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.

The BIS Annual Report: From Goldilocks to the Three Bears

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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. The BIS 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.

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.

PM on New Zealand Reserve Bank Pol­icy Shift–transcript

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Will Bud­get tax cuts fuel inflation?  (click here for the MP3 file)
PM — Wednes­day, 9 May , 2007  18:14:52
Reporter: Stephen Long
MARK COLVIN: Now, will the tax cuts in the Bud­get cause infla­tion?

Some lead­ing econ­o­mists argue that the Reserve Bank could be forced to lift inter­est rates down the track because Gov­ern­ment spend­ing and tax cuts will increase con­sump­tion and prices.

But oth­ers dis­agree. They argue that debt lev­els are so high that many peo­ple will be hand­ing their tax cuts straight to the bank.

ABC PM tonight–major pol­icy shift by New Zealand RB?

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Stephen Long from ABC News brought to my atten­tion the fact that the Reserve Bank of New Zealand appears to be con­tem­plat­ing a return to reg­u­lat­ing lend­ing.

This is only hinted at at present, but it rep­re­sents a major shift in Cen­tral Bank thinking–and a wel­come one, from a debt-defla­tion­ary point of view.

I’m inter­viewed about it on PM tonight; in the mean­time, here are some rel­e­vant excerpts from the Reserve Bank of New Zealand: Finan­cial Sta­bil­ity Report, May 2: