Turmoil-enomics I

This will be the thread for all discussions today for matters economic – each day a new thread will go up until we return to some sort of normality in the markets.

And we see that overnight the US markets fell, including a 3.54% decline on the Nasdaq.

Update: As at 1040am, the ASX is down 1.3%

This thread is now closed for comments – please use the Thursday thread.

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34 Responses

  1. Just thought I would let all you guys know you will only see me online on weekdays during working hours. Yes I am my own boss so not bludging LOL. I only have dial up at home and it is soul destroying watching my toenails grow as I wait for each page to update.

  2. A question or two.
    What is the difference between monetary policy and fiscal policy?
    I am eligible for the $1400 and possibly the $1000 (I receive both carer payment and allowance. I do not need to spend this ( due to my self restricted budget ((hate wasting what little I get)), but should I spend some to help the economy? Oh and what should I spend it on?:-)

  3. “KEVIN Rudd has declared Labor will spend more public money if its $10.4 billion economic pump-priming package announced yesterday fails to insulate Australia against the global financial meltdown.

    But economists expect the package, including one-off cash handouts for pensioners, low-income families and first-home buyers, will fuel a six-month spending spree that will sustain economic activity and allow Australia to maintain economic growth. ”

    It’s all designed with a hope of a soft landing in mind. Not a a dead cert neither. It’s also important to keep in mind that this is a short-term emergency strategy and more fundamental changes will need to occur to ensure stabilisation in the long run, in my opinion.

  4. Gravel

    Ultra simple summary – monetary policy is managing non-government expenditure in the economy. This is largely done through the RBA’s management of interest rates and for-ex trading. lower interest rates promotes expenditure by the private sector for example.

    Fiscal policy is when and how the Government spends it’s money. This can also influence private spending by giving individuals or companies more money to spend through tax cuts, pension increases or cash handouts.

    Fiscal policy is related to monetary policy to the extent that it affects what the RBA does (ie, the surplus, while fiscal policy, was intended to affect monetary policy by reducing inflationary pressures).

  5. Thanks D55… I have learnt something today. I can now rest my brain – don’t wanna learn to much.

  6. JMcP

    It’s all designed with a hope of a soft landing in mind. Not a a dead cert neither. It’s also important to keep in mind that this is a short-term emergency strategy and more fundamental changes will need to occur to ensure stabilisation in the long run, in my opinion.

    Spot on. Lets hope it works and the Henry review comes up with some good stuff to move forward with.

  7. Ross Gittin made and excellent point some time back:

    She’ll be right . . . unless debt problems bite

    “Most of Australia’s businesses haven’t borrowed a lot over the past 15 years or so, but our households have. In 1994, the ratio of household debt to annual disposable income was about 65 per cent. By 2000 it had rise to 100 per cent and now it’s about 160 per cent.

    No, a bigger worry is that the banks – anxious about their own unwise lending and its effect on their balance sheets – may start to ration their new and rollover lending, calling in loans and being reluctant to lend even to soundly based businesses.
    When businesses and households start to worry shock about the size of their debts and begin cutting back their spending as a precautionary measure, that’s when the economy really starts to slow.

    And it can feed on itself, with a small slowdown and small rise in job losses scaring people more and leading to a bigger slowdown and bigger job losses.

    That’s when problems in the financial economy cross over into the real economy of consumer spending and employment, turning a soft landing into a hard one. “

  8. Hey Joni and Blogocrats! Just found you. How good is this blog?

    I am happy re the continuance of discussions of all things political, but I am rather ignorant when it comes to economics. My contributions to such threads will therefore be limited.

    Still learning lots of stuff economic from the blogocrats though.

    Congratulations to you for taking up where Tim left off.

  9. Dave55

    Truthfully, you’ve made some excellent points and despite our differing perspectives I’m more than certain our main hope and focus is on the long run stabilisation and strengthening of our economy.

  10. While I cheer the government for giving pensioners and carers the payment (they also need a minimum of $40 per week increase),I am reserved about the rest.

    G W Bush sent every tax payer a $600 cheque costing hundreds of billions of dollars a few months ago. This was going to rescue their economy. MMMM their economy is going brilliant isn’t it.

  11. For me there is some good and bad in Rudd’s package.

    Good he has acted decisively, killing once and for all his doing nothing and sending everything off to committees. Also good the measures are all one off short term handouts and not ongoing payments made in haste. As a short term knee jerk fix anything that does go wrong will be limited to the time it takes for the money to wash out of the system. Having said that he is still going to seek both overseas and local advice on how best to dole out the money so it’s used as intended and doesn’t end up in the hands of the greedy whow are responsible for this mess.

