Turmoil-enomics IX

I have decided that no-one has any idea what is happening in the economy, so we may as well use magicians, psychic, seers, diviners, crystal balls etc. to find out where the market is going.

Last Friday, the markets around the world went into freefall, so is anyone brave enough to predict what is going to happen on Monday?

(thread VIII now closed)

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55 Responses

  1. This illustrates another massive failure of the free market system in the total distortion of the value of shares and entities.

    Over the last decade or so we have seen companies announce a loss and forecast downturns yet get rewarded by massive jumps in the share prices. Conversely other companies announce good earnings and good times ahead and they get hammered. Woe behold a good steady company that dares to forecast a 0.00001% drop in earnings for the upcoming quarter on the back of three record quarters. that company might as well pack up and go home.

    The same is happening with world currencies. The Australian dollar is being mercilessly hammered at the moment. Why? Is it because we are like Finland or Iceland in danger of total collapse in the upcoming world recession, no we are amongst the very few handful of countries that most likely won’t go into recession and whose outlook is in a small part positive, so of course according to the free market we must be hammered, whilst basket case countries like Iceland must have huge investment pumped into them (at public expense of course, you can’t expect the free market to pay for its failures).

    You make sense of this if you can but the sooner the Asia-Euro conference comes up with better market and financial reform telling America to go take a huge massive jump and shove their new prop up the free market deregulating it even more proposal the better.

  2. I have no understanding of economics so I don’t understand the Aussie dollar drop.

    I would’ve thought that because we are supposed to be able withstand the current world economic problems better than most countries our dollar should be rising.

    I’m already getting emails from retailers warning of massive increases in prices starting November so I think the retailers are going to see a sales slump this Christmas … and the flow on from that affects us all one way or another. I’ve shelved some large purchases I had planned for the next three months.

  3. From this morning’s Mayne Report:
    “For anyone with cash, the value looks amazing and I’m prepared to hazard a guess that today’s awful environment might actually end up being the bottom.”
    Stephen is a brave man.Mind you he expects falls today.

  4. Well I am no economist. I predicted the market to rise by 2% instead it fell by 2.87%.

  5. The ASX has dropped 800 points this month alone (about 2000 points this calendar year). January was the next worst @ 772 points.

    The markets will continue to fall until a new US President is elected – that just may breathe some relief into Wall St (they’re a fickle bunch and anything can spook or stabilise them).

    We will follow Wall St. (Remember they sneeze we catch the cold).

    Australia may not fall into recession (three consecutive negative
    growth quarters) but it will be dramatically affected by other countries in recession.

    Expect job losses, price drops in real estate cars and other luxuries (eg local holidays), price increases in essentials, poor returns on cash and other investments.

    The markets should start to claw back early next year but the general economy will have already been damaged and may take three to four years to fully recover.

    However, my mate’s wife (who is just discovering where all her money comes from) informed me yesterday in no uncertain terms that it is people like her husband, her sister and me who are the real cause of the problem by “talking the economy down” (she IS on a steep learning curve) as I suspect many other people are (or soon will be). I was also informed by the “new guru” that the young people will be alright, they will just keep spending on their credit cards (aaarg!) and only 10% of the population will be affected.

    Iggoranse is bliss!

  6. They are saying that the fall in the dollar could actually be good for Australia as it will make our products cheaper for OS buyers. The vice-president of the National Farmer Union Federation says in the SMH (cannot find link) that every percentage point lost against the US dollar was worth $190 million in net farm income.

    So it is not all that bad.

  7. I think the market will fall between 2-3% today.

    Our market is basically following the same pattern as the US.

    Also, I think the “fundamentals” no longer apply. What we are seeing is beyond “the fundamentals”.

    However I agree with TB, the election of a new President could be the turning point, same as in NZ where they are also about to hold their national election.

  8. joni,

    The fluctuations in the dollar are actually one of our best buffers against international turmoil – when it dives like it has, it sucks for importers and travellers but everyone else gains. Because we can grow almost all of our own food and a lot of consumerables, prices for the average family don’t fluctuate all that much, but our export economy booms meaning risks to unemployment are reduced, even where other countries are spending less. After all, they still need coal and iron, grains, meat etc and we can pump all of these out pretty cheaply for other countries to buy but the price stays solid in $A.

