It will get a lot worse, says Mc Aberrant

The bursting of the commodities bubble and a softening Asian economy on top of inevitable economic contraction and a sea of household  debt doesn’t make for a robust economy.  Yes, it is very likely to  get a lot worse.  Nice to see the ALP and Opposition agreeing with me.


It will get a lot worse, says ALP

The Treasurer, Wayne Swan, said “the global recession will get worse before it gets better”, but he was not prepared to concede that gross domestic product for the March quarter would be negative. The Government’s first stimulus package of $10.4 billion was designed, in part, to avoid a negative quarter of growth in December, but the $8.7 billion in cash handouts it contained only started being paid out in the last three weeks of that quarter.

Mr Swan said the package was also having an impact this quarter, as shown by increased retail spending in January. The cash payments from the second, $42 billion stimulus package would start from next week.

He said figures showing Australia was one of the rare developed economies to maintain positive consumption growth in the December quarter proved the spending package had worked.

Economists had expected a small increase in GDP. The size of the slump, and the possibility the agricultural sector will weaken, means the downturn will be more severe than expected.

Is the stimulus package likely to help buffer us against what is obviously worse to come?  And if so, by how much?

And what may be our saving grace if these measures have only limited impact?  Surely it be all eyes on China as The Daily Reckoning reports:

If Australia’s economy grows this year, it’s going to have a lot to do with the success of China’s $585 billion infrastructure stimulus plan. But that’s only if that plan works. And by works, we mean that it stimulates demand for Aussie resources.

But what if Albert Edwards is right on his warning on US and China?

THE US economy is likely to enter into a depression and the “implosion” of the Chinese economy will cause disastrous consequences for the whole world, Societe Generale strategist Albert Edwards said.

Advising investors to “bail out” of their stock investments now, Mr Edwards, whose super-bearish stance on the global economy proved correct last year, predicted another 40 per cent decline in the S&P 500 index caused by dismal profit reports and poor economic data during the first half of this year.

“In 2009 it is not the mounting risk of depression in developed economies that will come as a major surprise,” Mr Edwards wrote in a note to clients, “it is economic implosion in China and the global and geopolitical risk thereof.”

Over a year ago, Mr Edwards had predicted the US would enter into a deep recession because of the excessive amount of debt it had accumulated.

In forecasting a depression in the US, Mr Edwards means that he believes the US will see a peak-to-trough decline in its gross domestic product of more than 10 per cent.

In China, Mr Edwards expects the worst domestic upheaval since the Tiananmen Square protests in 1989 may cause the Chinese authorities to undertake a “mega-devaluation” of the Chinese currency, the yuan, in an effort to stay in power, as “the very survival of the regime depends on growth”.

A devaluation of the yuan would cause the rest of the world’s economies to competitively devalue their own currencies in response, Mr Edwards said, sparking a “1930’s-style trade war” that “could see a rerun of the Great Depression”.

Mr Edwards bases his forecast for an implosion of the Chinese economy on several technical factors.

He points to data showing China’s electric power output declined over the last three months. The data usually correlates with China’s GDP.

He also noted the sharp decline during recent months in the Organisation for Economic Co-Operation and Development’s leading growth indicator for China’s economy.

Where to from here? I’ve got rooms to rent in my newly acquired bunker if anyone’s interested.

Aberrant Mc

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313 Responses

  1. When we have 30% or more unemployment.

    When our citizens are living in cardboard boxes instead of homes.

    When there is no dole or support for the unemployed.

    When a major portion of our community are queued up at government soup kitchens for their daily meal.

    When people can only afford the absolute essentials in life.

    When our clubs, hotels and cafes close.

    When people need to toil the earth to grow their own produce.

    I will then begin to stress.

    Otherwise I will continue on my merry way, aware of what is happening, but also waiting to see the results rather than forecast the end of the world as we know it.

    The media and doomsdayers have a lot to answer for regarding the depression building in our society. They are causing unnecessary stress when there is aboslutely nothing the average person can do other than to keep going. People predicting massive unemployment are fools, our country conatins so many recession proof employment positions the porposal is absurd.

    What I do find amazing is Mr Springborg planning to dump public servants during an economic crisis. Public servants pay taxes and also purchase all of the items private enterprise produce. What an idiot of a position. Keep them employed until the good times return ensuring the survival of small businesses.

    No good giving payroll tax relief to small business if there are no customers.

  2. Shane

    Tony mentioned recently Dale Carnegie’s book How To Stop Worrying and Start Living. Which reminded me of a formula he mentions. Here it is:

    The next time Trouble–with a Capital T–backs you up in a corner, try the magic formula of Willis H. Carrier:

    1. Ask yourself, “What is the worst that can possibly happen if I can’t solve my problem?
    2. Prepare yourself mentally to accept the worst–if necessary.
    3. Then calmly try to improve upon the worst–which you have already mentally agreed to accept. ”

    Remind yourself of the exorbitant price you can pay for worry in terms of your health. “Those who do not know how to fight worry die young.”

    My point in posting this threat is to highlight that what hurts people most is there ‘fear’ and lack of preparedness to prepare to deal with life’s inevitable set-backs.

    This worst may never happen, but what if it does, are you prepared as an individual? Rather than ignore or deny the possibility of major set-backs, we need to address them head-on and include them in our calculations and If we’re lucky, the unpleasant things we most fear may never come to pass.

    It was you, in fact, that reminded me of the important of ‘new home-buyers’ being able to meet their obligations when circumstances change. For example, can they afford NOW to cover themselves against the prospect of unemployment by taking out the necessary insurances etc.

    It’s all about having a ‘margin of safety’ in your life to ensure against the fallout. And believe me when you’re not prepared the shock of something unexpected throwing your life into chaos is very real. It happened to me personally when I had my career suddenly derailed.

    I recall reading a few years back that what most people when hit by traumatic events was their lack of willingness that it could ever happen to them. It always happened to others. In fact, many rape victims for example, discovered they had ignored all the danger signs simply because they didn’t believe that something so nasty could ever happen to them.

    I advise my wife and children to acknowledge their fears because fear often comes with a gift. It’s a primitive warning signal. The difficult part is working out when fear is justified or not. nevertheless, fear has a real and often productive purpose.

    How many people had no sense of fear when they entered booming housing and stock markets and thought ‘I can’t lose’.?

  3. “My point in posting this threat i” Lol this was a slip ‘I meant thread’ , but did I really?

  4. Name of the game now is mitigation
    http://business.smh.com.au/business/name-of-the-game-now-is-mitigation-20090304-8ojb.html
    Elizabeth Knight
    March 5, 2009

    There is no doubt in my mind or in the minds of most economists and commentators that Australia will be declared in technical recession at some stage in the next six months.

    The economy contracted in the December quarter and will probably do so again this quarter and now not even the Government is continuing with the pretence that it can be avoided.

    We are a part of a global economy – most of which is in meltdown – and there is virtually no way to escape being a victim of it.

  5. John

    You and I have agreed on many aspects of the current crisis, but I can see light at the end of the tunnel.

    I agree acknowlegde fear, but also overcome that fear for if you do not it will consume you.

    For example a person has a fear of terrorism. They cannot prepare or have a ‘margin of safety’ for a terrorist attack, should they never take a risk and never fly, travel by train, travel by bus, enter a high rise, go to a shopping centre or attend a sporting event.

    Even during world wars there was not the pessimism that seems to be screamed from the media in hystercial doses at the moment. The media rallied people to the cause, more than dwelled on the losses inflicted to lives and property.

    While not meaning to be condescending we can only prepare for so much. Should I also prepare for a nuclear war, a terrorist attack on my house, invasion from aliens, eruption of a volcano, the siesmic shift of the earths plates. If I prepared for every possible thing that could happen in my life I would have a terrible life in my opinion.

    Hindsight is a wonderful thing, however if everyone on earth was cautious, reserved and took no risk simply because of a loss of money, exactly how many things do think would have been invented.

    For example. The Courier Mail headline the other day read “3 out of 5 Queenslanders fear for their job”. The truth was they polled a number of Queenslanders and 3 out of 5 were concerned that a family members job may be at risk. Totally different than 3 out of 5 fear for their own job.

    People believe the headline and all this does is simply create unnecessary stress.

    Having a margin of safety I agree, but to me the first margin of safety is your family and health.

    If you become depressed and your health suffers, over things beyond your control, simply because everywhere you look there are prophets of doom. Where does that leave a person and what exactly did it achieve.

    While being aware of the events unfolding around me, I have, from my own experiences, chosen to avoid those who simply preach doom and gloom.

    Life is a risk with far more joy outweighing the gloom. Problem is human beings dwell on and imagine the worst. I for one plan to live my life, not make myself sick with worry everytime something happens.

