David Koch - Sydney Morning Herald - Oct 5,2008

[handyandy]

3. From your post, it sort of also amazes me here to observe that there seems to be a big sizable number of Australians, who, like yourself, seem to take the last 16 years of prolonged continued economic prosperity in Australia, "for granted" , rather than to willingly and readily give full credit to the ruling Australian Federal Government or/and the RBA for its effective economic management skills and leadership and good fiscal/monetary/banking governance and regulatory controls in Australia.

Kenneth

Isn't it just possible that the 'last 16 years' would have happened regardless of which 'party' was happening. Obviously we would not have participated in the worlds party with absolute incompetents running the show but maybe the public needs to take credit for at least electing politicians who don't take things backwards (note - I didn't say who take things forward - my low opinion of all politicians)

Cheers

 

[buzzlightyear]

Are you kidding? It is universally understood that
1. The Australia economy was badly managed under Howard and has become a time bomb.

Before I spat out on my Wheaties as I read this, can you please elaborate on why you think is the case?

 

[sphinx]

Before I spat out on my Wheaties as I read this, can you please elaborate on why you think is the case?

They adopted a private-debt-driven economic growth strategy. Rather than focusing on productivity/innovation driven growth, they just "lure" people (e.g through low interest rate) to borrow more and "speculate" (e.g. housing bubble) to "grow" the economy.

Yes, you will see "superficial" GDP growth and temporary "paper wealth" growth (your property/share portfolio growth on "paper"). The consequence is that down the road, these wealth will be destroyed in a dramatic fashion (like the crisis unfolding now). And future-money are irresponsibly spent by people who can't actually afford but were made to believe they are rich based on easy credit and paper wealth.

 

[sphinx]

just some fact. In Australia, for every dollar growth in share market or their property price (ON PAPER, not real profit), 9 cents real money are immediately spent.. simply because you are "feeling" richer.

When the growth is a fake bubble-like growth, people are spending money they can't afford to spend and will have to pay back through an ugly recession.

 

[Peter Spann]

As I mentioned in another thread, I have a (now elderly) relative who, during Keating's recession, had the 'All Monies' clause invoked on their mortgage despite being well ahead on their repayments and with a low LVR (~30% at the time).

Not technically a margin call, but the bank simply transferred $x from their transaction account to their loan account without their consent. Said relative went absolutely ballistic, but bank was within its rights.

I don't know how widespread it was, but it certainly has happened in the past...

With respect it is very important for everybody commenting in this thread to re-read this post (and a couple of others that are similar) lest you unintentionally lead others and yourselves down the garden path of ignorance.
This practice – forcing people to sell their homes / investments was widespread in the “recession we had to have”.
It impacted thousands of people.
Not only can the bank enact the all monies clause they can (and do) require people to bring their loans into order with the approved LVR forcing people to tip in cash or sell up.
I have heard many times before (and indeed it has been stated in this thread) that banks won’t force people to sell if they are making their payments. I am sorry but that is naivety.
Banks are listed entities who’s share prices are in part impacted by their balance sheet and subject to prudential requirements for capital adequacy while is often “on balance sheet”. Both these things dramatically impact their inclination to sell up “bad debt”.
Let me see if I can explain this in lay man’s terms (which means I may make a generality or two)…
Let’s say a bank is required to have $1 billion in capital adequacy – cash or assets on (and sometimes off) their balance sheet to “guarantee” depositor’s funds. Cash increases that capital adequacy and bad debt decreases it. With mark to market account this problem will only be magnified this time round. The bank has to report how much security it has for its lending. If that security decreases it impacts their balance sheet which means they need more cash (or other hard assets) to prop up their capital adequacy. If people are withdrawing their money (as they do in recessions) they have less cash not more. The share market and regulators start getting worried. Share prices drop affecting the capitalisation of the bank and further putting pressure on the balance sheet. Not good. If the provision for bad debt goes up at the same time things start looking grim but there’s an easy fix - foreclose. Once the asset is sold (even at a massive loss to the bank) it moves it from a provision (balance sheet) to a loss (P&L) – problem magically solved! Not only that the bank would be rewarded by the share market for this especially if done rapidly. Let’s get all the losses into one financial year and go back to making profits (distributions – yummy) and bonuses (double yummy) while the poor home owner is saddled with a debt, no asset and possibly bankruptcy.
In particular one of the big banks in the early 90’s cleaned up their balance sheet by foreclosure. This does, can and WILL happen.
I have been advising clients for the last couple of years to ensure they are gradually lowering their LVR’s to get them in a much sounder position.