  9. Market is down 1.8% on opening…

  10. Poor James Packer, you know – I almost feel sympathy for him.

    Packers Wealth Down

  11. Dave55 yesterday offered the opinion that the ALP were offering a ‘Forward with Fairness” package with a lot of similarities with Workchoices.

    True enough, though it does need to be remembered that the ALP opposed all the aspects of regulation that they now support, eg limitation on union right of entry, some of the matters related to freedom of association, secret ballot for industrial action, even a national system.

    When it comes to the regulation of employment and industrial relations, the first reaction of the ALP is to do whatever affiliated unions tell them. It is only after realising that they are out of step with the mainstream political sentiment that they moderate their position. As has now occurred.

    Why else would they have originally opposed a secret ballot for industrial action?

    Their current policy reflects a good deal more sense than their original, though still with far too many shortcomings.

  12. Tom

    Oppositions do what oppositions do. If the public has a problems with the ALP legislation, then they will be dealt with at the next election.

    But what about an opposition that passes legislation without ANY comment and then comes out swinging saying that it is bad legislation? When they supported it 100%, completely, totally, without ANY reservations?

    And honestly – we get it – unions and the ALP are closely related.

  13. Tom this is an economic thread and though IR might be wedged into economics and the world turmoil, union bashing can’t be.

    Tell us Tom is it workers unions that caused the current world financial mess or business unions, especially those representing the financial sectors?

    Nothing is worse than letting business unions off the leash whilst at the same time muzzling the workers unions, and the pity is that it is the workers who suffer the most because of the failure of the business unions.

  14. Gee Adrian & joni, my comment was entirely factual. No union bashing at all and I was following on from the last comment on the previous thread.

    I don’t recall that I’ve ever been a supporter of the money hungry and ignorant, whether business organisations, banks or other groups. Much of the malaise is due to an obsession with exponential returns – housing and consumerism included. I find rampant consumerism repulsive, it is a poison in society. I intensely dislike the false financial economy (ie the financial and stock analyst brigade), and the resources this consumes at the expense of the real economy. And I’ve posted this on occasions in the past.

    These are the some of the reasons (many others as well) that I don’t regard myself as part of the conservative ideology. The fact is that I don’t see entirely redundant political relations with unions as defining of any political ideology. Some people who obviously prefer to have an “off the shelf” political opinion, and some Luddites in the ALP seem to disagree, but that’s about the extent of it.

    My judgement is that the Australian economy will withstand the current turmoil. Some of the planned development in mining and telecommunications (for example) will be deferred, housing demand will decline, as should housing prices. The government should support a correction in housing prices. They are currently vastly overpriced, and distort the effort of society (pressure to return to work soon after childbirth, high debt levels, over consumption land and power etc)

    Personally, I don’t expect Armageddon.

    There will rightly be a great level of suspicion of financial analysts, hopefully for a generation or more.

    Thanks for your attention.

    PS – Despite the above, don’t think the affiliated unions are off the hook!

  15. Tom, haven’t you admitted that your friends and family are bored with your constant union-bashing?

    What makes you think your blog companions would be any different?

    Get over it, mate – whatever it is.

  16. It really is kinda funny to watch, if it weren’t so serious. Australia was largely shielded from the current financial crisis until a couple of weeks ago. The levels of domestic credit, whilst pretty high, were nothing compared to overseas, the fundamentals of our financial institutions were largely pretty sound and pretty well regulated. Australia was going to cop some rough conditions for a bit as we sailed through the edge of this cyclone, but, with a steady hand, we’d have been ok. Then Rudd(er) steps in. Now I wasn’t at that meeting on a Sunday a couple of weeks ago, and it’s bloody difficult to find out what was said or recommended. But the fallout from the outcomes of that meeting have been enormous and were not exactly unforseeable. Adrian, a couple of months ago you spent an entire day arguing that the housing crisis was caused largely by Howard’s First Home Buyers Grant. Pretty well ignoring any other causes. Aside from a pretty general sorta kinda wishing Rudd hadn’t extended this, you’ve said nothing. But that’s nothing compared to the unlimited bank guarantee. This is the single worst, most incompetent, consequence ignorant, financially irresponsible fiscal decision of an Australian Government I have seen in my lifetime. And Turnbull and Bishop were incompetent for supporting it. However they aren’t the government. This is not about unions, it’s about the complete destabilisation of the financial institutions in this country. There was a moderate way that they could have given a form of guarantee, it was certainly considered (at the 20k level), yet they chose to go the whole hog. And from what I’ve seen, their defence is simply to go the Opposition on their attack of the independence of public servants.

