There would be a very ,very low probabilty that Australia will be exposed too that,even if one of the Big 4 were to go belly-up there would be prior warning signs plus Mr Rudd needs the protection of his self-esteem and the Government would just jump in and prop the system up,..imho..willair..
are our banks all doomed?
- Thread starter boz
- Start date
greece and Specially Spain have approved reduction of public wages, unemployment in spain and Greece is very high and soaring, that will increase productivity and exporting companies over there will improve income. Germany and Japan businesses have acces to cheap credit that helps investment, also flexibility in the working place is very helpful. In any case, every country is different, for example Italy is very different then Spain or Greece (no assets bubble in Italy and a balanced trade position over the last 15 years).
yes, I agree that there will be waarning sign (like for example property prices falling), but if USA and GBP that are big country had to prop up budget deficit to over 10% to help banks what will happen to australia? specially if at same time you have a slump in commodity price/demand?
The thing is boz, the PIIGS are having more credit extended, which imposes a higher interest burden, which restricts the ability to invest in higher productivity. Like most economists, I think it is an impossible task for a culture that has been conditioned to be a welfare state, to suddenly become entrepreneurial enough to lift productivity enough to reverse the cad trend like greece's. None of this is going to end well. This European quant easing is meant to be an investment in increasing productivity. I have 110% zero confidence productivity will be lifted enough to pay back the borrowings, from future tax revenue, with interest.
The PIIGS do not have the commercial culture of Japan or Germany.
I maintain that credit, the creation of new money, has to be met by an equal increase in production....and I give this no chance of happening in the Euro zone. I am off for the weekend....but will read more next week and try to clarify my views after reading more of Harkness' work.
As I said before you can't put all the PIIGS on the same boat, for example greece has massive foreign debt, Italy near none, so high interests would have near zero impact on Italy and big impact on Greece. overall the EU international investment position is good and after this drop on the euro would be close to zero, so it is not that eu need to source money out of eu to fund investments, higher interests will feed back through the economy by more money available from savings and reinvesting profits. You can clearly see this by the financial chrisis that effected europe where overall interest rates in europe are at record low, only few countries in PIIGS area are paying higher interests but even France that is not in very good shape is paying 0.5% less interest rate on its debt then 6 months ago. I don't think EU will do quantitative easing, they'll just want to stabilise bond yield and reduce volatility from Speculation.
The bottom line you have to remember if you decide to bet against greece is that theri total debt is less then Germany and far less then Japan. That mean people in Greece don't have mortgages or a very low amount of it, a lot of money can be eventually squeezed out from the population in greece
The bottom line you have to remember if you decide to bet against greece is that theri total debt is less then Germany and far less then Japan. That mean people in Greece don't have mortgages or a very low amount of it, a lot of money can be eventually squeezed out from the population in greece
if it aint in your hand it aint yours 
Maaaaaaate, inflation in a very big way will have to come our way.
THAT IS THE ONLY WAY that many a government, inlcuding the likes of USA etc ,can get their debt under control in the forseeable decade.
Cycle come and go and who knows where we really are in the the scheme of theings, but whilst we can have deflation now, when that comes to a stop then the explosion upwards will come. We in Aussie are very lucky becasue interest rates could be dropped heaps to ensure that most home owners on the edge would be saved from going over the edge.
Ultimately whilst I would personally like to see a 20-30% fall in house prices(So I can buy cheaper), it will just not happen (Capital cities is what I am mostly talking aobut). Outside of the large capital centres there are numeorus provincial type towns in Australia where housing can be bought for the 300 grand mark and at roughtly 4% loan rate, which would be no trouble if things got bad that is only 370 bucks a week which is affordable for most everyone in a general sense.
THAT IS THE ONLY WAY that many a government, inlcuding the likes of USA etc ,can get their debt under control in the forseeable decade.
Cycle come and go and who knows where we really are in the the scheme of theings, but whilst we can have deflation now, when that comes to a stop then the explosion upwards will come. We in Aussie are very lucky becasue interest rates could be dropped heaps to ensure that most home owners on the edge would be saved from going over the edge.
Ultimately whilst I would personally like to see a 20-30% fall in house prices(So I can buy cheaper), it will just not happen (Capital cities is what I am mostly talking aobut). Outside of the large capital centres there are numeorus provincial type towns in Australia where housing can be bought for the 300 grand mark and at roughtly 4% loan rate, which would be no trouble if things got bad that is only 370 bucks a week which is affordable for most everyone in a general sense.
The US ain't so confident in our quadropoly:
http://www.theaustralian.com.au/bus...lian-bank-shares/story-e6frg8zx-1225875702144
http://www.theaustralian.com.au/bus...lian-bank-shares/story-e6frg8zx-1225875702144
If you want to win with inflation our way you need a fixed interest rate, then you screw the banks lender that got a fix interest, if we get high inflation banks won't lend you cheap, also if we get higher inflation I am not going to leave my money in banks at lower interest then inflation.
Either way banks get asset deflating or not getting the interest rate they need to make money banks are doomed
that's problem with the PIIGS - they can't ramp up inflation to solve their issues because they're tied to the euro.
they'll have to be cut loose and their sovereign currency re-instated (and re-inflated) to solve their debt burdens.
they'll have to be cut loose and their sovereign currency re-instated (and re-inflated) to solve their debt burdens.
only because we're doing better than them.