 

[sash]

Sound advice for now and the next 6-24 months.

I don't have a crystal ball.....but I have already implemented some debt reduction strategies, namely:

1. Have taken titles of 40% of my securities

2. Have set-up Offsets across more than 1 bank

3. Have established a line of credit over a year ago...based on last years prices

4. Ensured that I am a AAA credit risk...have establised this over the last 10 years.

5. Set-up a company for Share holding and trading as another cash-flow mechanism. I sat on the sidelines over the last 24 months...now I am putting it into action.

As for people who think the Banks will do the right thing....DID YOU read the loan contract for the mortgage. It basically says that they can do anything they want to. You might be protected under the UCC (Universal Credit Code) if you have a PPOR but no such protection is extended to IPs.

Cheers
Sash

I have been advising clients for the last couple of years to ensure they are gradually lowering their LVR’s to get them in a much sounder position.

 

[Red Car]

Kennethkohsg,

I can understand your confusion. Your points are very valid and what you may miss is that some people in Australia are so "Labor" or "Liberal" that it colours their views immensely. They just cant separate reality from their own political views. There are the facts and then there are the twisted political views of certain people. You can pick them by the broad, outlandish and emotion filled opinions that they try to pass off as facts.

Cheers

 

[Daz]

Kennethkohsg,

I can understand your confusion. Your points are very valid and what you may miss is that some people in Australia are so "Labor" or "Liberal" that it colours their views immensely. They just cant separate reality from their own political views. There are the facts and then there are the twisted political views of certain people. You can pick them by the broad, outlandish and emotion filled opinions that they try to pass off as facts.

Cheers

I agree, no provision of facts, just broad sweeping statements.

If you going to argue that the Howard government didn’t perform well, that’s great, this is a democracy, but at least provide some evidence to support your view. It seems that some here don’t even bother to read a post thoroughly before responding, they just seem to want to force their opinion down your throat.

Kenneth put together a rational, sensible and researched set of views and received responses void of fact or reference.

If some here consider providing a $22billion surplus after paying off Labor’s $96 billion debt a “badly managed”, I’d hate to know how they measure success.

 

[Daz]

Are you kidding? It is universally understood that
1. The Australia economy was badly managed under Howard and has become a time bomb.
2. Removing the extraordinary resource boom from the equation, the economic growth has been despicable in every measure compared to most countries.

Only a person who doesn't know the difference between "lucky correlation" and "real causation" would contribute the "artificial and poisonous" growth to the previous government.

Nonsense, this nation prospered under the Howard government, even the current government agree that we are in a prosperous position now. The $22 Billion surplus was not conjured up in the last 11 months mate.

 

[Kennethkohsg]

Kenneth

Isn't it just possible that the 'last 16 years' would have happened regardless of which 'party' was happening. Obviously we would not have participated in the worlds party with absolute incompetents running the show but maybe the public needs to take credit for at least electing politicians who don't take things backwards (note - I didn't say who take things forward - my low opinion of all politicians)

Cheers

&&&&&&&&&&&&&&&&
Dear Handyhandy,

1. I fully agree with you that the Australian public must be duly credited for their wise choice in choosing the kind the Government that they want at both the Federal Governmental Level and at the various Local State governmental levels, resulting in the 16 years long continued economic prosperity in Australia, from 1991 to 2007 period.

2. Since 2003, I was initially highly impressed with the Australian peoples' government choice, having cleverly voted in their government at both the Federal and local State levels, in having a pro-business, with strong economic management track record Coalition Federal Government to lead Australia nationally, complemented and properly balanced by the pro-working class ALP State Governments at the various State governmental levels.