    Turnbull is a dickhead. Against ALP leaders I rate him equal with Rudd, ahead of Latham, but behind Beazley and Crean. But FFS, at some point the govt have to be held to account for such an utterly incompetent decision and worse, a failure to reverse it once it became so obviously clear that it was wrong.

  17. Well, I am not a magician or a psychic. I maybe a graduate of Mathematics but not an economist. But I will say my predictions as a human being. Well, observing the world today, the economic crisis suits it very well. If we don’t go where the root of all of these problems are, we are all going to be doomed. This is the sign of the end times. We should all look at our hearts. for our heart is the source of our thoughts and the thoughts are the source our actions and actions lead to events. We are all part of the world. Every crisis is our fault every victory is our cause.

  18. James, I’m inclined to agree with much of your post.

    My biggest concern is that the Government, the Opposition, the RBA and the Treasury ALL agreed to The Guarantee – smacks of financial naievity and incompetence on/at a number of levels. Their only defence would be that something had to be done – and done quickly – at the time.

    Hindsight is a wonderful tool!

    One would also question what sort of modelling and contingency planning occurs within the RBA and Treasury.

    BTW its only been SINCE the Guarantee that a number of commentators have lambasted it.

    One of the things that does annoy me in all this is the whinging though by financial organisations not within the ASIC area of control (they all come under APRA). They could be a bank – but choose to operate outside the regulations/restrictions (that cost money) to make greater/riskier returns – – but coupled with that are greater/riskier losses – this is one of those times when the gamble just hasn’t paid off. People only whinge when they lose…human nature.

    Some of us still believe the old mantra – “If sounds too good to be true, then ——–” Mortgage Fund returns of 12% were diligently avoided in this household and a more prudent 8-10% thankfully received. (Now a pleasant 6.5%)

    I have also noted this week that there are no alternative actions floating around only accusations (particularly from the Opposition) – many accusations are coming from the very financial “advisors” and “planners” who helped to get us into this mess in the first place – credibility O…

    Reversing the decision would be even more disatrous and create a public panic – much better to massage the original concept over the next couple of weeks…

    Footnote: Colonial First State has frozen the assets of some of its mortgaged based funds – Fund Managers with stopped withdrawals now number around 13 – significant. perhaps?

  19. Wow James, that means that the governments of Austria, Denmark and Germany also made the “single worst, most incompetent, consequence ignorant, financially irresponsible fiscal decision” in your lifetime too, because they did the same thing.

    I suspect the run on the non-bank fund was actually caused by Turnbull creating panic amongst private investors. And please note, the freeze on withdrawals is NOT on any regular withdrawals that are currently in place – which means that those who depend on the regular withdrawals will not be affected.

  20. I think the question that remains unanswered is:

    What would Jesus do?

    I mean, the conservatives ask the Good Lord, for the “right” advice and guidance when it comes to deciding who to kill and maim. So where is Jesus and his pocket calculator for some handy fiscal stimulous tips??

    Why hasn’t George sought the Lord’s counsel on this one??

    That’s what I want to know!!

  21. While there may be some reasoning of the current government acting hastily they needed to do this to keep funds in Australia and not have them flee to countries which are guaranteeing their banks deposits. We all need to remmeber this is a global situation and as such we can send our funds overseas if we so choose.

    It seems that the opposition want the government to guarantee managed funds as well and this is simply unrealistic. Managed funds are part of the free market investment economy and are not governed by rules and regulations. People who placed their moeny in them should have been made aware of the risk involved and if so they wear the consequences. Lets face it if you want to put your money in something risky you accept the risk.

    The Government did the correct thing. While it may upset some investors the overall majority of savings are still protected under the guarantee.