    Bad is that house prices will go up, nothing is more certain. Commentators are saying that unlike Howard’s $50 billion released over a long time that saw a continuous steep rise in house prices, Rudd’s measure should only see a one off small rise. Hope so. Also bad is that the inflationary impact of this is not know but it has to be negative, though commentators are still saying the next interest rates will be down and probably the one after that as well.

    —————————
    As a side I have noticed that the Bush administration is going to spend US$250 billion to partly nationalise their financial institutions along with put strict controls on executive remuneration, in other words they are taking up the European model which followed the British plan.

    The telling point being that the lesson has not been learnt as Bush and Paulson declared that this move went against everything Americans believe in and in no way means a move to any sort of social economic policy in the long term. As soon as this crisis is over Paulson made it clear they would go back to a free market model and hinted it might even be more unencumbered, reinforcing for me the belief that many in power in the US (including McCain) absolutely believe the current financial crisis is the result of too much regulation rather than too little. They are more than willing to experiment with everyone’s lives yet again in pursuit of their ideology. The only good thing for certain is that America from now on in is much more marginalised in the world and will never be the influence on world economic (and foreign) affairs it once was.

  12. I think it is about time a few more from Blogocracy joined this site, and decided whether this spending package amounts to a “bribe” or not.

  13. Gees Adrian, I was wondering where you were. Nice to see you letting fly again.

  14. Good comment Adrian.

    I have always supported Rudd, but was becoming disillusioned by the committies and forums. While they are good action needs to be taken or seen to be taken regularly as well.

    He has finally done something and needs to stay on thet path for a while to reclaim his credibility. if he does not keep the action momentun going he will once again be ridiculed as a once only action government.

    He could for example release his infrastructure projects on a gradual basis. Announce each piece of infrastructure a week at a time rather than announce it all in one hit. As long as he is releasing something each week it will show action.

    He could have announced payments to pensioners this week. Payments to families next week, increase in FHOGs the week after. That covers all of October with the same single announcement last night. keeps the opposition guessing and the media in a frenzy trying to predict his next move. A far better strategic plan in my view.

  15. Busy working interstate, typing this from a Qantas Lounge. Boring crap like Scheduled Logic and Critical Pathways. Client impressed though, happy with progress on the contract and very strong hint we will be the preferred tenderer for many more project coming online over the next few years. My boss is a no nonsense straight shooting type who says service to a client only comes second to looking after his employees. His reputation on this has spread to the point he wins tenders from the biggest players in this country and some from overseas.

    ————————–

    ah Tom, if Rudd had done nothing or held meetings to sort this out you would have criticised him. He does something you criticise him. He does a half and half you would have criticised him. Rudd loses with you no matter what.

    I’m ambivalent on the entire package seeing good and bad, but so far from what I’ve heard on the road it has been cautiously praised far more than criticised, even by the opposition who are now trying to take some of the credit.

    It might be several things both good and bad but in no way do I think it’s a bribe though I’m certain there are some politics in it.

  16. See Reb, psychotic abilities run in my family LOL

    “Gees Adrian, I was wondering where you were. Nice to see you letting fly again.”

  17. Why do I get the impression financial insanity is raising it’s ugly head again?

    Fed Gives Financial System No Doc Loan
    http://www.dailyreckoning.com.au/financial-system-no-doc-loan/2008/10/14/

    “In an announcement released at two in the morning in New York, the Fed announced that it and other central banks would be providing unlimited liquidity to anyone who wanted it, more or less. Specifically, it said that participants to its new lending program, “will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.” This is like a giant no-money down, NO DOC loan to the entire global financial system. If the Fed could talk, you
    It was the haymaker. In an announcement released at two in the morning in New York, the Fed announced that it and other central banks would be providing unlimited liquidity to anyone who wanted it, more or less.

    EDITOR REB: John, you’re up to your old tricks again. Can you please just provide the link, a brief excerpt (if you like) and your views, rather than cutting and pasting the entire article. Thank youse….

  18. Adrian, I’ve always been consistent in my non partisan commentary.

    I had no objection to one off payments made by the previous government, and I still don’t object. I’ve always thought that any additional payment to pensioners was better than no additional payment.

    The partisan comments by others represent a great level of inconsistency, if not outright hypocrisy.

    My criticism of the government spending package is directed towards the housing subsidies, as this is the sector where there should be a serious decline in prices. Housing is in need of this correction, and this policy pushes pressure in the opposite direction. As I said yesterday, the next generation will buy their first house at the age of 60, with the inheritance of their parents.

