Too much money!

I was just interested in other opinions.


Like many I grew up in a "battler" family where there was never enough and thus have the money is scarce mentality imprinted on my brain from early childhood.

When I talk with people involved in high finance and big property, there apears to be just vast sums of money in the world, and it's seaking a home!

For example one of my friends involved in property in Japan biggest head aches is the lack of resources and time needed to place a US$4B investment fund from the middle-east into the Japanese commerical property. US$4B that's several shopping centers, residential complexes, each that need due dilligence, legals, negotiations, planning, redesign all of which take months and months...its not easy to spend $1B wisely, actually it appears very very hard work!

The world apears awash with capital, this seems a huge change in the last 50-60 years! Can anyone see a end to this trend? What will the financial world be like in another 20 years or even 50 years? On a global scale will interest rates continue to decline as money becomes "easier"?
 
always_learning said:
The world apears awash with capital, this seems a huge change in the last 50-60 years! Can anyone see a end to this trend? What will the financial world be like in another 20 years or even 50 years?

To my humble opinion most of the Western currencies are overvalued. Overvalued versus what? Versus the Chinese, the Indian and several Eastern European currencies.
To my amateurish opinion, the leap in living standards in the West was fueled (among other things) by outsourcing of production to China, India et al., and when their economies continue to grow and sophisticate, and their HUGE population accumulates wealth, there will be no other way but to revalue their currencies, at the expence of the value of the "Western Dollar".

http://www.economist.com/markets/bigmac/displayStory.cfm?story_id=3503641
 
About 10-15 years ago, Kiyosaki observed that there was around US$1.5 trillion washing around the world, looking for a home every day.

I don't see much change coming, no matter what currency it's denominated in. If it moves from USD to RMB, so what?
 
Always Learning. There always has been and always will be more than enough money out there for YOU to achieve your personal financial goals.
 
quiggles said:
If it moves from USD to RMB, so what?

I would agree with you globally, of course!
But from my personal point of view (with all my assets/income denominated in AUDs) those figures above (USD 4B) may seem smaller in the future.

That is, and excuse me for simplicity, If today's AUD 100,000 is worth of 10,000 pairs of high quality Chinese made socks, in few years to come it may be worth only 5,000 or even 3,000 of the same socks. And not due to inflation, but due to currency devaluation.
 
spark said:
That is, and excuse me for simplicity, If today's AUD 100,000 is worth of 10,000 pairs of high quality Chinese made socks, in few years to come it may be worth only 5,000 or even 3,000 of the same socks. And not due to inflation, but due to currency devaluation.

Spark, I know you are considering the AUD$, but on a global perspective I think that in 10 years time, I am sure on a global average we can buy around double the amount of high quality socks for the same $100,000. Ie. for one hour of work I would expect to buy double the number of socks. Ie. my purchasing power for manufactured/consumer goods will double every 10 years.

Steven Covey in his recent book (mis)named "The Eighth Habit" talks of a 50 fold (not 50%) improvement in the next 30 years, driven by the information age. As an offside remark however I feel this wont happen, not because the information age cannot deliver 50 fold improvement but simply because we will hit the wall of natural resource constraints (water, power, arible land). The next "age" is nano-tech/bio-tech wave will of I believe take over (built upon) the information age and has the capacity to deliver an unbundance of wealth ( not in the limit financial sense) and quality of life to all societies.

How expensive was a TV, Microwave, Air-cons or even socks 20 years ago against average income.? I remember my mum paid $595 for a microwave and $890 for a color TV, I can buy a Chinese made Microwave for US$39.95 and a small TV for $60. $60 is what it costs me for lunch each week and $40 (I hate to admit) is what I spend on coffee's .
 
Spark,

If our currencies become so devalued perhaps we can make the socks ourselves? I have no quarms with that because I'm in I.T. and I'd see the jobs come back...
 
Mark Laszczuk said:
Always Learning. There always has been and always will be more than enough money out there for YOU to achieve your personal financial goals.

I am sure there is! But in all honesty my financial goals dont matter that much. My goals put such a strain on my relationship with my wife last year that I realise they cannot be achieved without breaking the very thing that I value the highest: my family. If my wife cannot cope with debt as a means to enable property investment and cannot cope with non-trivial amounts of money invested in the share market then I needed to choose to either give up my (financial) goals or give up my family; a painful no-brainer!
 
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always_learning said:
Spark, I know you are considering the AUD$, but on a global perspective I think that in 10 years time, I am sure on a global average we can buy around double the amount of high quality socks for the same $100,000. Ie. for one hour of work I would expect to buy double the number of socks. Ie. my purchasing power for manufactured/consumer goods will double every 10 years.