    Managed funds companies chose their course of action and how they were created, this is nonthing to do with the government. Institutions governed by APRA are another matter, they are restricted under governing rules and as such it is prudent for a government who restricts their actions through the good times comes out and supports them when things get tough.

    Investors in managed funds cannot have it both ways. It seems to be terrible political mileage by the opposition. They seem to be creating fear and rumour mongering. I had a pensioner today ask me why the government was freezing all bank accounts and not letting anyone get their money. The rumours and fear being instilled in the community due to the hystercial screamings of the opposition is very poor political point scoring when it effects the elderly who think even their own bank accounts are being frozen.

    I suspect this may have been a tactic of the opposition in creating the scare campaign which (if true) is nothing short of disgraceful. Especially from the previous government who would not even guarantee the benefits of Ansett employees who lost their livelihood.

  22. Nicely summarised Shane.

    However, the government has effectively rooted the Funds Management industry in Australia, while ‘protecting’ the Banking industry.

    This is unprecedented.

    Both industries are the victims of global market forces. To say the Funds Management Industry is “more riskier” than having your funds in the Bank, is not an argument that holds water in the context of events that have transpired in recent weeks.

    I agree that the Liberal party is making great political opporturnity by whipping up everyone into a frenzy over this, however their argument is a valid one.

    The Government chose to protect one industry and not the other.

    Had the Government moved to protect Fund Managers and NOT the Banks, then people would be fleeing the banks in favour of depositing their monies into “Cash” accounts held with Fund Managers.

    I’m actually siding with Talcum on this. I think the Government needs to do something to protect the Funds Management Industry.

    It can’t unilaterally move in to protect one industry, knowing full well, that its “intervention” could cause the collapse of another industry.

    I suspect that events are unfolding so quickly and dramatically that we are almost seeing a knee-jerk reaction from the Government and I think the Australian public has a right to know – as Crazy Eyes and Talcum have been demanding – what advice the government is acting upon.

  23. Joni, I commented on the Australian Govt decision as it relates to the Australian situation. The Australian situation is different to that of others, especially Europe. I don’t intend to research the various states of European economies to make a judgement on their actions. Their actions affect ours only insofar as there may have been some form of a run to institutions guaranteed in those countries from those not gauranteed in ours. The consequences in our country were forseeable. They either didn’t look or ask, in which case the govt is incompetent, the RBA didn’t state or foresee, in which case they are incompetent, or our govt ignored, in which case the incompetence goes back to them. No-one from that meeting will say what occurred. I have said that I very much doubt that Stevens would have not foreseen this, therefore I believe his counsel was not sought (more likely) or was ignored (less likely). I actually don’t believe Rudd and Swan set out to stuff up this badly, but stuff up they have. The only sensible solution is to go back and cap it.

  24. James of North Melbourne:

    “The only sensible solution is to go back and cap it.”

    I agree. And they need to do it bloody fast, as there’s a lot of investors out there being uneccessarily “spooked” about the security of their deposits with Fund Managers.

    And let’s face it, a cash deposit with a Cash Management Trust held with a Fund Manager is at no more risk than a cash deposit held at a bank. So I fail to see why the government would protect one and not the other…

    At least, that’s what I think, in my generally, limited, uninformed view of things…

  25. Here I was thinking that the guarantee was put in place (rightly or wrongly) in response to other countries providing guarantees on deposits in banks, and that the current turmoil was international and had existed for months. But in fact, it is all Australian and down to the actions of Rudd and Swan.

    And one thing I do not get, why have no other countries (from what I can see) had a run on non-bank investments that have prompted the non-bank guarantees that some are demanding?

  26. Shane “It seems that the opposition want the government to guarantee managed funds as well and this is simply unrealistic. Managed funds are part of the free market investment economy and are not governed by rules and regulations. People who placed their moeny in them should have been made aware of the risk involved and if so they wear the consequences. Lets face it if you want to put your money in something risky you accept the risk.”

    Have the Opposition called for this? If so they are about as dumb as the govt. Start guaranteeing everyone and you completely stuff the whole thing. It’s not that difficult. They just have to back the bus up a little bit, and cap the guarantee at 100k, or even 250k, pick a number, but not have it unlimited.