  19. See Reb, psychotic abilities run in my family LOL

    JMc I think you meant “psychic” abilities – but after what you’ve written in the last few days you’re probably closer to the truth! 🙂

    The word frenzy, springs to mind!

  20. Thank you Dave55, I think I can grasp that. 🙂

  21. Fiscal policy is when and how the Government spends it’s money. Dave55

    Surely you mean “our” money Dave 🙂

  22. TB,
    My Bad 😦

  23. Guys, I know I’ve got to get a life. Being unemployed is killing me. It’s just a bad habit I’ve developed and I’m trying to kick it.

  24. John,

    We value your thoughts and insights. Just keep them bloody brief!

    🙂

  25. The way things are heading we might all be unemployed soon….!

  26. I’ve checked the dictionary for ‘bloodybrief’ no such word reb LOL

    Hey, given the amount of time you guys are on here I actually thought you were unemployed. Misery enjoys company wink.

  27. The way things are heading we might all be unemployed soon….!

    Some are lucky enough to be able to choose to be 🙂

  28. Tom of Melbourne

    Good to see you have opinions both good and bad of government decisions. So do I. We need people who see good and bad in both sides of politics. This is what makes a site exciting and debateful.

    I may agree or disagree with you, however I will never be vindictive or personal. I call our previous Prime Minister Mr Howard and I call our current one Mr Rudd. that is out of respect for the office of our leader who was democratically elected, not out of respect for the individual.

    The personal name calling in my opinion shows the simple lack of intelligence of the respondent. When in doubt name call. reminds me of school. I son’t like what you have said so Im gonna throw a tanty.

    After all it is the swinging voters who change governments. Without them we would live in an autocracy yet people still blindly vote for one party. I cannot see the logic in this, it allows the party to be complacent in the knowledge that you will vote for them no matter what their policies are.

    I am a swinging voter and have been since about the age of 22 when I realised there was more to voting than blindly voting Liberal/Country Party each and every election like my father. I now vote labor, liberal, green , democrat ( RIP) based on the election and the policies presented for the election together with previous performance if I am leaning towards the current government.

  29. TB:

    “Some are lucky enough to be able to choose to be”

    Yes, rub it in while we serfs slave away for a pittance.

    By the way, how are the teeth?

  30. Shane, I’ve never considered myself a swinging voter.

    It may surprise some, but I voted ALP in every election from the 70s to 2004. Last year I voted informal.

    I prefer to look at policy and party structures and the political behaviour that result. I’m not as interested in the political personalities (most contemporary politicians fail to have a personality).

    I always admit that I am often particularly critical of the ALP because of my own background and the level of disappointment I feel in what they’ve become.

  31. I consider myself a swinging voter and am proud of the fact I have contributed to the election and defeat of a number of governments of both political divides.

  32. I just consider myself a swinger..

  33. TB

    ” See Reb, psychotic abilities run in my family LOL

    JMc I think you meant “psychic” abilities – but after what you’ve written in the last few days you’re probably closer to the truth! 🙂

    The word frenzy, springs to mind!”

    It’s an old joke TB. There has been a method in my madness though, believe it or not. Take Blogocracy, as an example, Tim created a certain theme with an underlying philosophy over a period of time. I refer to it as a ‘body of knowledge’ created from a whole host of current events etc.

    And personally, I find myself repeating similar opinions based on a certain philosophy. You recall the period when you become disillusioned because you felt you were banging your head against a brick wall on ‘Blogocracy’ and were tempted to just pack it in?

    Well, I came up with the idea to express core ideas up front so I could get a feel for others views and values so at later dates I could make quick referrals back to theories and opinions that had arisen previously. My emphasis has obviously been on markets and economics.

    For example, Professor L.Randall Wray (https://blogocrats.wordpress.com/2008/10/14/ts-meltdown/ ) claims :

    “In the United States, there has been a long-run trend that favors relatively unregulated “markets” over regulated banks that has also played into the hands of neoconservatives. The current financial crisis is a prime example of the damage that can be done by what has been called the “post-regulatory environment”

    Which I tend to agree with. Now, if you disagreed you may decide to investigate further by clicking on the link.

    So, the way I see it, it’s always healthy to have a body of knowledge available from material you’ve viewed earlier and which is aligned with your thinking and supports the point you are trying to make. We, in my opinion are building on that knowledge base daily.

    Also, by having a filing system where I know that particular blog is listed under ‘markets’ also helps to narrow my search.

    Where have ‘entry’ labels disappeared to anyway.

  34. Okay TB, maybe it is best to put the link in Url

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