Steven Covey in his recent book (mis)named "The Eighth Habit" talks of a 50 fold (not 50%) improvement in the next 30 years, driven by the information age. As an offside remark however I feel this wont happen, not because the information age cannot deliver 50 fold improvement but simply because we will hit the wall of natural resource constraints (water, power, arible land). The next "age" is nano-tech/bio-tech wave will of I believe take over (built upon) the information age and has the capacity to deliver an unbundance of wealth ( not in the limit financial sense) and quality of life to all societies.

How expensive was a TV, Microwave, Air-cons or even socks 20 years ago against average income.? I remember my mum paid $595 for a microwave and $890 for a color TV, I can buy a Chinese made Microwave for US$39.95 and a small TV for $60. $60 is what it costs me for lunch each week and $40 (I hate to admit) is what I spend on coffee's .

This is an excellant post.

Is is very hard to understand the MASSIVE drop in the price of consumables over the last 15 years.

Hers is actual example to illustarate the impact so consider this.

I paid in 1987 $599 for my push button National Microwave ( which I proudly still have). It was top of the line and I was earning $215 after tax a week. So it cost me 2.5 my take home pay or 250%.

Applying todays income of my wife that same microwave should cost $2500. :eek:

Instead it is around $450 for top of the mine with more features covection cooking if you want. Percentage of wages is now 0.45 or only 45%. THis is drop of 5 fold!

Here is another one.

I am about to buy a new Subaru Forester. 2005 spec,. $35,500 drive away. 2.5l , 112kw, abs, etc. If I want to get one with 5k on the clok I pay $32,000. In 1998 I paid $34,000 for a new Subaru Imprezza 2.0ltr. 92kw, same spec. Essentiall over 7 years the price has stayed the same and the specifications/safety/security/fuel efficiency has increased. If I wanted Impreza it would be less than 1998 prices!

Comparing wages again we are looking at a real drop of 50% due to increase in wages over the period.

Think about it? Where is the real money in the future?

Rase resources, safe food production, water, power to some extent, unpolluted living, will be were the wealth is. ;)

Peter 147
 
Peter 147 said:
This is an excellant post.

Is is very hard to understand the MASSIVE drop in the price of consumables over the last 15 years.

Hers is actual example to illustarate the impact so consider this.

I paid in 1987 $599 for my push button National Microwave ( which I proudly still have). It was top of the line and I was earning $215 after tax a week. So it cost me 2.5 my take home pay or 250%.

Applying todays income of my wife that same microwave should cost $2500. :eek:

Instead it is around $450 for top of the mine with more features covection cooking if you want. Percentage of wages is now 0.45 or only 45%. THis is drop of 5 fold!

Here is another one.

I am about to buy a new Subaru Forester. 2005 spec,. $35,500 drive away. 2.5l , 112kw, abs, etc. If I want to get one with 5k on the clok I pay $32,000. In 1998 I paid $34,000 for a new Subaru Imprezza 2.0ltr. 92kw, same spec. Essentiall over 7 years the price has stayed the same and the specifications/safety/security/fuel efficiency has increased. If I wanted Impreza it would be less than 1998 prices!

Comparing wages again we are looking at a real drop of 50% due to increase in wages over the period.

Think about it? Where is the real money in the future?

Rase resources, safe food production, water, power to some extent, unpolluted living, will be were the wealth is. ;)

Peter 147

Nice - can anyone do a comparison like this for income vs housing?

I am not that old and I cant personally do a very good comparison, if anyone out there has been in the same field for say 20yrs that would to the trick....

<KS>
 
Peter 147 said:
Essentiall over 7 years the price has stayed the same and the specifications/safety/security/fuel efficiency has increased.

Dear Peter,

This overlooks the impact of:
-Sales tax replaced by GST 22% -----> 10%
-Automotive import tariff reduced 17.5% -----> 10%

Cheers,

Sunstone.
 
<KS> said:
Nice - can anyone do a comparison like this for income vs housing?

I am not that old and I cant personally do a very good comparison, if anyone out there has been in the same field for say 20yrs that would to the trick....

<KS>

Well I believe the ball park figure is 30% of average income, further more this average is been fairly consistent during the post WWII period! What is different houses are BIGGER now, not only are they BIGGER but they are BETTER! Take a look at what the basic WB '50's home had included? 1 bathroom, basic kitchen, laundry containing a sink and 3 bedrooms! Hotwater was optional as was a flush toliet if available! My parents married after the war and moved into their first new home sortly after...no running hotwater (a copper to boil it) and an outside loo!

Imagine induring Melbourne thru the winter with an outdoor loo...that's no so far away from the treatment handed out to suspects during theSpanish Inquisition :D
 
Peter 147 said:
Is is very hard to understand the MASSIVE drop in the price of consumables over the last 15 years.

* I don't know if the CPI is regularly reweighted to reflect changing relative values, but I would suspect price relativity have changed as follows (with the big staples of food and rents being roughly constant):


BIGGEST DROPS
- Electronic stuff
- Clothes

ABOUT THE SAME
- Food
- Rents

BIGGEST RISES
- Education (both private schools & HECS)
- Private health


Note the biggest drops are imported mass-produced capital-intensive manufactures. The biggest rises are domestically produced labour-intensive services that are produced one-on-one.

