Steve Keen finally admits he was wrong!

[Francesco]

Do you have some data shadow?
I don't have data on how much banks in major country used the government funding guarantee.
Australian banks needed badly the funding, overseas banks had very little need (if nothing), they needed capital to cover the losses on their assets.

What does it matter why banks in other countries borrow less than Australia and hence rely less on credit flow? Funding follows investment opportunities. In a world spectrum of investment opportunities countries like Australia are still relatively young (growing population), stable (security wise, no rebellions) and investment grade (mines with minerals to support growing countries like India and China). Shouldn't funds be more in demand and rightly flow to Australia for the good of the world, rather than to say Fiji or Papua New Guinea (without the scope and quantity of investment opportunities in demand by the world)?

Let's keep in perspectives, in some things it is different here in Australia.

 

[WinstonWolfe]

Funding follows investment opportunities.

So why don't Australians invest in these opportunities rather than resi property?

And if these opportunities have been so great, where's the massive surplus of capital that we are able to fund future growth from? Why do we run CADs and why is NFD getting bigger per capita?

In a world spectrum of investment opportunities countries like Australia are still relatively young (growing population),

How can a developing country like China have continuous current account surpluses, when we can't, if the opportunities here are as great as you believe they are?

stable (security wise, no rebellions) and investment grade (mines with minerals to support growing countries like India and China).

If our mines are such prolific producers of net cash flow, ergo capital, why don't we have the ability to finance these operations ourselves, rather than having to borrow foreign funds or sell the mines to foreigners? If investing in resi property is better than investing in mines, then why don't foreigners set up businesses in Australia to buy Australian resi investment property?


Shouldn't funds be more in demand and rightly flow to Australia for the good of the world, rather than to say Fiji or Papua New Guinea (without the scope and quantity of investment opportunities in demand by the world)?

Funds do flow to Australia in the form of the sale of commodities to the rest of the world. But then we think it is better to let foreigners own the mines and take the profits back overseas.

Let's keep in perspectives, in some things it is different here in Australia.

Yes, let's keep in perspective that we run CADs and have growing a NFD, and we prefer to invest in resi property rather than in the profits of our own commodity extraction.

 

[WinstonWolfe]

Winnie, thanks for your reply.

I may be completely wrong here but it seems that you have a bit of an obsession with finding and posting bearish views which leads to some here seeing you as a uber-bear where as you may feel that at times a reality check is needed.

Are you our devils advocate?

Cheers

Pete

Pete, are my views as uber bearish over a 1 yr time frame as a 40 year time frame?

I've come to accept that the majority of forumites care little beyond their own investments and their own investment timeline. Self interest rules the day, and that's why many forumites interpret data that goes against their get rich investment plans, as bearish.

But most forumites exposure to investment property is less than 15 years.

I've been involved in it over 40 years, and the people I pay most attention to have been in it longer.

If some want to invest with eyes wired shut to objectively understanding the macro and micro climate, then good luck to them. Meanwhile, I'll continue to consider all the fundamentals, not just those that reinforce how I am already invested.

 

[yieldmatters]

Shouldn't funds be more in demand and rightly flow to Australia for the good of the world, rather than to say Fiji or Papua New Guinea (without the scope and quantity of investment opportunities in demand by the world)?

Chris Joye argues our big 4 banks should show a home bias to their activities because they have an implicit government guarantee. I wonder if he would apply that logic to the rest of the world that Australia relies on so heavily? Most of the worlds banks are currently either government directed, government owned, or government guaranteed. What if they showed a home bias?

This country has lost the plot. We have forgotten what productive enterprise looks like. We buy some property, sit on it and wait for profits to flow our way that we never earned nor deserved. When the new money stops flowing from overseas the game stops. Hence the intense lobbying of people like Chris Joye to get the debt markets that underpin property prices government guaranteed. It will keep the game going just a little bit longer.

 

[HiEquity]

Yes, let's keep in perspective that we run CADs and have growing a NFD, and we prefer to invest in resi property rather than in the profits of our own commodity extraction.

WW Australian companies own far more mines overseas than foreign companies own in Australia. Other than some things that are just too big to fund ourselves - such as a project the likes of Gorgon. Our CAD and NFD interest costs are easily serviced from our revenues. Government debt is very small compare to its annual revenue.