  6. I recall reading a few years back that what most people when hit by traumatic events was their lack of willingness that it could ever happen to them. It always happened to others. In fact, many rape victims for example, discovered they had ignored all the danger signs simply because they didn’t believe that something so nasty could ever happen to them.

    Ignored all the danger signs??

    WTF?

    This worst may never happen, but what if it does, are you prepared as an individual?

    Perhaps this sentiment explains why your posts are consistently and so overwhelmingly negative, and anyone (ie me) who suggests otherwise is labelled as having “their blinkers on”.

    The truth is that you John, wallow in any piece of news that supports your relentless negativity.

    Fortunately, for you at least, the press is always full of bad news, so you have plenty of sources to quote from.

    But like Shane of QLD, I prefer to maintain a comparatively more balanced perspective.

  7. reb

    The press is full of hysterical negativity for one reason, it grabs attention. You never see the news advise that nothing terrible happened today. If nothing terrible happens in Oz they search the world for any possible snippet of disaster.

    They manipulate peoples emotions, destroy reputations and familys lives with ‘possible’ allegations and when those ‘possible’ allegations are found to be false there is a retraction on page 46 in a little box retracting their statement whihc was headline news on page 1 at the time.

    The media are a necessary evil, yet they seem to have changed from providing balanced and objective reporting, to sensational falsehoods on many occasions.

  8. Shane

    “For example. The Courier Mail headline the other day read “3 out of 5 Queenslanders fear for their job”. The truth was they polled a number of Queenslanders and 3 out of 5 were concerned that a family members job may be at risk. Totally different than 3 out of 5 fear for their own job.

    People believe the headline and all this does is simply create unnecessary stress.

    Having a margin of safety I agree, but to me the first margin of safety is your family and health. ”

    Here’s the key, many of us are fearful of things that are far removed from our daily existence, i.e, terrorism. But also, there are many who are terrified by the prospect of climate change etc.

    The stark reality for a number of years has been an unwillingness to accept that the economy could falter in a major way. So fearless in fact, that we’ve gladly taken on huge amounts of personal debt. This shows many people’s unwillingness to accept that when (not if), but when economic conditions change the personal impact is likely to be major.

    Choosing to avoid doom and gloomers is fine if you’re personally prepared, but if you find yourself reacting excessively, like quite a few do, then it’s an indication to me that they’re really not sure or comfortably about handling the potential downside. I’m simply a person who has learned through bitter experience that it’s best to be up front and willing to confront my own fear no matter how uncomfortable I may feel.

    My fear of what is to come from a personal perspective is, in
    fact, is near none existent. My concern for others, however, has grown. People’s lives can and will be effected in pretty profound ways simply because they didn’t see it coming and made no effort to be prepared. There was no calculation of the real risks, in many cases, and now they’re still not assessing the risks because they think its a product of media hype.

    On the other hand, some people are becoming aware of the reality as their jobs come under threat and why wouldn’t they be worried. But putting our heads in the sand isn’t a solution is it?

  9. People’s lives can and will be effected in pretty profound ways simply because they didn’t see it coming and made no effort to be prepared.

    But John, how can someone “be prepared” for the unexpected death of a child? Or a car crash that leaves you or a dependent permanently disabled, or any number of unexpected events that can happen to anyone at any time.

    By your logic, we should all somehow “be prepared” for these possibilities, including, astoundingly, the prospect of being raped.

    Did you get a different fridge magnet from the rest of us??

  10. reb, on March 5th, 2009 at 10:11 am

    I concocted a narrative for ‘aberrant’ genetics built around the flimsy evidence provided on the other thread, consisting of pure speculation and a call for future research by somebody who does science-y things into ‘complementary genetic sets’ and ‘hard-wired genetic divisions of labour through personality traits’ as part of my virtual noetics project…probably with a reconstructive archaeo-evolutionary emphasis.

    Narrative: Once upon a time there was a pre- or proto- or hominid troupe (depends on when the specific gene and gene variants arose, and their patterns of transmission and distribution) which would go out collecting bananas. Since collection of bananas mostly did not involve encountering tarantulas, not all proto-hominids in a troupe needed to pay full attention for or to tarantulas, and most could focus on bananas and their collection, while only a few were required to pay full attention for or to tarantulas. Thus, the troupe collected more bananas and sustained fewer spider bites with mostly optimists, but always a few pessimists in their midsts; said pessimists strangely registering as equal-or-not-less-attractive to 48% of the population despite constituting only 6% of the population, according to the same flimsy research piece. Finis. Well, not really finis, it probably gets more complex insofar as intra-special competition and special adaptation allow for the same gene and personality variations, but it’s a convenient story.

  11. Legion,

    Yeah exactly! Try telling that to John though…

  12. Reb

    ” I recall reading a few years back that what most people when hit by traumatic events was their lack of willingness that it could ever happen to them. It always happened to others. In fact, many rape victims for example, discovered they had ignored all the danger signs simply because they didn’t believe that something so nasty could ever happen to them.

    Ignored all the danger signs??”

    Very glad you asked. Gavin De Becker, is a personal security expert in the US, who authored a book titled “The Gift of Fear’. His expertise is in threat assessments and he spends large amounts of his time counselling and educating in rape prevention.

    He states repeatedly that every victim he has counselled had warnings, vague feelings of discomfort prior to an attack, ie. they felt they were being watched etc. He calls them satellites. Most dismissed their feelings as silly believing rape only happened to other people.

    I read it almost ten years ago now, and what I learned was so insightful that I’ve never forgotten its message.

    http://www.bookoffers.com.au/the-gift-of-fear-gavin-de-becker/
    Shattering the myth that most violent acts are unpredictable, de Becker, whose clients include top Hollywood stars and government agencies, offers specific ways to protect yourself and those you love, including: how to act when approached by a stranger; when you should fear someone close to you; what to do if you are being stalked; how to uncover the source of anonymous threats or phone calls; the biggest mistake you can make with a threatening person; and more.

    Learn to spot the danger signals others miss. It might just save your life.”

  13. reb, on March 5th, 2009 at 10:35 am Said:

    Legion,

    Yeah exactly! Try telling that to John though…

    Now you explain what Legion said in simple terms Reb

  14. The Gift of Fear….I read it almost ten years ago now, and what I learned was so insightful that I’ve never forgotten its message.

    Clearly.

    Perhaps you should preface all your posts with “Abandon all hope ye who enter here…”

  15. Reb

    “But like Shane of QLD, I prefer to maintain a comparatively more balanced perspective.”

    That’s great Reb, you’re the best, simply the best. But…much of what we are seeing is the lack of perspective that has caused this crisis in the first place. I’m simply reporting on the causes and symptoms my friend.

    Check your super balance? Is your job safe? You may have done everything right, but a lot of people got it very, very wrong and now we’re seeing and experiencing the consequences of that.

  16. John McPhilbin, on March 5th, 2009 at 10:35 am

    Doesn’t Taleb caution against the conversion of uncertainty into some false assessment of risk? How does someone predict a black swan event, let alone which direction it will fly in from, that it will bite you on your rudey bits of all the things it might do having appeared from nowhere, and thence fly off in?

  17. reb, on March 5th, 2009 at 10:39 am Said:

    The Gift of Fear….I read it almost ten years ago now, and what I learned was so insightful that I’ve never forgotten its message.

    Clearly.

    Perhaps you should preface all your posts with “Abandon all hope ye who enter here…”

    It’s about not burying your head in the sand reb. Life isn’t the fairytale you may think it is. In fact, I’ve heard you whine so many times about how nasty and unfair life can be.

    Hiding from it doesn’t make it go away. Nor will clicking our heels closing our eyes and saying ‘there’s no place like home, there’s no place like home’ Don’t forget Toto

  18. Legion, on March 5th, 2009 at 10:46 am Said:

    John McPhilbin, on March 5th, 2009 at 10:35 am

    Doesn’t Taleb caution against the conversion of uncertainty into some false assessment of risk? How does someone predict a black swan event, let alone which direction it will fly in from, that it will bite you on your rudey bits of all the things it might do having appeared from nowhere, and thence fly off in?

    Legion

    When in the military I learned something very valuable ‘expect the unexpected’. The key is learning to be flexible and adaptable to changing circumstance. Denial makes us rigid and unprepared and instead of bending we end up breaking. Too many people have been living in denial that almost anything on ‘the downside’ is possible.

  19. True, and its a ‘process’.

  20. To All Blogocrats

    I think I’ve run enough posts expressing my opinions and concerns so far. In fact, I think I’ve reached saturation point.

    I’d like to step back for a while, simply because I believe we’re in the middle of a process that’s going to throw up some very nasty surprises. Don’t get me wrong, I love Blogocrats and many of the contributors but I do feel a sense of denial – and yes, I could be wrong, very wrong. It wouldn’t be the first time (lol).

    I’ve got a few things I really need to concentrate on over the next couple of months and will take this time to step back and see exactly how this process plays out. My intention will be to return and try offer more constructive contributions about how to deal with the fallout. But until the fallout is realised (or not) I’d prefer to avoid going in circles.