* What is the effect of big drops in something like consumer electronics?

We either buy more of it or spend less (as a proportion of income) on it. Or even both if prices have dropped greatly.

Think of telephones for instance. 25 years ago it was rare to have a second phone and you had to wait for the guy from Telecom to come out, put in a new socket and then offer you a rented phone (choice of pastel blue, beige, or light green). Now with de-regulation, you buy a cheap phone ($30), an extension lead (which sometimes costs as much as the phone), plug it in and away you go! So houses with two or more phones are now common.

* Parkinsons Law states that expenditure rises to meet income. Thus if the price of one class of goods drops, people might buy more of those items as they (or marketers) see 'needs' that didn't before exist or were considered 'affordable'.

But the average house of 2.6 people can only have so many phones, so after a point there is more money sloshing about than they're willing to spend on (fixed) phones. As they *have* to spend it (refer Parkinsons Law), I suspect that this creates inflation in prices of other products and services (inflation being defined as too much money chasing too few goods).

This is concealed by the 2 or 3% pa that comes out in the CPI stats. Such goods and services may include real estate, private health and education which appear to have inflated quicker than the CPI generally in recent times.

Some services such as health and education have a large government policy component. However for something like housing, and as experience with homebuyers grants show, if people's capacity to pay is increased, then they will spend up to their limit, creating asset price increases that eventually mean people get less for their dollar.

Chinese Electronics has certainly kept the CPI down, but I think there's a case for arguing that cheapness in one sector gives rise to inflation in another.

Regards, Peter
 
Peter 147 said:
Is is very hard to understand the MASSIVE drop in the price of consumables over the last 15 years.
Part is technology, of course, but also outsourcing of labour to cheap countries (with low currencies)
I paid in 1987 $599 for my push button National Microwave ( which I proudly still have).
And they did work well those days... I remember that we had a 1982 Sanyo from my in-laws, which worked wonderfully till 2002, and then it was transferred on to my sister in law. Now they do not last so long... But, that's an off-topic
Comparing wages again we are looking at a real drop of 50% due to increase in wages over the period.
In consumables and gadgets, yes... Not in housing though. My personal theory is that the cheap prices of microwaves, cars and socks just made more "spare" money available, and that was poured into real estate, which value is less defined by labour/resources costs and more by "social" demand, in a similar way that was described in the post above.

From here there are two possibilities left for the infamous threads of "housing crash":
1) China revalues, AUD devalues, socks and micros cost more, less money for housing.
2) China revalues, AUD devalues, cheap AUD=rates go up. And then, you-know-what.
 
Hi All

Thanks for the comments.

Sunstone you comment I partly accept re GST and such but overall it is suprising prices are the same. As opposed to the early to late 90 when $ devalues and cars went up.

I think Technology has made the savings and that as the technology becomes readily available in China & Vietnam , Korea you see cheaper microwaves, stereos and computers. And as technology shrinks the world computers are made in Asia that save time to harvest crops in Australia and so on and so on.

I started my carreer as draftsman. Now hand drawing is gone and it is all CAD. Time has been slashed. Also take off lists can be automatic rather than maual cost of taps , lights etc..

I will end with the comment the beloved Alfa Romeo is up for sale. Sadly we must part!! I just listed it for sale on three website.

I get Colour photos, full description and automatic features list. The days of an ad in the local paper and counting the letters to save $$ has gone.Now I am continuously reaching millions of Australians.

How much did it cost for three ads. $9 for carpoint, $10 for carsales and $0 for carguide. I am out advertsing NOW and not in a weeks times to 4M in Sydney for $19 :D

Peter 147

PS Any one want to buy a great Alfa Romeo :confused: :eek: .
 
mdk92 said:
My crystal ball sees a safe scandinavian made station wagon in your future .... ;)

God, I am that transparent. :eek:

Yes I like very much the XC Volvos :eek: I am seeking help at Volvos Anonomyous. :D

I am rationalising this decison in that if Mrs 147 drives Subaru I can get a Ferrari 308, ...one day....maybe...yeah right. :(

Selling Alfa is like giving up an italian girl friend.

She is gorgeous, exciting but tempermental and high maintenance. You want to keep her but in the end you know what is right long term.

I will stop there so as not to be outed by our female posters as being closet sexist. ;)

Peter 147 ( for now)
 
Peter 147 said:
Selling Alfa is like giving up an italian girl friend.

She is gorgeous, exciting but tempermental and high maintenance. You want to keep her but in the end you know what is right long term.


Peter 147 ( for now)

I have owned Italian cars and have an Italian wife and yes, you are right on both counts. :)
 
I'm always so fascinated about the world economy, its as complicated and sophiscated as nature itself. Yet, can be simplistic for the average joe to take part in it. :)
 
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