  27. reb

    Banks are governed by government rules, managed funds are not. In my opinion this is the difference. Also the country can survive without managed funds. It would collapse into anarchy without the banks.

    Before the current outflow from managed funds what percentage of deposits were in banks and what percentage were in managed funds. The difference is overwhelming.

  28. #16. James of North Melbourne | October 27, 2008 at 1:15 pm

    Jump on the Bolt bandwagon, why does that not surprise me.

    Why do the right mostly live in an alternate universe different to everyone else?

    It really is kinda funny to watch, if it weren’t so serious. Australia was largely shielded from the current financial crisis until a couple of weeks ago. The levels of domestic credit, whilst pretty high, were nothing compared to overseas, the fundamentals of our financial institutions were largely pretty sound and pretty well regulated. Australia was going to cop some rough conditions for a bit as we sailed through the edge of this cyclone, but, with a steady hand, we’d have been ok. Then Rudd(er) steps in. Now I wasn’t at that meeting on a Sunday a couple of weeks ago, and it’s bloody difficult to find out what was said or recommended. But the fallout from the outcomes of that meeting have been enormous and were not exactly unforseeable.

    Let’s do some rewriting of the facts (which you do again below but I’ll come to that).

    Just how were we “largely shielded”? Were we in almost total isolation from the rest of the world, that’s the first I heard of that?

    Levels of domestic debt “pretty high” but nothing compared to overseas, bunkum. We only a very short time ago had the highest per capita personal debt in the world bar none. America and UK took our model and ramped up their personal debt in recent times to overall go ahead of us. but we were still way up there and ramping up our debt at exponentially increasing rates.

    Rudd took actions that were unreservedly supported by everyone, including Malcolm Turnbull, who said at the time it was the right thing, the right amount and done at the right time. So apparently Malcolm would have done exactly the same.

    You are trying what Bolt did in making a cyclone out of love puff, and by the words you use I’d swear you were Bolt.

    Adrian, a couple of months ago you spent an entire day arguing that the housing crisis was caused largely by Howard’s First Home Buyers Grant. Pretty well ignoring any other causes.

    Wrong. I did not pretty well ignore your other causes or those bought up by others, including the RBA. From memory I used what the RBA and other financial institutions had stated at the time, which was that the first home owners was in PART responsible for a jump in house prices. I didn’t just make it up,

    Aside from a pretty general sorta kinda wishing Rudd hadn’t extended this, you’ve said nothing.

    Wrong again. Are you just selective in the way you interpret what others post or are ideological blinkers the cause. I first said I had great misgivings about the Rudd first home owners grant for the same reason as I had misgivings about Howard’s, which were proven by events. Howard put in $50 billion over a long time period sustaining the house price growth, Rudd is putting in $5 billion in one short hit which will give it a spike. I then did some research as to why Rudd has done this. The guarantee I could understand but the FHOG seemed counter productive to me. On researching I then said I could understand the reasoning behind it and though it had shortcomings there was no other stimulus that could do the job in the time period required and for the scope it could achieve.

    But that’s nothing compared to the unlimited bank guarantee. This is the single worst, most incompetent, consequence ignorant, financially irresponsible fiscal decision of an Australian Government I have seen in my lifetime

    .
    Oh have you got money locked out?

    What a load of overblown, exaggerated and absolute nonsense that is. Here is the example of Rudd loses if he does nothing and loses if he does something. No matter what Rudd did in this circumstance one thing is for certain, James would have been here canning it in much the same words.

    So I guess you are going to say either Rudd should have done nothing whatsoever (in which case the opposition and just about everyone else would have been all over him for doing nothing) or are you saying he should also bail out mortgage and investment houses. Hey why not bail out James Packer he has lost over half his fortune, or anyone else who loses money for that matter. Just fill in a loss from investment form and you will be covered by the government courtesy of James.

  29. James

    If the government limits the guarantee to 250k what will happen with people who have more money than 250k?. If all of the holdings over $250k are withdrawn from banks and sent overseas how much will this effect the interest rates our banks charge as they will once again need overseas funding.

    While the money pours into our banks it lowers the amount required from offshore borrowing. This lowers the rate required to be passed onto borrowers because we all know it is the overseas borrowings that are so highly priced at the moment.