    Please feel free to contact me via email if you’d like – even you Nature5. If you’d like to discuss anything of interest.

    johnmcphilbin@live.com.au

    Far from having the shits or attempting to ‘spit the dummy’ I think now is a good time to priorise my own life and explore opportunities that need my attention.

    I’ll be back in the future there’s no doubting that simply because I like this place and the people in it .

  21. Legion, on March 5th, 2009 at 11:19 am Said:

    True, and its a ‘process’.’

    Thanks Legion. Remember you’re an intelligent person. Do me a favour, try to keep your opinions simple and easy to understand – then people will really understand and appreciate what you’ve got to offer. Adapt to the people around you in terms they can easily understand. It took me a long time to learn that, and I still end up losing people. It’s a learning process (wink)

  22. shaneinqld, on March 5th, 2009 at 8:46 am Said:

    “What I do find amazing is Mr Springborg planning to dump public servants during an economic crisis. Public servants pay taxes and also purchase all of the items private enterprise produce. What an idiot of a position. Keep them employed until the good times return ensuring the survival of small businesses.

    No good giving payroll tax relief to small business if there are no customers.”

    I don’t know why you’d think that Shane, as this genius also reckons that he’ll have the Qld economy in the black when the recession ends. Well, duh!!!!

    I’m sure he made that idiotic statement in the hope of gaining votes. Kicking public servants is generally a surefire vote winner and all the parties give it a go when they haven’t got much else going for them.

    I wonder if it’s occurred to boy wonder how his policy measures will be implemented if he gets the nod and he’s sacked the public service? I also wonder if it will occur to Joe and Josephine Public?

    I guess he’s just lost the public service vote and I wonder if he realises that public servants also vote?

    John, Shane and reb, you’re all right up to a point. It’s a matter of balance. The worst case scenario could happen and you need a contingency plan, but don’t let yourself be paralysed by what might happen. I don’t think you can plan too far ahead in times like these, because the future is so cloudy.

    My suggestion; buy plenty of tinned food with a long shelf life, go shares in a cow with a calf at foot, ditto sheep, find some rabbit traps, buy a compost bin and vegie seeds and a shotgun to discourage looters!! 😉

  23. John

    Roared laughing at your response at 10.37am.

    I gave up reading Legions reponses ages ago as my simple mind cannot comprehend what on earth he is saying. His comments remind me of Bank Jargon, a lot of big unnecessary words which all boils down to pay your loan or we will sell your house.

    ‘Check your super’. I did, its down over 50% but I am not retiring for many years yet, so why should I panic at this stage. It has grown for over 25 years and now dropped over 2 years, in perspective it has grown for 25 of the last 27 years. I dont call that very, very wrong. Could have put it in a term deposit I suppose, but then I would have missed all the growth since 1980 and the share market is not yet back to 1980 figures, it is only back to figures 5 years ago.

    ‘Is my job safe’. No it is not (I am at the mercy of the big four banks at the moment,) so should I stop working.? I don’t have the luxury of putting away 3 or 6 months slalary in an account for a rainy day as suggest by so called economists, and I doubt if many of the average worker could. I will work until I have no job and then look for another one, what on earth else can I do.

    The Banks cut commissions to brokers by over 30% last July resulting in substantial loss of income for my business. John how do you think I should have prepared for a 30% drop in income of which I was unaware.

    The only true preparation to job loss is to never have a job, then it can never happen to you.

    My head in not in the sand or in the clouds, it is level and looking forward to my future with optimism despite what the world and our economy throw at me over the years to come. I have experienced recessions, droughts on our farm, sheep prices of $2 per head when we walked off, my father heartbroken, but we picked up the pieces and moved on.

    John I also assure you that many, many, many more people will lose their homes and suffer financially as a result of physical injury and having no insurance or very poor financial management than will from job loss as a result of the current dowturn.

  24. JMc

    Denial can be a two edged sword, my friend…

    The things you write about are already happening, its just not widespread enough here yet…

    …the recession we “had to have” put 12% of people out of work – that meant 88% continued on their merry way…

    …that will happen here…but I suspect with a lower unemployment figure – maybe 8% (max 10%)…the infrastructure stimulus will help tremendously because the “miners” will move into the civil works projects and the multiplier effect will help the general economy…

    Mid 2010 will see us start to crawl back…stock market, economy and then jobs…

    What people want to hear is how can we benefit from this particular failure of a global system.

    As an example, cyclones hit Queensland on a regular basis, because of this houses in Queensland are now built to a particular standard. Because we built our own house we asked for a higher standard – costs a bit more but it reduces the risk of cyclone damage and we get a reduction in insurance premium. Positive out of a negative.

    My point is this, JMc, we need to hear about what should be done to reduce the risk of the GFC happening for the next generation.

    How we can build a positive foundation of support for society rather than being cannon fodder (in many ways) for the corporate Robber Barons…

    I want my kids and grandkids to grow up in a better world – every generation of my family has had one, or more, serve in the military during a conflict…

    Why do we allow so many people to make money by doing nothing (ie speculation) and risk other people’s money doing it?

    What are your views on regulation for banks?

    What is the G7 or G20 role, the IMF, World Banks in the future?

    How do we control a “global” system rather than groupings of national interest, in which we suffer?

    Do the “reserve” banks actually play a role in all this or is it just a shield for commercial banks and government?

    How do we regenerate our agricultural industry?

    How do we protect our manufacturing industry?

    Why isn’t Australia at the forefront of alternative energy?

    Why do we still drive cars powered by oil products in 2009?

    How do we protect working families from this sort of financial damage (ie restrict borrowing as we used to in the sixties…?)

    How do we protect retirees and pensioners from a fall out of this magnitude in the future?

    Is capitalism THE answer or are their alternatives?

    In short JMc, your just going over the same ground in many different ways – we need to move on, mate…and start addressing what we do AFTER the recessive “cyclone” (Kevin Rudd’s description, I see) hits…

    I’ll stop now – ’cause every time I “edit” I add…!

    …and Shane – I agree the media is run by grown ups who should know better via kids who don’t, for people who can’t!

  25. Jane

    Well said.

    I already grow my own vegies, Im from a family of keen gardeners. Bottled my own beetroot a number of months ago and it tastes oh so much better than the tinned stuff.

  26. You want to know something pertinent? I am probably in John McPhilbin’s camp as far as my thoughts on the financial crisis go. I’m particularly aware of the risk to jobs & economic throughput given I’ve recently been offered a partnership in a small business with people I trust, but an exposure to the downturn in retail spending.

    The point I want to make, however, is that I am not getting anything out of these daily to twice daily posts by John. They seem to be aimed more at justifying his negative feelings on the matter rather than enlightening the rest of us readers or providing new fodder for us to discuss on the matter.

    I would prefer a return of this blog to the revelation & discussion of “new” developments in politics. I think we are all aware of the financial crisis and the risks involved. We may not all agree the extent of them, but we’ve rehashed this same subject day-in, day-out for two months now. Can we move on please?

  27. Is capitalism THE answer or are their (sic) alternatives?

    THERE

    Not deliberate JMC!!! must be a Freudian slip…

  28. I would prefer a return of this blog to the revelation & discussion of “new” developments in politics. I think we are all aware of the financial crisis and the risks involved. We may not all agree the extent of them, but we’ve rehashed this same subject day-in, day-out for two months now. Can we move on please?

    Totally agree Ben. If we are all agreeable, let’s all make an effort to get the discussion back to along the lines as Ben suggests.

    And I hope that will continue to involve your participation John.

    We may not agree on some things but like everyone else, your views and contributions are most very welcome here..

    🙂

  29. B.T.

    Completely agree!

  30. John McPhilbin, on March 5th, 2009 at 11:29 am.

    Agreed John, better to treat the blog as a tutorial rather than as a lecture 😉

    Having said that, was it such a short time ago that the newspapers pointed out almost on a daily basis that the ‘crisis’ was a skills shortage. Difficult I think for the general population to have ascertained that the current situation was on the horizon. Was it only such a short time ago that Howard was saying, Go for it kiddies, you’ve never had it so good and Swan howled down for scare mongering. Difficult to have had hindsight under these conditions me thinks.

  31. Also Min,

    It was the Howard Government – and The World’s Greatest Treasurer that relaxed the rules for Superannuation contributions and encouraged people to contribute up to $1 million to their Super Fund as long as they did so by July 1, 2008.

    Imagine all those poor souls who went ahead and did this – they’ve probably lost about 50% of that money by now.

  32. Precisely Reb

    “Imagine all those poor souls who went ahead and did this – they’ve probably lost about 50% of that money by now.”

    And many were encouraged to take out ‘margin loans’ to do so.

