected a massive 500 billion into banking system recently .. sounds like money made from thin air .. a few hundred billion here, a trillion there, cut rates, produce more money.. wow, what a great idea…

 

[Aaron Sice]

In an article in AFR, it mentioned that RBA foreign reserves? are nearly exhausted due to massive injections into the banking system since august. And it may have to RAISE rates and sell bonds to keep up australias massive debt (largest in the world per capita). Im not sure exactly how australias massive deficit is funded.

interest rate rises - you answered your own question.

take the money off the table of those who worked for it to keep the economy going.

it's blatant wealth confiscation. they can blame whatever they want (consumer debt, consumer spending, consumer whatever, commodity prices blah blah blah) but the simple fact is, when the ASX200 dips below it's 200day moving average for more than a month there are rate rises.

Dear BlueCard,

1. Care to further elaborate on your concept of "wealth confiscation" and provide us specific examples thtrough the relevant supporting case studies, please?

2. I look forward to learning from you further, please.

3. Thank you.

Cheers,
Kenneth KOH

healthy skepticism (sp?) is a good thing. i don;t appreciate cynicism though.

case studies? mate, i don;t think any government organisation will "find" that the RBA is operating as a giant laundering device because it's operating within the law.

i can provide some EXAMPLES though.

i should stipulate this isn;t the ONLY reason there is a rate rise. but if you see the XJO dip below is 200 day MA you can be 100% sure of a rate rise.

November 07 was a rate rise but not because of a dip below the 200dMA.

they're already touting another rate rise after last month saying "that'd be it for a while". well, last month the XJO was nowhere near breaking the 200 day MA.

have a looksie today.

 

[Aaron Sice]

http://www.rba.gov.au/Statistics/Bulletin/A02hist.xls

all the rate changes are here.

your own research is more valuable than mine.

 

[Kennethkohsg]

Dear BlueCard,

1. Thank you for the data and sharing your thoughts with us.

2. Like Trendsta, your "wealth confiscation effect" is something totally new for me.

3. So far, I have not done any study or examine this correlationship between the RBA's decision to increase the interest rate and the event i.e. when the ASX200 has dipped below it's 200 day moving average for more than 1 month, the RBA lifts rates by 0.25% to inject the money back into the market.

4. Is this relationship "casual" in nature and statistically signifcant and reliable as an accurate predictive tool on the RBA decision-making process outcome? Is the relationship single-directional or multi-directional?

5. How's about the situation for the RBA Board's decision made in December 2007?

6. Looking forward to learning further from you further, please.

7. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

In an article in AFR, it mentioned that RBA foreign reserves? are nearly exhausted due to massive injections into the banking system since august. And it may have to RAISE rates and sell bonds to keep up australias massive debt (largest in the world per capita). Im not sure exactly how australias massive deficit is funded.

However, from the article it seemed as though Australia is very vunerable to any debt crisis, and it could really impact our economy hard due to our debt binge.. Also it mentioned that aussie banks have to keep borrowing offshore because unlike previously when debt was covered by deposits, the debt levels are soo huge deposits don’t cover those debts, and even the major banks have to source money offshore.

/QUOTE]
+++++++++++++++++
Dear Trendsta,

1. Some interesting points being made here.

2. Can you kindly provide us the relevant AFR article or point us to its source, please?

3. What is the present debt levels faced by Australia?

4. I do recall reading about Australia being listed as among thetop few nations with one the highest debt levels in the world but not as the world's highest/biggest debt owning nation, though.

5. If Australia today is indeed the Nation with the highest debt level in the world, then there are now new inherent risks emerging as far as investing in Australia especially in its housing markets are concerned. The present median housing prices in many of the Australian Capital Cities, like Sydney, Perth, Melbourne , are reportedly among the most expensive ones in the world. According to Demographia, they are presently greatly over-valued, using the various standard housing affordability measures.

6. So far, both the Australian RBA and the Australian Federal Govt are openly very "comfortable" with the average Australian household debts level. They do not see it as being "excessive" nor posing a threat to the Australian Economy at this point in time.

7. For your further comments/discussion, please.

8. Thank you.

Cheers,
Kenneth KOH