    It is borrowings for development and growth that keep the economy growing. All a double edged sword.

  30. 23. James of North Melbourne | October 27, 2008 at 3:09 pm

    Again this is all Bolt stuff.

    Fantastic after the fact dissection, and like Turnbull supposedly everyone knew this was going to happen but said nothing until it did happen, then like you everyone in opposition is an instant after the facts expert for what Rudd should have done at the time.

    The great hoo ha made about this came about when Turnbull began making a big deal about it after the investment houses started making a noise about missing out on the guarantee (as did some foreign banks) and the government first mentioned there will have to be some changes made.

    Turnbull then went ballistic selling down Australia’s whole financial system (something he often accused Rudd of) and sprouting doom and gloom about the poor investors having their money locked up (but neatly forgetting to mention they were still getting their dividends) and billions being lost. As Insiders rightly identified this is part of Turnbull’s scatter gun tactics to get as much stuff out there as possible so at any time in the future he can go back and say “I told you so on such and such a date and at this time”.

    I honestly can’t see what Rudd could have done differently that would have silenced those like Bolt and Milne along with their apers, for as sure as night and day whatever he did it would have been the wrong thing.

  31. A bailout is a bailout.

    The government has bailed out one industry at the expense of another.

    Surely, it must’ve known that by bailing out one industry, it would have severe ramifications for the other “unprotected” industry…???

  32. reb

    You cannot please everyone. the banking system needed reassurance or we would have had a massive meltdown for no other reason than panic, just like they did on northern rock in the UK.

    People investing in banks sought low returns in return for security by way of APRA. People in Managed funds sought higher returns in return for no security by way of APRA. Black and white to me. Know your risk.

  33. One of my shares has lost 32% just today. It is one the ASX200 as well.
    Darn it all I might go and whinge to Malcolm Turnbull and Julie Bishop and see if they will gurantee my share 🙂

  34. How the US Fed is handling the crisis:

    http://www.wallstreetpong.com

  35. I don’t think it is always up to contributors to come up with policy solutions for a government. We test our opinions and those of others.

    Some foreshadowed unanticipated problems. Not this one specifically, but the type of intractable ones that are now occurring. Others applauded the government for its rapid and decisive action.

    I don’t think a crisis always needs rapid decision making. A crisis needs clear heads, intelligence (intellectual and information forms), calm contemplation of the options, and the consequences of each option. Any planning process considers the consequences of the decision.

    The need for the government to be seen as acting rapidly and decisively seems to have overcome the need for sound policy making processes.

    Politics got in the way of good policy.

    In a crisis, criticism of the opposition wears thin – they don’t hold office, and they are politicians after all. They can only be relied on to behave politically.

    The government should have known, or should have considered this outcome.

    Now the government will have to ride out the storm, and confront a run on a particular sector, or revise the original rapid and decisive action and bare the political consequences of the back flip.

  36. Totally agree Tom.

  37. Tom

    The opposition may not hold office, however most people with any education know that what is happening now cannot be the fault of the current government due to the minimal amount of time they have been in office and the fact that very little leglislation was enacted by the time the crisis started.

    So given these details it is more than apt to criticise an opposition who was in government when the underlying factors causing our current situation were allowed to develop unhindered.

  38. Wow, Adrian, you must have missed the bit where I called Turnbull a dickhead, and you have the hide to call me blinkered! As for Andrew Bolt, I did notice he posted on that New York Times article about deregulation in the US some 3 weeks after I referenced it! He must stop using my material! And I was critical of this govt action well before reading anything from Bolt on it. As to your last paragraph, read what I’ve written and you’ll find both scenarios are wrong.

    “A cyclone out of a powder puff”? Unbelievable! These institutions’ very operation relies on a level of liquidity to be able to trade. Pull the liquidity and the fund can go under. This is actually serious mate, not just some faceless fat cat corporate. Many many ordinary Australians have money invested in these institutions.

    Adrian, the govt made a decision out of a meeting on a Sunday afternoon two weeks ago. That decision has had serious consequences. These consequences were forseeable. Have you any comment on this or does your commentary extend only to bagging Turnbull? Honestly, you call me idealogical yet where I am prepared to go to some lengths, and have done, to be critical of both parties, especially the current Liberals, all you have is praise for Rudd and invective for Turnbull. At the moment, they both deserve invective.

