I believe Australia is going into a severe recession, and this has been obvious since China hit the wall. In hindsite it was crazy to think China could decouple from the rest of the world.
I also believe the economic crisis has been mainly caused by the entire western world living beyond it's means in a debt funded orgy. A lot of growth wasn't real, it was all an illusion funded by debt. The sub prime and the subsequent debt crisis were just the trigger that set everything off. This bust was always going to happen, it just needed an event to get things started. So, it's started, and now the developing world has been bought down too. This was always going to happen with globalisation.
So, was Keating right all along..??
Is this world wide fiscal stimulation going to work..??
Are low interest rates leading us to a disaster..??
It could be argued that it's low interest rates that caused the bubble in the first place.
As you get older you start to see things differently. I went through the Keating recession. My family owed 500k at one stage, and we paid at the top, 22% interest rates. It was only good luck that we survived. I've always hated the man ever since.
However, what if Keating was right? What if slashing interest rates and government induced stimulous is the exact wrong thing to do? I suspect a lot of the people on here who I respect the most, and who have reduced debt, lived and suffered through the Keating recession. I think with whats coming up, I'm glad I went through it.
I think, especially in Australia, that we inevitably have to drop our standard of living. The commodity boom is well and truely over, and historically, commodity booms have never ended when supply catchs up to demand, they have ended with global recession.
Oh dear..!!
We have a massive problem coming up with the current account deficite. We either lower our spending and standard of living, or the current account deficite will explode. There is no getting around this potential disaster waiting to happen. Even with the commodity boom, our imports were growing faster than our exports. The commodity boom ment that we didn't need a manufacturing industry. Our export income has now been slashed. We now have a problem. We didn't have any problem at all while the commodity boom was happening.
If/when the current account deficite explodes upwards, our economy we be seen as a disaster waiting to happen and the dollar will crash even further. The market will do it's thing here.
If I'm right here, then slashing interest rates to pump start the economy is the wrong thing to do. It will just keep the bubble in everything propped up. The bubble needs to deflate, and the quicker it does, the sooner everything can get back to normal again.
I think global governments need to see reality.
I see things differently to most here. Being a commodity exporting farmer, you get a completely different perspective to a city person with a services based job. I said even at the top of the bubble that Australia would be in big trouble if the commodity boom ever finished. I thought it would continue for a decade or more. How silly of me?
I found this on the unmentionable forum,....
http://petermartin.blogspot.com/2009/01/saturday-insight-our-problems-are-worse.html
However, this blokes views make a lot of sense to me. The best bit of the whole article is a bit about from Gerry Harvey,...
......."Gerry Harvey of the retailer Harvey Norman says he's not that fussed about getting people back into his stores in the short-term. He'd rather the government concentrated on making Australia productive".......
I feel the same way. I would rather some short term pain, rather than trying to keep the bubble pumped up.
I wouldn't be pumping up the residential property market by the FHOG. I wouldn't be dropping interest rates further, and I think higher interest rates would be more sensible. I'd be slashing immigration now before unemplyment gets too high. I wouldn't be giving tax cuts. I wouldn't giving crazy cash handouts to increase retail spending. I'd instead be spending money on Australia's infrastructure. This would employ people and better prepare Australia for the future.
Good luck everyone. Cheers.
I also believe the economic crisis has been mainly caused by the entire western world living beyond it's means in a debt funded orgy. A lot of growth wasn't real, it was all an illusion funded by debt. The sub prime and the subsequent debt crisis were just the trigger that set everything off. This bust was always going to happen, it just needed an event to get things started. So, it's started, and now the developing world has been bought down too. This was always going to happen with globalisation.
So, was Keating right all along..??
Is this world wide fiscal stimulation going to work..??
Are low interest rates leading us to a disaster..??
It could be argued that it's low interest rates that caused the bubble in the first place.
As you get older you start to see things differently. I went through the Keating recession. My family owed 500k at one stage, and we paid at the top, 22% interest rates. It was only good luck that we survived. I've always hated the man ever since.
However, what if Keating was right? What if slashing interest rates and government induced stimulous is the exact wrong thing to do? I suspect a lot of the people on here who I respect the most, and who have reduced debt, lived and suffered through the Keating recession. I think with whats coming up, I'm glad I went through it.
I think, especially in Australia, that we inevitably have to drop our standard of living. The commodity boom is well and truely over, and historically, commodity booms have never ended when supply catchs up to demand, they have ended with global recession.
Oh dear..!!
We have a massive problem coming up with the current account deficite. We either lower our spending and standard of living, or the current account deficite will explode. There is no getting around this potential disaster waiting to happen. Even with the commodity boom, our imports were growing faster than our exports. The commodity boom ment that we didn't need a manufacturing industry. Our export income has now been slashed. We now have a problem. We didn't have any problem at all while the commodity boom was happening.
If/when the current account deficite explodes upwards, our economy we be seen as a disaster waiting to happen and the dollar will crash even further. The market will do it's thing here.
If I'm right here, then slashing interest rates to pump start the economy is the wrong thing to do. It will just keep the bubble in everything propped up. The bubble needs to deflate, and the quicker it does, the sooner everything can get back to normal again.
I think global governments need to see reality.
I see things differently to most here. Being a commodity exporting farmer, you get a completely different perspective to a city person with a services based job. I said even at the top of the bubble that Australia would be in big trouble if the commodity boom ever finished. I thought it would continue for a decade or more. How silly of me?
I found this on the unmentionable forum,....
http://petermartin.blogspot.com/2009/01/saturday-insight-our-problems-are-worse.html
However, this blokes views make a lot of sense to me. The best bit of the whole article is a bit about from Gerry Harvey,...
......."Gerry Harvey of the retailer Harvey Norman says he's not that fussed about getting people back into his stores in the short-term. He'd rather the government concentrated on making Australia productive".......
I feel the same way. I would rather some short term pain, rather than trying to keep the bubble pumped up.
I wouldn't be pumping up the residential property market by the FHOG. I wouldn't be dropping interest rates further, and I think higher interest rates would be more sensible. I'd be slashing immigration now before unemplyment gets too high. I wouldn't be giving tax cuts. I wouldn't giving crazy cash handouts to increase retail spending. I'd instead be spending money on Australia's infrastructure. This would employ people and better prepare Australia for the future.
Good luck everyone. Cheers.
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