Can you service your existing debts if rates rise to 10% or 18%

[unloadmymind]

Guess what. Today's cash rate is even lower than during the GFC. How could that be? LoL.

I suggest people should understand how global capital markets work.

Just because you had 15% interest rates in the old days, doesn't mean we'll get back to the old days. We are in a New Normal.

 

[Ausprop]

Guess what. Today's cash rate is even lower than during the GFC. How could that be? LoL.

I suggest people should understand how global capital markets work.

or don't work LOL

btw over production of goods would be considered 'old world economics' if there is such a thing. The golden era of prosperity during the Howard years are all now well behind us. as China rebalances to internal consumption, rising wages and living standards and as the AUD collapses as a result of an economy that has serious structural imbalances you will see rapidly rising prices. Amongst other countless variables

 

[unloadmymind]

Does not compute.

A collapsing Aust economy does not jibe with rising rates, while there's no budget to stimulate.
AUD may fall but with so much supply of commodities and goods, we know what that does to supply demand equilibrium.

 

[Ausprop]

Does not compute.

A collapsing Aust economy does not jibe with rising rates, while there's no budget to stimulate.
AUD may fall but with so much supply of commodities and goods, we know what that does to supply demand equilibrium.

re collapsing economy.... in this discussion we are projecting for 10 years

in the case of oil, nothing happens, inelastic remember.... As for other goods, we need cars and we manufacture precious little else, so we have become a nation of price takers

Not hard to see stagflation raise it's head again, but the whole thing is really difficult to pick because this country has never addressed its structural imbalances and with the effect of dutch disease perhaps the time has come.

 

[unloadmymind]

Still that doesn't translate to 10-18% rates in th next decade.

At most, 5%.

Stagnant GDP = low rates. And possibly even zero rates and QE (if you even know how that works in the new world).

Indeed the good old Howard days are over. Which incidentally was a period of high rates. LoL.

 

[donkey]

If Unemployment rises significantly then we could see rates increasing significantly as well.

 

[Hooray]

If Unemployment rises significantly then we could see rates increasing significantly as well.

You need to explain that to those of us not educated in economics.

 

[unloadmymind]

If Unemployment rises significantly then we could see rates increasing significantly as well.

I strongly suggest a refresher course in Basic Economic Principles.

 

[Deltaberry]

Haha come on don't post a graph with one inverse axis to confuse people.

 

[Ausprop]

would be interesting to see it from 1970 and also beyond 2011.

 

[scha9799]

It will be certainly interesting to see when/if the rate goes up to 10%

Surely, we can find out who is really swimming naked and is a great swimmer.

Time will tell

 

[unloadmymind]

Haha come on don't post a graph with one inverse axis to confuse people.

That is not my problem.

Reading graphs with inverted RHS is not rocket science.

As you can see there's a nice actual relationship between rates and unemployment.

 

[unloadmymind]

would be interesting to see it from 1970 and also beyond 2011.

I won't care about the 70s as I was not born yet and the AUD was not yet in free float.

As to 2011-2015 we all know what happened. Unemployment rate went even higher, (now 6%) while the RBA cash rate went even lower (now 2%). Just plot it in the graph above and you will see.

Anybody thinks unemployment will soon improve in the next decade? You must be dreaming. Unemployment is now even higher than during the GFC.

 

[unloadmymind]

It will be certainly interesting to see when/if the rate goes up to 10%

Well when there are plenty of new jobs to absorb the increasing population, coupled with wages increasing way above inflation, that could happen. In other words, dream on!

One of the RBA's legal obligations under the Reserve Bank Act 1959 is to help achieve Full Employment. And they only have one major tool to achieve that -- monetary policy through interest rates setting.

 

[Ausprop]

I won't care about the 70s as I was not born yet and the AUD was not yet in free float.

oh yes... the new world economics. When did that start by the way? Pre GFC, beginning of GFC, end of GFC, when the iron ore price recently dropped?

I remember in 1994 a guy in the UK telling me there was a new world economic order, commodities were on a permanent down trend. Seemed plausible at the time.

 

[unloadmymind]

I'd say the new economics has started when the Feds printed money from thin air by the trillions to get out of the Great Recession of 2008-09. The most unconventional monetary policy ever done.

You can blame them for the super low rates we are in for a considerable period of time below 5%. And there's no known timeline when this QE will be reversed by the Feds.

The world is held hostage by American economics.

 

[Tim86]

I could survive 9% interest rates.

10% interest rates would require me to pick up another shift at work and work a full 5 day week, plus be a cheap *** with grocery shopping.