  39. But Shane, no one on either side of politics would’ve have forseen 12 months ago what is unfolding today.

    My criticism of the current government’s actions is that they have done so as a knee-jerk reaction without considering the impact of their decision making on another sizeable financial industry in Australia.

    Equally I am critical of the Liberals for now making politics out of this issue when they first promised full and bi-partisan support.

    What we are seeing is unprecedented.

    However there is no room for political games AND there is no room for poorly thought out rash decisions…

  40. Adrian, show some testicles and debate my points (or ignore them). Don’t be such a coward as to pigeon hole me with a Conservative commentator thereby undermining what I have to say. That’s bullying, intellectually bereft, and most of all spineless.

  41. Tom @ 35

    hear hear!

  42. reb

    I agree no one would have forseen 12 months ago. It is the political mileage being gained at citizens stress that enrages me.

    I still believe the deicison to be correct. They have supported APRA controlled institutions and so they should as those institutions pay a price for being controlled by APRA.

    Anyone else can stand on their own as they chose to be created outside APRA guidelines at their and their investors risk. They planned it that way !!!!!! so they could charge and earn what they liked without government control.

    Why is no one willing to accept that these institutions and their investors, being outside APRA should accept the risk they now face ?.

  43. Reb,

    If no politician saw this coming a year ago then they are blind!!!

    I remember a discussion over at Meganomics well over a year ago about the inpending economic disaster…it was just a matter of when.

    I thought all this was going to commence in March but the US fed just kept pumping the money into the system and it still eventuated.

    I’m very disappointed with both sides of politics over the handling of this thus far…they knew but did not prepare well in advance, it was like ignoring the problem and it will go away.

    Now they are all making reactionary decisions and politicising the situation and we deserve better.

    As a nation we will emerge with a few grazes but if all resumes as business as usual then no lesson will be learnt.

  44. 42. Shane | October 27, 2008 at 4:49 pm

    Nice to see we still agree, Shane!

    They could be a bank – but choose to operate outside the regulations/restrictions (that cost money) to make greater/riskier returns – – but coupled with that are greater/riskier losses
    18. TB Queensland | October 27, 2008 at 1:44 pm

  45. Scaper:

    “If no politician saw this coming a year ago then they are blind!!!”

    Actually, I agree. I sent John McPhilbin an article which was published in the NY Times in 1999 about how Fannie Mae was going to be exposed to risky debt levels that could leave them in a precarious position. And that was 10 years ago.

    I guess no one wanted to hear bad news while everyone cashed in.

  46. I have pleaded with people to consolidate many times, especially with credit cards…the banks are still trying to up the limit on people.

    I don’t touch those things, I only have a debit card as if I can not afford to outlay on an item then I should not have it…a lesson that I learnt when I was a kid.

    That reminds me that I forgot to purchase that fridge that is discounted to the members of Master Builders…almost $600 cheaper than retail.

  47. So James you believe the government should have also guaranteed the non-APRA regulated funds? Where does this end, what’s the cut off? (and yes I read you attack on Turnbull but was replying on your criticism of the government policy and the things you got wrong about my past posts rather than giving you a pat on the back for slamming Turnbull, I’ll fix that now and say well done for rightly criticising the lame attacks on Turnbull and a great chunk of the population agree with you).

    These investment funds are attempting to blame the entire run on their money to the government’s action but that is not entirely true as people in considerable numbers were removing money from them almost from the moment this crisis started. Many investors realised they were in riskier “investment” funds and all the news was telling them they were the ones in trouble overseas. Yes there was an acceleration after the government’s guarantee announcement but I contend that even without that guarantee there would have been a run on these institutions.

    I agree with Tom at 35, but I can tell you now if Rudd had delayed for a single moment Turnbull, the rabid right wing media and commentators would have pounced and no matter what Rudd came up with he would be tainted with the no action, committee procrastinator bureaucrat tag for the rest of his time in office. It would have been “At a time of greatest global crisis when Australia needed action from our leader he did nothing but consider it.”