    My heart goes out to those who’ve worked so hard all their lives and always strived to do the right thing..This is the type of reality check that’s sorely needed and needs to be addressed like TB says. We forget these lessons and future generations end up paying again, for something that should have been avoided.

  33. John McP, as you say people “discovered they had ignored all the danger signs simply because they didn’t believe that something so nasty could ever happen to them.”

    Agree that everyone should be a little cautious about leaving themselves open to danger, especially in situations outside their normal experience.

    There are several problems with taking this concept to extremes.

    Firstly, the train/plane crash scenario, tsunamis, earthquakes, acts of god, etc. We cannot predict when, or even if, it will happen in most cases. We can only insure against the outside possibility of total loss (of life or property). We can of course avoid building on the San Andreas Faultline, and avoid travelling with Plummet Airways, etc. This is still not total protection. All we really can do is insure ourselves and carry on as normal.

    Secondly, we often have vague feelings of disquiet about things, and mostly it is just jumping at shadows. Not every single vague feeling of disquiet is a sign of impending catastrophe. We will wind up being nervous wrecks if we react to every single niggling doubt that crosses our fertile minds during each day.

    Thirdly, if we act on each worry with mitigating actions to prevent any danger, then we will totally inhibit our lives. Fear of their children being run over stops parents from allowing their kids to ride bikes. Fear of them being kidnapped stops parents from letting the kids play in the park. Fear of them falling stops parents from letting kids climb trees. Fear of car accidents would stop people from driving anywhere at all except in the back paddock, in first gear.

    Where do we stop, John? Fear of falling asteroids stops us from leaving our bunkers???

    Life is something of a series of calculated risks, I reckon. Depending on our life experiences and our sense of security, we all assess these risks somewhat differently. Relative to our own perspective, some people look like crazy daredevils, and others look like scaredy cats.

    Some put their money under the mattress, and some negative gear to the max. Most of us are a bit more balanced, and take limited risks without losing our shirts.

    Incidentally, studies have shown that most financial planners and financial analysts are in the “adrenaline junkie” category (i.e. Risk Profile 6 – 7 on a scale 1 – 7). This is a worry, since they are trusted with our life savings, and have a completely different idea of what is risky compared with most of the population (median Risk Profile is 4, most people are 3 – 5).

    Maybe that’s why we are all in such a financial mess now? We allowed the adrenaline junkies to take the wheel, and trusted them to make sound decisions? These 6-7 types need clearer guidelines, i.e. legislation and regulation. They will resent it fiercely, but that is really too bad I reckon. In this case, the risk seekers are jeopardising not just their own financial futures but the wellbeing of the majority, with their actions.

    One last thing, John. Have you ever thought that you might be suffering from delayed PTSD from your time in the military, then rekindled by the traumatic accident in that job with Chubb? Seriously, such extreme focus on negative issues is a typical symptom of PTSD, and would be a perfectly normal response if you have faced serious danger in your life.

    Severe threat and trauma apparently tends to set the mental amplifier on high alert, and is very hard to reset when the danger has abated. I know a lady in Perth who specialises in researching and treating people for this, especially ex-military and their families. I guess some of the people from the Victorian bushfires may also be suffering, after what they have been through.

  34. Eise

    “One last thing, John. Have you ever thought that you might be suffering from delayed PTSD from your time in the military, then rekindled by the traumatic accident in that job with Chubb? Seriously, such extreme focus on negative issues is a typical symptom of PTSD, and would be a perfectly normal response if you have faced serious danger in your life.”

    It has been a factor I’ve had to contend with I’ll admit Elise. Which is also why I need a little distance to ensure I maintain perspective. And yes, there are so many things that you have no real control over, however, when very real threats emerge such as what’s happening in the economy, people can’t say ‘we didn’t expect it and this is so unfair’ when they can’t cover their debts. How many times do we have to experience this type of crisis before everyone, including government regulators etc to ensure against allowing the system to become a destructive rogue.

    By the way , everybody’s free to wear sunscreen (wink)

  35. Yep!!! I think we are on the same page, John.

    Take care of yourself, and your family!

    I always wear sunscreen, and plague better half to do likewise. Poor man. Mind you, he is the one with regular solar keratoses and intermittent BCC’s being cut out, so there is some justification…

    Perceived risk versus real risk, as you were saying John!

  36. Elise of Perth, on March 5th, 2009 at 1:23 pm Said:

    Yep!!! I think we are on the same page, John.”

    And I’ll say it again Elise, it’s really nice to see you back amongst friends and mixing it up.

    I’ll try to keep posting comments and keep and eye out on developments, but I really do need to focus on myself and my family for a while.

  37. Elise, TB, Reb et al

    The Great Repression (LOL) this has what has really frustrated me. So much of this was avoidable.

    The great repression
    http://www.theaustralian.news.com.au/story/0,25197,25115869-28737,00.html
    ‘The harsh reality that is being repressed is this: the Western world is suffering a crisis of excessive indebtedness.

    “IT began as a sub-prime surprise, then became a credit crunch and is now a global financial crisis. At last month’s World Economic Forum at Davos there was much finger-pointing – Russia and China blamed the US, everyone blamed the bankers, the bankers blamed everyone – but little in the way of forward-looking ideas. From where I was sitting, most attendees were still stuck in the Great Repression: deeply anxious, but fundamentally in denial about the nature and magnitude of the problem.”

  38. This is a thought that deserves some reflection:

    ‘As he observed again on Monday, all current policy debates are focused on how best to rehabilitate an unstable and unhealthy system and revive the bad habits that brought about its implosion, and all the while avoiding any responsibility ourselves for our role in any of it.’

    The whole post, indeed the whole blog, is well worth reading.

    http://www.amconmag.com/larison/2009/03/04/prosperity-myth-and-liberty/

  39. Brilliant Ken

    Just the tonic!

    “For now, instead, we rush from bubble to bubble, from one crash heedlessly to the next. We are all entitled to our wants and ambitions whether or not we bother to work for them. We are all satellites, orbiting one another endlessly, pretending that society can be built out of greed and detachment, while we know in our hearts that this is not so. “No man is an island,” John Dunne famously wrote. “Every man is a piece of the continent, a part of the main….any man’s death diminishes me, because I am involved in mankind and therefore never send to know for whom the bell tolls it tolls for thee.” Not just any man’s death, I might add, but every man’s life. We are bound to each other and to our history as surely as ever, only we’ve come to believe otherwise. Perhaps it’s time we shook the cobwebs from our eyes, and put these illusions of ours to rest, to look within ourselves and find out what prosperity actually means – how we let it define us.”

  40. Nice to be back John!

    I have a couple of questions for you.

    What is the longest time you can last, before thinking of something catastrophic about the economy?

    Are you able to increase this time at all, with determined attention to other issues?

  41. For those who don’t read the whole thing, Larison also quotes another contrary thinker:

    ‘Yet, what if we were to widen our aperture a bit and consider whether a nation of self-defined consumers is a good thing? What if the very self-definition of ourselves as “consumers” – now used unselfconsciously as the one universally valid term to describe Americans (not “workers” and certainly not “citizens”) – is deeply damaging to the civic and moral culture of a nation? What if economic and political policies that promote consumption over good, hard work induce very bad habits that in turn lead to very bad economic outcomes?’

    This of course is precisely the path that Rudd’s mob has taken: use government resources to try to get us back spending and borrowing as quickly as possible. While the conservatives stand condemned for having no coherent alternative, their criticism of so-called stimulus packages for trying to cure the disease with more of what caused it in the first place seems to me to have a lot of substance.

  42. Ken Lovell, excellent points!

    There seems to be something a bit pathological about what has been going on. It seems like some sort of collective insanity over the last decade, and we are still trying to resusitate it as before, with a bit of minor tweaking.

    The system became bloated and diabetic, and had to be admitted to hospital for emergency treatment. Now we hope to supply it with a few pills and discharge it to continue on its merry way again? Have we really addressed the fundamental underlying issues?

    This line of thought could do with a lot more exploring, as you suggested Ken.

  43. reb, on March 5th, 2009 at 12:47 pm

    Reb I sometimes wonder what the headlines would now be should Howard have won the last election. Maybe a topic for a caption comp…

  44. When you hear people bemoaning the fact that Australians faced with hard times saved more money than usual and that this is somehow to be deplored and reversed if possible … and few public figures bother to note what a bizarre set of fundamental values that now implies in our society … this seems to me a society that has fallen completely for a magic pudding world view in which everyone can just get richer and richer forever and ever without any particular effort or sacrifice on their part.

  45. Ken..was thinking the same thing. Was pondering why the last stimulus package has been labelled ‘a failure’ because Australians used the money to either pay off debt or saved it.

    And yes I do understand that we need to spend in order to keep the economy choofing, however as you say “a bizarre set of fundamental values that now implies in our society..”.

  46. “Elise of Perth, on March 5th, 2009 at 1:43 pm Said:

    Nice to be back John!