3. Consequently, with the ALP State Government in power and ruling all the Australian States, I was subsequently caught by surprise by the Australian People's choice to officially vote in an ALP Federal Government in November 2007, thereby making Australia a common single ALP government at both the Federal and State Government levels.

4. Such a common single Party ruling political structure, be it the present ALP or/and the common single ruling Coalition Party, at both the Federal Government and local State Governmental Levels , is said to be a "weak" political structure for any country.

5. However, I was subsequently updated that the Australian Peoples' government choice was indeed a wise one, in that it has done away with the bi-partisan politicking at the voters' expense and that a single ALP Government at both the Federal and State Governmental levels, will mean that the ALP will have assume full responsibility for proper consequence outcomes of its own Government in Australia, thereby having no excuse for failing to develop Australia with way it should go, in order to best benefit the country and for the long term good of the Australian Peoples.

6. However, at the way things were seen as actually developing in Australia over the last 9 months, it does not seem to have served the originally intended objectives, underlying the Australian People's government choice for a common single ALP Government at both the Federal and Local State Governmental levels.

7. Consequently, from the way things are developing at the various local State Governmental levels, it seems that the Australian Peoples seem to be
slowly trying to replace the various long-serving ALP State Government with a more pro-business Liberals-National Party Coalition State Government as recently observed in the WA's case.

8. Will Australia eventually have new bi-partisan political structure again with the ALP ruling at the Federal gonvernementa Level and the Coaltion Liberals-National Party ruling at the various local State Govcernmental levels, in the near future, nobody knows for sure that this present trend as observed in the WA case, will eveutaly spread to other Australian State Governmental levels, at this point in time

9. Will this new bi-partisan Political Structure best serve Australia's best interests, in the long run, objectively speaking?... Or will it further weaken the public governence for Australia as a Nation, on the whole?

10. Nobody can tell for sure, at this point in time.

11. for your further comments and discussion where neccessary, please.

12. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

See, that is why I said you are lacking the basic logic. According to your logic, if the life is worse now, it MUST be the current government's fault in management. If the life was better, it MUST be previous government's "good" management. That is why I said you don't understand the difference between correlation and causation.

Very unfortunately, most people think in this simplistic way.

&&&&&&&&&&&&&&&&&
Dear Sphinx,

1. I presume that you have deliberately "erred" in your own logical reasoning from my perspective;- in that if life for the average Australian household today, has worsened or/and improved for the better, for that matter, it is the present incumbent ruling party, governing Australia today, that must ultimately bear its full responsibility towards the Australian Peoples.

2. Consequently, the ruling Party in government must always be prepared to be openly criticised or to be subsequently praised by the Australian Peoples accordingly, by way of the peoples' feedback to the ruling government, regarding its various policies that it has newly implemented.

3. That is the way, I understand how the Western Democracy actually works in Australia, at this point in time.

4. Consequently, I do not quite understand the underlying logic behind your statement that, "If the life was better (yesterday?? or today?), it MUST be previous government's "good" management. " ?

5. ... Why must it, be so, logically speaking from your own perspective, please?

6. Looking forward to understand and to further learn from your unique viewpoint and perspective, please

7. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Not mentioning the current global crisis, an economic policy also has its lingering effect for quite some time. That is why the idiotic (more accurately, sinister, as they know the consequence) policy propelled by people like Greenspan/Howard will give the "appearance" of growth during their reign but pass on the disastrous consequences to the next government.

&&&&&&&&&&&&&&&&&&&
Dear Sphinx,

1. I beg to differ from your perspective.

2. To me, it's a matter of different perspectives and focus ( NOW vis-a-vis the Future Focus, Short Term Effects vis-a-vis Long Term Consequences etc) and different personal life ethics ( "Good" = "Correct" and "Bad" = "Wrong" Policies in our own personal opinions) and this is what actual world of politics is all about.

3. Let the voters ultimately decide and make their own choice as to the kind of actual Society and the kind of real Government that they actually want, for themselves.

4. For your further comments and discussion where neccessary, please.

5. Thank you.

regards,
Kenneth KOH