I provided a number of comparisons of real wages, mortgage payments, interest rates and the like in my interview on the 7.30 Report this evening. I’ll post a table containing those data by tomorrow morning.
If you’re a new visitor and would like to receive my Debtwatch Report, which Kerry mentioned in tonight’s interview, please click here to send me an email about it. Or you could sign up for the blog,Â after which I will add you to the subscribers list (there have been some hassles reported by some users on this front by the way, so if that happens to you, please follow the First Rule of computers–“If at first you don’t succeed, give up”–and send me an email instead).
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Both parties will make much of their economic management credentials in this election campaign.
Many Australians, on the other hand, seem convinced that the economy would do as well regardless of which party were in power.
The average punter has it right: luck, rather than skill, has determined which governments in retrospect came up smelling like roses in the economic management stakes, and which instead smelt like manure.
By far the biggest determinant of political luck is what was happening to private debt while any given government was in power. If debt was rising, then the government looked good; if it was falling, then the government looked bad.
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.
Prior to the NASDAQ crash in early 2000, American commentators were fond of describing their economy as being in a “Goldilocks” phase–with all economic indicators being “just right”.
That phrase dropped out of circulation after April 2000, but a level of complacency still ruled when that stock market crash appeared to have little impact on the real economy.
Complacency dramatically left the building today, with the release of the Bank of International Settlement’s (BIS) 77th Annual Report.Â The BISÂ turns the Goldilocks story around, and sees it not from Goldilocks’ perspective, but from that of the Bears. Just as the Bears’ domestic idyll was disturbed by Goldilocks the Home Invader, the apparently neat global financial system has been put at risk by out of control speculative lending.