The First Home Owners Boost (as it is officially known) has certainly given the Government bang for its buck. By spending roughly $200 million of its own money to date, it has added about $3 billion to the housing market. But the additional $2.8 billion has come from increased mortgage debt taken on by those most vulnerable to a serious economic downturn, at a time when the latest “unexpected” increase in unemployment indicates that, like it or not, the global downturn is coming our way.
James Galbraith has written a very good analysis of the crisis and why the policies being followed in the USA (and, by implication, here) will not work.
I reproduce some extracts here to give you a flavour of the article, but I recommend a read of the full paper in the Washington Monthly–thanks to blog member Warren Raftshol for bringing it to my attention. The emphasis added to some points is mine.
It seems we’ve moved from Stanley Kubrick to John Cleese. Rory Robertson’s reply to my “Rory Robertson Designs a Car” post reminds me of one of my many favourite scenes from Monty Python, the fight between King Arthur and the Black Knight:
King Arthur: [after Arthur’s cut off both of the Black Knight’s arms] Look, you stupid Bastard. You’ve got no arms left.
A new high performance hybrid car has recently been released by a Roring Motors, Inc. According to Managing Director Rory Robertson, the new “GoFlowMobile” ™© achieves unparalleled performance for a hybrid car, by applying a simple insight from economics to the hide-bound world of engineering.
Bnet Australia has just posted an interview with me by Phil Dobbie.
The interview is linked here, and I’ve also tried to post it to my podcast feed using a new WordPress plug in.
Can subscribers to the Debtwatch podcast please let me know whether this turns up in their iTunes, etc.? I don’t get any confirmation of whether the posting succeeds or not.
Jon Stewart at “Comedy Central” put together a masterful rip into the stock market spruikers on the CNBC network, exposing how their so-called expertise was little more than a blind exhortation to join in the euphoric excess of the bubble, and to keep it alive as it died an inevitable death.
The last quarter’s GDP figures, showing that Australia’s GDP contracted by 0.5% in the last quarter, ended the “phony war” debate over whether we’re in recession. The previous quarter’s 0.1% was so close to zero that it’s semantics to question whether we’ve seen six months of negative growth or not: we are in a recession.
The decision of the RBA Board to leave the cash rate at 3.25% today confirmed that its members don’t understand the economy.
There was an inkling of this in the statement by Board member Warwick McKibbin early last month criticising the Rudd Government’s stimulus package (“Reserve bank director opposes package”, SMH February 6):
A quick quiz: when did Australia’s biggest private debt bubble burst?
A young Gough Whitlam
If you consider the rate of increase of debt, the correct answer is “in mid-1973″. The bubble started to expand a year before Whitlam came to power, and its collapse during Whitlam’s term was the real–but at the time, unappreciated–cause of the economic crisis that undid his government.
Niall Ferguson has just made the first call for widespread debt rescheduling that I have seen published in a major newspaper–today’s Australian, and I am sure it is reproduced in many newspapers around the world (if your local paper is owned by News Limited, there’s a good chance that you will find it there).