China is a one party state that runs surpluses to the detriment of the well being of its people. I know which country I prefer to live in!

I really don't see what the fuss is about.

 

[yieldmatters]

WW Australian companies own far more mines overseas than foreign companies own in Australia. Other than some things that are just too big to fund ourselves - such as a project the likes of Gorgon. Our CAD and NFD interest costs are easily serviced from our revenues. Government debt is very small compare to its annual revenue.

China is a one party state that runs surpluses to the detriment of the well being of its people. I know which country I prefer to live in!

I really don't see what the fuss is about.

What does government debt have to do with it? (typo maybe?)

 

[WinstonWolfe]

WW Australian companies own far more mines overseas than foreign companies own in Australia.

Do you understand how Net International Investment Position is derived HE?

Other than some things that are just too big to fund ourselves - such as a project the likes of Gorgon.

Gorgon is too big to fund ourselves because we've been running CADs for decades, hence we don't have the savings to reinvest.

Our CAD and NFD interest costs are easily serviced from our revenues.

You mean the revenues we alternatively could be using to fund Gorgon

Government debt is very small compare to its annual revenue.

China is a one party state that runs surpluses to the detriment of the well being of its people. I know which country I prefer to live in!

Are you saying China would be better off running CADs.

I really don't see what the fuss is about.

That's right HE, you don't see.

 

[chilliaa]

Yes, let's keep in perspective that we run CADs and have growing a NFD, and we prefer to invest in resi property rather than in the profits of our own commodity extraction.

For god sake mate, you are talking primarily about a property forum. Of course the focus here is going to be property. That doesnt mean that the whole of australia replicates the actions of people in this forum.

This topic is going round and round and round and round and..........

One piece of advice to everyone, beware of information paralysis.

 

[yieldmatters]

Of course the focus here is going to be property. That doesnt mean that the whole of australia replicates the actions of people in this forum.

Unfortunately the whole of Australia does replicate the actions of people in this forum!

But fair point though. The property market economics section can easily drift into global macro economics which can be a bit over the top.

 

[WinstonWolfe]

For god sake mate, you are talking primarily about a property forum. Of course the focus here is going to be property. That doesnt mean that the whole of australia replicates the actions of people in this forum.

Then why post about your share trading and fundamental analysis Chilli?

This topic is going round and round and round and round and..........

One piece of advice to everyone, beware of information paralysis.

Yes Chilli, it would be naive of anyone to think what is happening in China or our national accounts has any bearing over interest rates or Australian property prices. Much better if we just stick our heads in a hole. And that nasty GFC thing? We are better if we just ignore it cos that certainly won't have any bearing on our property prices. And if it does, then we can rely on the RBA nad the govt to borrow against future tax revenue and print dollars....and everything will be kosher.....and property prices won't go anywhere but UP UP UP

 

[steveadl]

We are better if we just ignore it cos that certainly won't have any bearing on our property prices. And if it does, then we can rely on the RBA nad the govt to borrow against future tax revenue and print dollars....and everything will be kosher.....and property prices won't go anywhere but UP UP UP

I know you're being sarcastic WW, but in the bigger picture yes - that's pretty much what will happen. Govt's, fed's etc will step in when necessary to keep the status quo (whether to the detriment of the countries accounts or not), and our small picture individual investor assets will plod along as usual.

I fall into the category you mentioned earlier, whilst all the macro talk is interesting, it doesn't effect my individual asset purchases much as the story will still be the same in 50yrs (albeit perhaps at more dramatic levels), and beyond that doesn't concern me.

Having said all that, I do enjoy the conversation.

 

[boz]

WW Australian companies own far more mines overseas than foreign companies own in Australia.

But foreign own big chunk of australian companies while australian not as much, when you run CAD, specially in the long term, you just get the whole country sold to foreigners, the only way to avoid it is to run massive gdp and productivity increases. This is not happening (and didn't happen for long time)

Government debt is very small compare to its annual revenue.

this is a very tricky matter: when you have an economy that has been pushed up too much by bubbles (for example like was japan 20 years ago) than when it deflate you get that revenue gets much smaller very quickly (and now japan has got by far the biggest public debt of something like 170% of gdp), you can see that from US and UK that even without stimuli they had big revenue drops, same with australia that the surplus is gone and deficit arrive very quickly and resource prices didn't even drop that much jet. it can be just few years beore we have high public debt as with high private debt like UK and US.