    I have a couple of questions for you.

    What is the longest time you can last, before thinking of something catastrophic about the economy?

    Are you able to increase this time at all, with determined attention to other issues?”

    Here’s some self-disclosure – I have quite a natural tendency to read undercurrents in attitudes and behaviours. This stems no doubt as a genetic predisposition (wink), in part, along with experience (i.e. the military and security work). Add to that my background in business and behavioural sciences and a mind that is quick to spot recurring patterns (both healthy and unhealthy). My attention gets naturally drawn to events and issues that seem important to understand. I also find that history keeps repeating itself when we ignore its lessons.

    Funnily enough, I sometime deliberately dramatise issues in order to draw attention to it. I do this simply because most people could care less unless of course they’re hit with cold reality.

    This is, no doubt, something I learned was important in the military and the security industry. There’s a natural tendency for people to ignore real threats and therefore take no mitigating actions to counter these threats.

    And as far as human behaviour is concerned, it’s remarkably predictable – take Glabraith’s comments about the financial community and it’s willingness to allow financial insanity to take over, and his insight into business and political avoidance of trouble in order not to disturb their comfortable and orderly live. We avoid and deny reality and threats like the plague when it’s convenient for us to do so….Galbraith writes

    “Even in such a time of madness as the late twenties, a great many man in Wall Street remained quite sane. But they also remained very quiet. The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them.”

    ..now, as throughout history, financial capacity and political perspicacity are inversely correlated. Long-run salvation by men of business has never been highly regarded if it means disturbance of orderly life and convenience in the present. So inaction will be advocated in the present even though it means deep trouble in the future. Here, at least equally with communism, lies the threat to capitalism. It is what causes men who know that things are going quite wrong to say that things are fundamentally sound.”

    The Great Crash: 1929

  47. It’s like someone linked a generator to a hamster wheel. The hamster is getting more and more tired but somehow we have to keep the generator going … so the poor old hamster’s progressed from a few sips of caffein drink to a huge mainline shot of adrenalin, presumably in the hope that the poor bugger will get a second wind sooner or later. But then what?

    Maybe it would be more sensible to review the need for the generator.

  48. Ken

    “This of course is precisely the path that Rudd’s mob has taken: use government resources to try to get us back spending and borrowing as quickly as possible. While the conservatives stand condemned for having no coherent alternative, their criticism of so-called stimulus packages for trying to cure the disease with more of what caused it in the first place seems to me to have a lot of substance.”

    Economics isn’t called the abysmal science for nothing. I hate to confess this but I will, but I’m extremely interested in the whole recovery process and exactly how it will pan out. So far, we’re applying theories that we think will work and yet, the opposite may be the case, it may down the track make things worse.

  49. Ken Lovell, on March 5th, 2009 at 2:45 pm Said:

    It’s like someone linked a generator to a hamster wheel. The hamster is getting more and more tired but somehow we have to keep the generator going … so the poor old hamster’s progressed from a few sips of caffein drink to a huge mainline shot of adrenalin, presumably in the hope that the poor bugger will get a second wind sooner or later. But then what?

    Maybe it would be more sensible to review the need for the generator.”

    I agree. Lol the images your metaphor conjures. There’s lot of extremely tired and pissed off and angry hamsters.

  50. Elise…

    See…”The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil”. Perhaps this is inherent.” Banks in survival/profit mode

    Banks to haul in $5b in fees
    http://business.smh.com.au/business/banks-to-haul-in-5b-in-fees-20090305-8oyx.html
    Australian banks will collect more than $5 billion in fees in the year ahead as they aim to survive the global economic crisis, a researcher forecasts.

  51. From the Oz: http://www.theaustralian.news.com.au/story/0,25197,25143008-12377,00.html Home lenders want home buyers grant extended

    Just a thing of mine. I would still like to see any Home buyer’s grant better targetted. That is, there are one heck of a lot of people out there who can afford the repayments, who have (at least for the moment) job stability, but who need a leg up re a deposit. I am talking about people who are not First Home buyers, people with maybe a couple of dependants, that is, the remarried/non-home owners.

  52. Lets hope China pull through, there’s a hell of a lot riding on it.

    China to ‘significantly’ increase spending
    http://business.smh.com.au/business/world-business/china-to-significantly-increase-spending-20090305-8p12.html
    China will “significantly” increase investment in 2009 to counter a slowdown in the world’s third-biggest economy, Premier Wen Jiabao said.

    However, he did not announce a bigger stimulus package.

    “We face unprecedented difficulties and challenges,” Mr Wen said in his work report, presented to the National People’s Congress in Beijing today. The nation needs to “reverse the economic slide as soon as possible”, he said.

    China’s export collapse has dragged the economy to its weakest growth in seven years and cost the jobs of 20 million migrant workers, adding to the risk of social unrest.

  53. Time to face up to reality
    http://www.theaustralian.news.com.au/story/0,25197,25140819-7583,00.html
    …we’ve yet to see the bad news on collapsing business investment, weaker export volumes and sharply lower contract prices for coal and iron ore exports.

  54. Min, on March 5th, 2009 at 2:09 pm Said:

    reb, on March 5th, 2009 at 12:47 pm

    Reb I sometimes wonder what the headlines would now be should Howard have won the last election. Maybe a topic for a caption comp…

    Lol, Min. I’ve even thought of one…..”you’ve never had it so good!”

  55. Min & Jane,

    Ok, you’ve made me do it!!

  56. reb, on March 5th, 2009 at 10:35 am

    I don’t need to tell John…John is already aware that what he contributes is important to a community understanding of a very real threat to community wellbeing – by describing it, analysing it, engaging in some measure of prediction of its contours and particular behaviours, prompting normative discussion about it, and sharing freely the fruits of that expenditure of valuable time and energy and caring for others as much as self, gazing into the abyss that is the abysmal science’s object. My tale was more an analogy about why positive illusions are mostly preferred to responsibility or responsivity in a pre-aggregate reflexivity where ‘balance’ and ‘perception’ is still mostly a carnival’s funhouse of mirrors.

    John McPhilbin, on March 5th, 2009 at 11:24 am

    I’m both sorry and not sorry to read that, John. I didn’t think (re-)iteration and continued scanning to build up a better picture of an epochal event was wasted effort, nor doing so said anything about validation or invalidation per se, nor about positivity or negativity except insofar as those relational qualities both feed into and feed out of a reflexivity for reflexivity.

  57. Thanks Legion

    You get it.

    Cheers

  58. John

    You and I have agreed on many, many areas and I agree with so much of what you say.

    It will be sad for you to step back as I hoped you would step up. Step up and write about the collapsing economy, this site needs everyone and sometimes I think we feel overwhelmed by disagreement from our fellow bloggers. This is what is so good about Blogocrats, your responses are not censored or trashed because you disagree with an opinion.

    My suggestion is while writring your blog also search for and include a few positive things about the economy as well ( could be hard to find at the moment but they are there), simply to improve the overall mood of the blog you write.

  59. Shane

    I appreciate your comments. Please understand that in order to be constructive people have to acknowledge the reality of what is happening first. This hasn’t been the case so far.

    I’d only be offering opinions based on problems people don’t think exist in the first place.

    There’s a strong air of denial…I’ve aired my frustration in Recession Obsession II

  60. John

    I acknowledge what is happening around me and jobs are being lost. But on a positive note Woolworths plan to employ 7,000 more staff. There is a positive for you in an otherwise gloomy position.

  61. shaneinqld, on March 6th, 2009 at 8:20 am Said:

    John

    I acknowledge what is happening around me and jobs are being lost. But on a positive note Woolworths plan to employ 7,000 more staff. There is a positive for you in an otherwise gloomy position.”

    That’s great, but how sustainable is it? That’s the reality we’ve got to ask ourselves. Perhaps they’re banking on the competition failing which will obviously neutralise the gains in employment simply because their competitor will be forced to make staff cutbacks. Again, I’m not trying to rain on anyone’s parade, I’m just highlighting economic reality as it may play out.

  62. A somewhat interesting thread over at teh LP on ‘sentiment‘…

    But let’s not get too gloomy. Just because I’m in my 50s and my superannuation has dropped by almost a third with no sign of an end to the fall and I haven’t got a job as my company just made big redundancies (but as I was a contractor I was laid off without any payment), there is little need to worry, apparently. Because … well, the theory seems to be that if we all just carry on as usual, the system will recover and we can all carry on as usual, ad infinitum.

    I’m not an economist but I don’t buy it. This is the time to be having a national conversation about the purpose of the economy.

  63. Legion, on March 6th, 2009 at 9:41 am Said:

    A somewhat interesting thread over at teh LP on ‘sentiment‘…

    But let’s not get too gloomy. Just because I’m in my 50s and my superannuation has dropped by almost a third with no sign of an end to the fall and I haven’t got a job as my company just made big redundancies (but as I was a contractor I was laid off without any payment), there is little need to worry, apparently. Because … well, the theory seems to be that if we all just carry on as usual, the system will recover and we can all carry on as usual, ad infinitum.