    As I said with the Right Rudd loses no matter what he does, but he doesn’t lose with the people. Plus we have all this doom and gloom (yet again and again and again) of failure before the ink on the policy has had time to dry. This is also sop for anything Rudd does.

    Latest poll has given Rudd a big tick for his actions in the crisis and he has gone up in leadership and economic management. Turnbull has taken a dive.

  48. Well well well, The 7:30 Report has tabled information that many of these funds started freezing their deposits as far back as March, thus knowing they would be in trouble. As the crisis got worse more froze their assets well before the government bank deposit guarantee.

    Then there is the fact that some of these funds can actually bail themselves out and have the financial backing to guarantee their deposits.

    I’ll post a link to the transcript as soon as it becomes available.

  49. Turnbull has taken a dive.

    …and based on past performance there’s more to come, until he drowns – the general public are awake to his nonsensical rhetoric …

    …AND the fact that he’s one of the fat cats who play with the none regulated crowd, whinging about guarantees…

    …the crowd who would also whinge about increased regulation in good times- can’t have it both ways…

    …risk is risk…if you don’t put protection in place then expect to have an accident…how simple is that…

    …the guarantee decision was correct at the time – based on global information and national concerns…we now need fine tuning (as they all said at the time)…

    …managers have to sometimes make decisions based upon limited information (comes with the territory) – good managers usually have a 30% 70% “hit” rate (ie 70% good 30% negative)…

    …its the way of the world…at this stage – Rudd is 80/20 – Turnbull 90/10 – I reckon…but then I am a Queenslander, what would I know?

  50. Then there is the fact that some of these funds can actually bail themselves out and have the financial backing to guarantee their deposits. Adrian

    Dontcha LUV IT!

  51. The transcript isn’t up yet (usually takes a while) but here is the link:

    http://www.abc.net.au/7.30/content/2008/s2402694.htm

    …and the Alan Kohler piece after it is well worth the listen. He thinks the budget is already in deficit and that’s a good thing. He also said the current higher inflation figure is only short term and it will come down to 3% in the near future. Transcript will be here: http://www.abc.net.au/7.30/content/2008/s2402694.htm

  52. Adrian “So James you believe the government should have also guaranteed the non-APRA regulated funds? Where does this end, what’s the cut off? (and yes I read you attack on Turnbull but was replying on your criticism of the government policy and the things you got wrong about my past posts rather than giving you a pat on the back for slamming Turnbull, I’ll fix that now and say well done for rightly criticising the lame attacks on Turnbull and a great chunk of the population agree with you).”

    The simple issue is that the govt have given an unnecessary and enormous advantage to one area of the market over another and the consequence has been a massive destabilisation of the financial system in this country which, if fixed now, may cause the govt some embarrassment, but if not fixed, will have ramifications for years if not decades.

    Adrian, your misquoting or maybe misrepresenting of what I write is bordering on dishonest. I do not think that the govt should guarantee managed funds, and I have said this more than once. And my criticism of Turnbull was for his populist support of the deposit guarantee without consideration of the consequences.

  53. James, the alternative is complete collapse of the financial market rather than some of it – the unregulated, high risk section…

    …no-brainer…

  54. A “massive destabilisation”, here is your exaggeration again. We are talking about 10% of the population who had funds in known riskier entities. The big overseas versions of these entities are in a major part to blame for the current situation and some of those overseas entities have stakes in the Australian ones. And its not as though these entities didn’t know this was coming as some froze their funds well ahead of Rudd’s announcement and if The 7:30 Report is correct some have the backing and funds to guarantee their own investor deposits.

    You are attempting to make a mountain out of a molehill just as Bolt did and you use almost exactly the same language.

    Having a go it me for apparently misquoting you when you started this by misquoting me. So if you don’t think the government should guarantee managed funds just what are you going on about this massive destabilisation? Just what do you think the government should have done, nothing?

  55. Adrian – “if Rudd had delayed for a single moment Turnbull, the rabid right wing media and commentators would have pounced and no matter what Rudd came up with he would be tainted with the no action…”

    There is no way Keating would have allowed the opposition and media to dictate terms to him on a critical decision. He would have been straight on the front foot, controlling both the policy and politics.

    I’m not particularly bothered about the politics, it is the job of government to get the policy right. It is Swann that is not up to it.

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