Below is the press release from the Centre for Policy Development for the launch ofÂ my “mini-book” on debt. Please pass the news on, andÂ I hopeÂ to meet some of you at the launch.
You load sixteen tons, and what do you get?
Another day older and deeper in debt”
(Merle Travis, 1946)
Australia has been on a 45 year private debt binge that has now reachedÂ unsustainable levels. It’s been going on so long that our entire system is becoming reliant on it: we almost can’t afford to stop borrowing.
I expect–and hope–that the tenor of discussion at this month’s RBA Board meeting will be very different to last month’s. In August, I imagine, the community members of the Board listened sagely as the RBA’s economists explained why the risk of future inflation had risen, why this justified a “pre-emptive strike” of raising interest rates, and then reluctantly agreed to the rise.
I hope that this month’s discussion is more along the lines of “if you guys are the money experts, how come you didn’t see it coming?”–it, of course, being the unfolding collapse of the US housing market, and the resulting extreme turmoil on financial markets.
The 7.30 Report is making good use of the web with its extended interview feature. These are the edited highlights of the major interviews it does for stories, at best ten per cent of which sees the light of day in the final story.
Here is the link to the extended interview with me for their story on predatory lending and the Cooks case.
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Those of you who missed last night’s 7.30 Report (like myself–I was playing tennis at the time!) should check the link below:
Â American mortgage shock waves hit Australia
Apologies again for a tardy update cycle on this blog, but as you can imagine, I’m busy as hell right now. When the dust settles–in early October–I hope to bring everything up to date.
I will also be releasing a mini-book on debt for the Centre for Policy Development on September 18th. Venue TBA, but please contact the CPD if you’d like to attend. The working title is And Deeper in Debt…
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To its credit, the House of Representatives Standing Committee on Economics, Finance and Public AdministrationÂ decided to hold an “Inquiry into home loan lending practices and processes”, in the form of a one-day round-table discussion with interested parties.
They invited a diverse group: all the major banks were asked, as well as representative of non-bank lenders, mortgage insurers, valuers, community representatives, regulators, and yours truly. We were asked to consider four topics:
- To what extent have credit standards declined in Australia in recent years?
- Have declining credit standards caused an increase in the number of loans in arrears and the number of repossessions?
Oh dear. WhenÂ Nassim Khadim from The AgeÂ asked me to comment yesterdy on the electoral assertion being made by the Liberal Party–that rising State debt was putting upward pressure on interest rates–I responded thatÂ the assertionÂ was:
“Total, total bullshit. It’s like saying that somebody dropped a pebble into the ocean and that caused a tsunami. And you can quote me on that.”
Well, I expected just to see the “pebble and tsunami” analogy turn up in the report. Instead, I saw the first two sentences of the above–and learnt the hard way that editorial standards at Australia’s major dailies are no longer as reserved as I took for granted:
Named in mock honour of America’s greatest swindler, a Ponzi Scheme is a financial ruse that, for a time,Â generates apparently great returns from an investment that in fact produces nothing. Ponzi Schemes initially appear to work because the promoters pay early entrants seemingly fantastic returns, by the simple expedient of giving them money deposited by later entrants. So long as the Scheme continues to grow, it can appear successful–and indeed individuals who get in and out before the Scheme collapses can become fabulously wealthy.
As you may know, the House of Representatives Standing Committee on Economics, Finance and Public Administration has arranged an Inquiry into home loan lending practices and processes, to which I have been invited. The submissions have just been released; click on the link to access them.
My submissionÂ is here for speedy reference. Apologies to all for the absence of posts recently, but if can be allowed some Aussie vernacular here, I’ve been busier than a blue-arsed fly in recent weeks, and (now you’ll have to allow a very inept mixing of metaphors!) won’t get my head above water for some weeks yet.
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It’s not yet the main topic of debate between Liberal and Labor, but some of the arguments in Debtwatch have at least made their way into Hansard courtesy of a speech by Laurie Ferguson. The full extract from the speech is shown below.
“This makes a mockery of the claim by the Prime Minister that we have never been better off. Whilst the Howard government crows about the success in the economy, which was largely inherited from Labor and fuelled by the raw materials demands of India and China, there is an alternative reality of an out-of-control personal debt spiral. Steve Keen from the University of Western Sydney writes:
Jessica Irvine from the SMH has written an excellent piece with this headline in today’s SMH. I’ve linked it on the blog roll, but it’s linked here too for quick reference.
Â My Debtwatch report will be very brief this coming month: I’m off to the USA tomorrow for some conferences, and I’m “under the gun” to produce papers and presentations to suit. I also won’t be available for comment at the time of the RBA’s next meeting–which is of course highly unlikely to move rates in either direction.