    I’m not an economist but I don’t buy it. This is the time to be having a national conversation about the purpose of the economy.”

    Thank you, thank you, thank you Legion. You hit me right between the eyes. So true!

  64. John, maybe as you say:

    “There’s a strong air of denial…I’ve aired my frustration in Recession Obsession II”

    Maybe also, as you outlined in your list of stages of grief, people have reached “acceptance” that we are in a downturn, or recession if you prefer.

    Robin Bowerman of Vanguard Investments, is of that opinion:
    http://blogs.news.com.au/news/smartinvesting/index.php/news/comments/amid_market_noise_the_silence_is_deafening/

    The fact that people disagree with you about whether a recession is going to decend into a Great Depression does not necessarily constitute “denial” in the sense of “stages of grief”. It may simply be an alternative opinion on the basis of the available data.

    People have been calling it the start of the GD in every recession since the GD. “The End of the World is Nigh”, end of life as we know it, etc, etc. Rejecting a prediction of Armageddon is not necessarily “denial”.

    I think we have had too much focus on negative facts, without discussing many useful ideas on what to do. Sure, people need to understand that there is a problem before they get around to dealing with it. No doubt. After that, though, harping on about the problem and pointing to endless negative examples does not help any further. It is depressing and demotivating.

    Could we perhaps spare a few thoughts on to how to weather the downturn, and come out of it more rapidly?

  65. I’m not sure about people in denial.

    What I (and maybe others) feel is saturation overload.

    Whenever anything happens, be it a terrible event like the bushfires or the financial crisis, we are over saturated through the media to the point of overload and fatigue. I just get sick of hearing about it.

  66. Elise and KL

    Hear bloody hear!

  67. Kitty at al,

    Which is why reb and myself are thinking of placing a ban on anything related to the GFC until next week.

    Whadyareckon blogocrats.

  68. Don’t like bans (especially blanket bans)…

    …smacks of censorship…heavy moderation…

    …something that’s been avoided pretty well so far…

    I understand your sentiments but its a bit like Conroy and his NannyNet…

    What next ? Posts about Brokeback Mountain? Now there’s an idea.

  69. LOL TB

    Not so much a ban – just that we need to rest our poor fragile little minds from all of the financial doom and gloom.

    and mmmmm……. gay cowboys…… mmmmmmm

  70. Once upon a time there was these two cowboys…

  71. TB Queensland,

    Yes, yes, ban blankets!

    Dreadful things – harbour dust mites, and much too heavy as you suggested. Totally with you.

    Doonas are better!

  72. LOL Elise

    That caused me to make a guffaw that caused people to popup from their cubicles.

  73. pop-up cubicles?

  74. And you guys thought I’m pessimistic (Lol)

    China won’t save the world
    http://business.smh.com.au/business/world-business/china-wont-save-the-world-20090306-8qjw.html?page=-1
    Willie Pesek
    March 6, 2009 – 12:56PM

    The idea that China can grow strongly as the world unravels is a fantasy. Ditto for the view that China is going to save the global economy.

    China is already slowing, of course. The third-biggest economy grew 6.8% in the last quarter of 2008. Such growth sounds like heaven just about everywhere else. Yet for an economy at China’s level of development, one that zoomed along at a 13% pace in 2007, it’s hell.

    Premier Wen Jiabao was wrong to err on the side of caution yesterday when he delivered the Chinese equivalent of the US State of the Union address. He said the country’s 8% growth target is within reach, indicating an additional stimulus package isn’t needed. It’s a bad call, and Wen is likely to regret it as 2009 unfolds.

    Markets are sensing as much. On Wednesday, stocks around the globe soared on hopes that at least one major economy would skirt disaster. Markets came back to Earth yesterday after China quelled stimulus speculation. As the global meltdown deepens, it probably means the export demand that drives China won’t return until well into 2010.

    Five reasons for pessimism

    Here are five reasons a Chinese rebound in 2009 may not pan out:

    1. World growth is collapsing. This isn’t hyperbole, but a sobering fact. The International Monetary Fund can’t downgrade its global growth estimates fast enough as the credit crisis overwhelms economies as diverse as Ireland, Japan, the United Arab Emirates and the US.

    Asian governments are increasing spending to soften the blow from falling asset prices, consumer spending and manufacturing. The European Central Bank is struggling to keep up with the region’s plunging economy.

    The trillions of dollars of wealth being lost as markets plummet are depleting public coffers and damaging consumer psychology. It’s not a good environment for any government hoping for a revival in global demand.

    2. China’s key customer is in hiding, indefinitely. Just when you thought conditions in the $US14 trillion ($22 billion) US economy couldn’t get any worse, they ”deteriorated further” in almost all corners of the country over the last two months, the Federal Reserve said in its regional business survey.

    Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, spoke for many this week when he said exporters are facing a ”life and death” crisis. Exporters are so worried that they are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade.

    One thing is for sure: The US consumer isn’t about to help China out of this dilemma.

    3. A lack of tools. It’s important to remember that the 4 trillion yuan ($910 billion) spending plan unveiled in November was more spin than reality. Much of it wasn’t new, but a tally of existing spending efforts. They were never going to boost a $US3.3 trillion economy anyway.

    China’s almost $US2 trillion of currency reserves would seem to give the nation considerable policy latitude. Yet China’s vast economy lacks the financial infrastructure to get the bang it needs from its stimulus in yuan. Would building more roads, bridges and dams do the trick?

    ”8% GDP doesn’t really tell you anything about job creation,” says Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc. ”Many of these projects are not particularly job-intensive.”

    The spending will help, but such projects didn’t propel growth as hoped over the last 30 years. Exports did.

    4. All those US Treasuries. Financing loads of new projects could prove dicey, even for cash-rich China. Any move to draw down $US696 billion of US government debt could leave China with major losses and prolong the US recession.

    That leaves domestic lending institutions. If China wants to avoid a Japan-like bad-loan crisis, or something far worse, it has to be careful about massive public-works projects with questionable economic benefits.

    Of course, there’s the ”official” gross-domestic-product figure, and then there’s the real situation in the most populous nation. The double-digit drops in exports among China’s biggest trading partners in Asia show how bad things are getting. Offsetting those trends won’t be easy and it won’t be cheap.

    5. Rebalancing takes time. Just as the US needs to become a nation of savers, China needs more consumers. That’s a destabilizing, decade-long process that requires the creation of national safety nets and more education and health-care spending.

    Reverse migration

    Making that transition would be a big enough challenge with a healthy world economy. Doing it while Group of Seven members are in recession and developing Asia is slowing rapidly will prove extraordinarily difficult.

    Wen wasn’t exaggerating yesterday when he said China faces its ”most difficult” year of the past 30. How much China’s export collapse is hurting can been seen in the 20 million migrant workers who are suddenly unemployed. The risk of social unrest is higher than at any time since 1989, the year of the Tiananmen Square protests.

    China’s top-down system has worked extraordinarily well in recent years. It’s still a stretch to think the country can turn its economy upside down in this ever-worsening environment.

    Wen says China needs to ”reverse the economic slide as soon as possible.” Too bad officials in Beijing think their work is largely done. It’s not, no matter what the official spin is.

    Bloomberg News

  75. John (strangle, strangle) these are the problems and so what are the solutions?

    reb, on March 6th, 2009 at 12:48 pm Said:
    Once upon a time there was these two cowboys…Elise of Perth, on March 6th, 2009 at 12:52 pm Said:
    TB Queensland, Yes, yes, ban blankets!

    A Brokeback joke..sigh the best that I could manage at short notice.

  76. Min, on March 6th, 2009 at 2:31 pm Said:

    John (strangle, strangle) these are the problems and so what are the solutions?”

    I don’t think can really answer your question with any authority, Lol refer back to Recession Obsession II

  77. John, I’m not much impressed with anyone ‘of authority’ and so you’ll do.

  78. You can’t help yourself, John.

    One more time, if China are so bloody broke, what the hell are they doing running around Australia spending up big on buying our assets???

    Think on an individual level. If you are broke, do you go around spending like a drunken sailor? If a restaurant is going broke, do they go out and purchase extra premises?

    However, if someone is trying to sell you something, might you possibly put a big effort into convincing them that you are currently too broke to pay them much? Would you put an effort into making it a credible story by supplying negative news? Especially if you think these people have been ripping you off with high prices recently? Duh.

    Incidentally, have a look at our trade and export figures from the Reserve Bank data. I don’t see collapsing exports, like near zero or whatever. Do you?

    http://www.rba.gov.au/ChartPack/balance_of_payments.pdf

    The main problem is commodity prices, but they are similar to what they were a few years ago, and Australia still put food on the table back then. 2007 prices and export earnings were abnormal, not a benchmark normal year.

