And Deeper in Debt… Launch next Tues­day 12pm

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Dear All,

Below is the press release from the Cen­tre for Pol­icy Devel­op­ment for the launch of my “mini-book” on debt. Please pass the news on, and I hope 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 reached 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.

Debt­Watch No 11 Sep­tem­ber 2007: Why didn’t they see it com­ing?

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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.

Link to extended 7.30 Report Inter­view

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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.

7.30 Report on “Amer­i­can mort­gage shock waves hit Aus­tralia”

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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:

 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…

Brief Report on the Home Loan Lend­ing Round­table

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To its credit, the House of Rep­re­sen­ta­tives Stand­ing Com­mit­tee on Eco­nom­ics, Finance and Pub­lic Admin­is­tra­tion 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?

Total, total bull­shit”?

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Oh dear. When Nas­sim Khadim from The Age 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 that the asser­tion 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:

Debt­watch No. 10: America’s Ponzi Schemes Unravel

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Named in mock hon­our of America’s great­est swindler, a Ponzi Scheme is a finan­cial ruse that, for a time,  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.

Sub­mis­sions to Par­lia­men­tary Enquiry released

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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 sub­mis­sion 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.

Debt­watch gets a men­tion in Par­lia­ment

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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:

First home pay­ments hit $3000 per month

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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.

 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.