I really don't see what the fuss is about.

this explain this:

chilliaa
This topic is going round and round and round and round and..........

 

[Bill.L]

Hi all,

What Steve said here....

the story will still be the same in 50yrs

The Latin American debt crisis in the early '80's, the Savings and Loans bankruptcies of the early '90's, the Asian meltdown of the late '90's, etc, etc..
They were all going to send the world into the next depression, bigger than the '30's. Our CAD and NFI were at record levels by all measures.

Our TWI is not collapsing, therefore the rest of the world does not have problem with our CAD. We have things the world needs, energy, minerals and food.

Keen got property wrong because he didn't see that we will be in the same situation in 5, 10 and 20 years time.

bye

 

[boz]

Hi all,

What Steve said here....




The Latin American debt crisis in the early '80's, the Savings and Loans bankruptcies of the early '90's, the Asian meltdown of the late '90's, etc, etc..
They were all going to send the world into the next depression, bigger than the '30's. Our CAD and NFI were at record levels by all measures.
our Net foreign debt is at all time high now

Our TWI is not collapsing, therefore the rest of the world does not have problem with our CAD.
they did have a problem with that last year when the AU$ lost 40% of value in 3 months
We have things the world needs, energy, minerals and food.
yes, but if they get cheaper for quite sometimes then in the last 3-4 years australia is in a big trouble

Keen got property wrong because he didn't see that we will be in the same situation in 5, 10 and 20 years time.

he might just been ahead in his forecast by 5 or more years, markets can be irrational for much longer (or shorter) then exepcted

 

[WinstonWolfe]

Hi all,

Our TWI is not collapsing, therefore the rest of the world does not have problem with our CAD.

bye

Then why are we paying them an extra couple of % to attract their money?

And by that reasoning, we can keep running CADs and building NFD ad infinitum. In fact, by that reasoning we can keep building NFD with CAD after CAD until the foreign interest bill leaves nothing for us to spend on consumption....

 

[WinstonWolfe]

Having said all that, I do enjoy the conversation.

It will be interesting to see what the topics amongst the economic and govt elites become over the next 5 years.

In August, the RBA mentioned for the first time there is a risk of a property bubble and deflation.

I note they are also mentioning the term external shock more.

But I should remind myself this stuff would be viewed as biased against property investment....and therefore few here want to hear it.

 

[Shadow]

And that nasty GFC thing? We are better if we just ignore it cos that certainly won't have any bearing on our property prices. And if it does, then we can rely on the RBA nad the govt to borrow against future tax revenue and print dollars....and everything will be kosher.....and property prices won't go anywhere but UP UP UP

Pretty much spot on there Winston. That's exactly how it played out.

 

[HiEquity]

That's right HE, you don't see.

Nice one WW.

As you haven't seemed to learn the art of splitting quotes, I will have to respond with a list:
- Yes I understand our net foreign investment position but we were talking about mining.
- Gorgon is too big because there are only a few companies in the world who can fund $50bn by just withdrawing it from their bank account. Nothing to do with money flows between countries. These companies are owned by representatives from many countries, including Australia.
- Yes China should be running deficits IMO. I know there are quite a few people there who could use the social security, health benefits and infrastructure support such a decision would provide. China is not a model country for anything I aspire to for Australia.
- For an optimal financial position, it is known that individuals, businesses and countries should all invest with leverage. To do otherwise is to have a "lazy balance sheet". As the country grows so should the debt so as to maintain the gearing - ideally it will always be at "record highs" otherwise it means we are under utilising our capacity. There is no problem with that.

Nice chatting to you but I agree, this thread isn't getting anywhere...

 

[Shadow]

In August, the RBA mentioned for the first time there is a risk of a property bubble and deflation.

I'm pretty sure the first time they mentioned a property bubble was in 2002 or 2003.

I'll try to dig up the relevant article.

 

[Shadow]

our Net foreign debt is at all time high now

1. Has it ever been at an all time high before?

2. Can we afford to pay the interest on the current debt?

3. Could we still afford to pay the interest if the debt doubled from here?


(The answer is YES to all three questions by the way.)