    How about a bit of perspective?

  79. Now, Now Elise. I’m just the messenger. I’ve been labeled too pessimistic and I think that bloke has shown me up.

    I didn’t cause this crisis remember. Soros and TB did. (wink)

  80. John, you didn’t read what I wrote. You haven’t properly looked at the RBA data.

    The chinese can’t be all that broke.

    We are being conned.

    We have our amplifier stuck on feedback, making such a noise that we can’t think straight.

  81. One version of a guesswork gambit: Someone might dispose of some of their accumulated (foreign) reserves to purchase commodity-producing assets, and effectively the commodities, under the expectation that loosened monetary and fiscal policies which expand the money base somewhere else would soon enough lead to inflation in those foreign denominated currencies and dilution of their holdings in those currencies, first, and inflation of the prices of those commodities in those currencies, second, as cash ceased to be a safe haven even for those over there. The expenditure by, say SOEs, therefore, becomes prudent in the long run, shrewd in the medium run as hedging, and cynical in the short run. Cashed-up SOEs, however, do not comprise the bulk of an economy which consists of very long tails geared towards export markets which have dried up.

  82. Legion, agree with your argument. Exactly. Never underestimate their intelligence or their long-term perspective!

    We are selling our commodities largely to the SOEs, as I understand it, not to the “very long tails”. As long as they are nation-building, creating infrastructure and factories and accomodation, then we have exports.

    A lot of the paranoia is about our export market to China “grinding to a halt”. My argument is that this is unlikely, except in the short term, when price negotiations are underway.

    Hell, nothing undermines a seller (i.e. Australian resource companies) more than having a stockpile of unsold commodity during a price negotiation. I watched Exxon do this to their customers during negotiations – rerouting product to other customers for the duration. Ethical??? Effective!!!

  83. Sorry, that Exxon example is a mirror image. The Exxon subsidiary was actually creating an artifical shortage to increase prices. De Beers is a past master at this art too.

    By comparison, the Chinese are running down existing stockpiles and not purchasing, leading up to the negotiations. This will create an artificial oversupply to keep prices low.

    The Chinese are also propping up smaller Australian mines with higher operating costs and poorer quality ores. This also creates oversupply and keeps prices low. In fact, it would probably be worth their while to even run some mines at a loss, to keep the overall price down on the larger volumes from the larger suppliers.

  84. Elise of Perth, on March 6th, 2009 at 4:17 pm

    Elise, there may be no China as we know it or knew it IF unrest breaks out there…here, we tend to question the terms OF the ‘social contract’; there, where it’s posited by some, eg, that the social contract is predicated on continued growth-as-development, THE social contract itself may become questionable. The same argument can be applied across a range of politically fragile nations where social and economic aspirations are thwarted by economic downturns.

  85. Elise of Perth, on March 6th, 2009 at 4:08 pm Said:

    Legion, agree with your argument. Exactly. Never underestimate their intelligence or their long-term perspective!

    We are selling our commodities largely to the SOEs, as I understand it, not to the “very long tails”. As long as they are nation-building, creating infrastructure and factories and accomodation, then we have exports.

    A lot of the paranoia is about our export market to China “grinding to a halt”. My argument is that this is unlikely, except in the short term, when price negotiations are underway.”

    Unlikely?, maybe, maybe not, which is why I repeat that my concern is not so much our exports long term, however, a rapid deterioration of economic and political conditions will have a major impact on the entire global economy – cheap Chinese exports included (which have had a deflationary effect on the global economy over the last decade). Like Legion and yourself, I have my fingers crossed that China pulls through.

    However, we still need to consider the downside and look for opportunities possibly outside of China simply because we’ve become heavily reliant over the boom years. It was almost unheard of only last year that China could fall into a heap, and now that fantasy is being challenged.

    China bankruptcies create cracks in global supply chain
    http://www.iht.com/articles/2009/03/05/business/yuan.php

    HONG KONG: China’s hopes for a speedy export recovery from the global crisis could be undermined by the weakest links in its powerful supply chain – smaller companies too damaged by the downturn and credit crisis to get goods to market.

    As collapsing sales to recession-hit Western markets weigh on China’s economy, bankruptcies pose a growing risk to its export machine, threatening everyone from suppliers of crucial parts and materials to companies that transport finished products.

    Struggling Chinese exporters are facing higher costs and need to keep closer checks on suppliers, and a shrinking pool of financially healthy companies to deal with is limiting their vaunted flexibility, slowing down delivery times.

    “The financial crisis is creating a situation that is unparalleled. If a Chinese company cannot sell to a Hong Kong company, which in turn cannot sell to, say, a foreign department store, each of their businesses will be affected,” said Satpal Gobindpuri, a partner in Hong Kong at the DLA law firm. “It’s creating a domino effect.”

    In addition to tumbling exports, companies have been hit by a squeeze in credit markets. About 90 percent of world merchandise trade is funded by trade finance, such as letters of credit.

    A report Wednesday showed that factory output and new orders had returned to mild growth in February after shrinking for four months, though analysts cautioned about reading too much into the rise.

    Wing Fung Optical International of Hong Kong, which makes sunglasses and eyeglass frames in the southern Chinese city of Shenzhen, has seen sales skid 25 percent in recent months as demand shrank in its key markets, Italy and the United States.

    But its director of business development, Raymond Chan, said recent bankruptcies among suppliers posed a bigger risk to the company.

    When a parts supplier went bust recently, sending Wing Fung scrambling to find an alternative source that could offer the same quality, delivery on a U.S. order was held up by two weeks – a delay that could have cost Wing Fung its customer.

    “Delivering on time is crucial if we want to stay competitive,” Chan said.

    Adding to the problem is that many owners of small businesses in China are running away and leaving their companies in legal limbo, often just posting a notice on the factory door. Customers are left in the lurch with no chance of getting back any money owed or receiving goods they have ordered.

    “They see no point in winding up operations properly if they don’t have assets to pay creditors and workers,” said Gobindpuri, the Hong Kong lawyer.

    The risk-consulting company Kroll said it had seen a surge in demand for checks on Chinese suppliers. Red flags include workers not being paid on time or being laid off, delays in delivery times and a sudden shift to a new business.

    “If a supplier is moving into another area of business, they’re doing it for a reason,” said Jack Clode, the Kroll managing director of business intelligence and investigations. It also means the existing “customer may no longer be a priority.”

    Clode, who foresees a sharp increase in factory closures in China this year by midsize Western companies as their domestic demand evaporates, said financial strains were also prompting suppliers to cut corners with cheaper materials.

    Wing Fung, the eyeglass maker, has cut its number of suppliers by a quarter in recent months, dropping those that are late paying their bills. It also said it was extending credit to longstanding, reliable suppliers who are having short-term financial difficulties.

    Chinese manufacturers are also growing worried about the health of their customers in the West as economies there worsen.

    For the first time, Kroll is being asked by Chinese companies to conduct due diligence on Western customers.

    “Li & Fung set off alarm bells,” said Clode, referring to the Hong Kong blue-chip, global supply-chain manager.

    Li & Fung sources goods for Wal-Mart Stores, among others, and is the biggest creditor of KB Toys, the former leading U.S. toy retailer.

    When KB Toys filed for Chapter 11 bankruptcy protection in December, Li & Fung was owed $5 million.

    Wing Fung was also caught last year when an Italian wholesaler suddenly went out of business. The Hong Kong company is still awaiting payment for goods, but does expect to be paid eventually, which is not the case with its bankrupt Chinese suppliers.

    While rising bankruptcies are raising the risk of doing business in China, the country is unlikely to lose its status as a low-priced global trade center, not least because many companies are focused on the country’s huge domestic market in the long run.

  86. Legion, on March 6th, 2009 at 4:37 pm Said:

    Elise of Perth, on March 6th, 2009 at 4:17 pm

    Elise, there may be no China as we know it or knew it IF unrest breaks out there…here, we tend to question the terms OF the ’social contract’; there, where it’s posited by some, eg, that the social contract is predicated on continued growth-as-development, THE social contract itself may become questionable. The same argument can be applied across a range of politically fragile nations where social and economic aspirations are thwarted by economic downturns.”

    Exactly Legion.

  87. Agree Elise.

    We do NOT sell our businesses to China at any cost – they are masters at brinkmanship…and do not do business the way we do…

    ..a deal is not a deal until the service/product is delivered and paid for, they slip and slide for a better price even after the contract is signed and during the contract period…I experienced it with my own Chinese clients and discussions with colleagues…

    They must buy our commodities to maintain the 8% growth that they have committed too…only question is who can hold their breath the longest…

    …BHPBilliton would be in with a big chance – as for weak kneed Rio, not a chance, our regulators must hold out…with a big, sorry (gotta be nice), NO!

