Data for 7.30 Report Interview coming soon…

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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, 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).

The Political Debt Cycle

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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.

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.

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.