    …as I’ve said before – I wouldn’t be surprised if the GFC wasn’t planned as part of a greater Chinese strategy…

    Our biggest problem is Japan – our biggest trading partner is sliding into depression very quickly… meaning they have no money to buy our products anyway.

  88. As US unemployment reaches a 25 year high, a new wave of trouble begins

    Job losses now feeding US housing crisis
    http://business.smh.com.au/business/job-losses-now-feeding-us-housing-crisis-20090306-8rf9.html
    March 7, 2009

    A STUNNING 48 per cent of the US homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a record, latest figures have shown.

    The reckless lending practices in Florida, California and Nevada that were the epicentre of the housing crisis are no longer driving up the nation’s delinquency rate. Instead, the foreclosure crisis is being fuelled by a jump in defaults in Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

    A record 5.4 million homeowners, with a mortgage of any kind, or nearly 12 per cent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association said.

    That is up from 10 per cent at the end of the third quarter, and up from 8 per cent at the end of 2007.

  89. Bank pours $330b into stricken economy
    http://business.smh.com.au/business/bank-pours-330b-into-stricken-economy-20090306-8rf6.html
    Edmund Conway
    March 7, 2009
    Bank of England CEO

    THE Bank of England has taken a historic “step into the unknown” by pledging to create £150 billion ($330 billion) of cash and pour it into Britain’s stricken financial system.

    It pledged for the first time in its 315-year history to effectively use printing money as its main means of controlling the economy, warning that this was the only way to prevent Britain from suffering a lengthy recession and potentially becoming mired in deflation.

    The move means that, for the first time, interest rates are no longer the primary tool for monetary policy, and the central bank will instead pump cash directly into the system.

    It announced the radical step after cutting rates by half a percentage point to an all-time low of 0.5 per cent on Thursday: the lowest that the bank judges it can go without causing the entire financial system to malfunction.

  90. Crisis leaves apartment sales crippled
    http://www.theaustralian.news.com.au/story/0,25197,25150759-2702,00.html
    POCKETS of suburban Australia are being littered with empty, unsaleable concrete shells, as pricey apartment projects fail to find buyers.

    The economic downturn has seen 16,623 apartments and townhouses abandoned or deferred in Sydney, Brisbane and Melbourne between January last year and this year. Figures from BIS Shrapnel show the number of apartments and townhouses abandoned or deferred in Sydney between January to July last year was 4072, but between August and January this year it rocketed to 5326, taking the total to almost 9400.

    In Melbourne, numbers of deferred apartments almost doubled over six months and in Brisbane, the number rocketed from 691 in the first half of the year to 4686 in the second.

    Figures from the Construction Forestry Mining and Energy Union show the monthly rate of construction companies with winding-up applications against them has increased from 15 in June to 129 three weeks before Christmas, almost half of which involved busineses in NSW.

    A major South Australian company involved in the state’s largest waterfront development, the $2 billion Newport Quays project in Port Adelaide, was placed in receivership yesterday, with debts of more than $8 million.

    Alpine Construction owner Robert Papilion yesterday met with banks in a last-ditch effort to stave off receivership, before accountant and business advisory company PPB was called in to take control. Alpine Construction reportedly stopped work two weeks ago on stage two of the $2 billion development, which is being developed by companies Urban Construct and Brookfield Multiplex.

    Urban Construct chief executive Todd Brown said the development was “for all intents and purposes” finished.

    Toop & Toop sales agent Troy Tindall told The Weekend Australian the developers had recently offered buyers the choice of a new BMW or a boat if they purchased a waterfront appartment. He said one of his clients would today offer at auction a $70,000 Mercedes Benz C200K car as incentive to buy his appartment.

    In Sydney’s North Shore, along the Pacific Highway between Chatswood and Hornsby, there are estimated to be between 200 and 500 apartments unsold, including many that are unfinished.

    Developers overpaid for the sites in the boom and apartments are more costly to build than houses, at $1400 a square metre versus $900/sqm for a house, so they are unable to lower the prices to pay back their debts.

    Industry insiders say part of the problem is that many thought the apartment boom that began up to 10 years ago was here to stay.

    In Australia’s most expensive street, Wolseley Road in Sydney’s Point Piper, high-flying developer Michael Bezzina’s $80 million eight-apartment project is in the hands of the receivers. The apartments originally had an asking price of $14 million each, but three now have pre-sale contracts to purchase them for $10 million.

    On the Gold Coast, dozens of $4 million-plus apartments have been on the market for more than a year. The coast is suffering badly from over-developed complexes, including Michael Bezzina’s Jade apartment tower, which is also in the hands of the banks. There are four apartments still to sell. Others sold during the boom for more than $12 million. Larry Malan, director of Gold Coast real estate firm Location, Location, Location, said the price of second-hand apartments over $1 million had dropped 20 per cent.

    Apartments in complexes in Sydney’s Homebush West have remained unsold for over a year. They are advertised for under $300,000 each.

  91. Good news, or is it?

    Young families defying recession to lead revival
    http://www.news.com.au/dailytelegraph/story/0,22049,25149807-5001021,00.html
    EXCLUSIVE by Simon Benson

    March 07, 2009 12:00am

    WESTERN Sydney is in the grip of a property mini-boom, with exclusive NSW Treasury figures revealing that young families are defying a national recession.

    Data from the Office of State Revenue shows that across all western Sydney suburbs, property sales for the three months to February have soared by up to 20 per cent on last year.

    Liverpool, Campbelltown and Fairfield have recorded 12 per cent rises in sales, a six-year high, while Blacktown and Penrith have seen a 20 per cent increase.

    A total of 8455 contracts were exchanged on new and existing homes during the three-month period in the Western Suburbs – an increase of more than 1100 over the same period last year.

  92. TB

    “…as I’ve said before – I wouldn’t be surprised if the GFC wasn’t planned as part of a greater Chinese strategy…

    Our biggest problem is Japan – our biggest trading partner is sliding into depression very quickly… meaning they have no money to buy our products anyway.”

    As promised TB, I’ll try to contribute when I can. Although, I think China are in genuine trouble, it matters not whether China are playing games or not. In fact, if what you’re saying is the case, it would mean China are playing an advantage that could gut the US and most other developed countries.

    Either way you slice it, it’s not good, and Japan seem to have gone into a free-fall with no end in sight.

  93. What many people don’t realise is just how invested in the US Japan, China, and M/E oil countries are. The great danger now is if these countries decide enough is enough and decide to cut their losses. Highly unlikely at this stage, however, if these problems continue their is only so many losses these countries will be willing to take.

    Regulators to go back to basics in fixing ailing system
    http://business.smh.com.au/business/regulators-to-go-back-to-basics-in-fixing-ailing-system-20090306-8rfi.html
    AIG’s latest bail-out reinforces the need for a global response to the financial crisis, writes Elisabeth Sexton.

    BEN McCARTHY is a senior executive for a credit rating agency, so he knows plenty about sentiment in the marketplace for all manner of financial products.

    McCarthy, the managing director of the Australian branch of global agency Fitch Ratings, says the current sentiment is a bit like the way Sydney swimmers feel about heading back into the surf after three shark attacks in the past month.

    But worse. “In the markets, people are not even getting into the bath at the moment because there’s water there,” McCarthy told a conference this week.

    That was on Tuesday, after Australians woke to the news that the world’s largest insurer, American International Group, had delivered a fresh shock overnight in the form of a $US62 billion ($96.5 billion) quarterly loss.

    A fourth US government bail-out was announced, this time for $US30 billion.

    The next day the chairman of the Federal Reserve, Ben Bernanke, appeared before a Senate committee. Bernanke dropped his usual reserve. “If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told the committee.

    “This was a hedge fund basically that was attached to a large and stable insurance company,” Bernanke said. It “made huge numbers of irresponsible bets, took huge losses. There was no regulatory oversight because there was a gap in the system.”

    The reaction on the world’s markets was savage. The US sharemarket fell to an 11-year low and others followed suit

  94. Interesting

    Selling off the heart of our nation
    http://www.news.com.au/dailytelegraph/story/0,22049,25148808-5013110,00.html
    Special investigation by Tracey Spicer
    March 07, 2009 12:00am
    HASAN Mohammad Bin Laden – one of Osama’s brothers – is playing Farmer Joe.

    The head of the Middle-East Foodstuff Consortium is on a spending spree, targeting millions of hectares of farmland around the world to use as Saudi Arabia’s “rice barn”.

    And next on his hit list is Australia.

    Saudi Arabia, along with Abu Dhabi and Kuwait, want to buy more than $1 billion worth of Aussie farmland in a 21st century land grab; a global game of Squatter. Their mission is to own Australian cropping land to feed their own people. The big legal question is: Who owns what if there is a global food crisis?

    “Everyone knows it’s been going on,” Suzanne Laing from the Australian Grain Growers Association said. “But we don’t want to make any political comment.”

    A spokesman for one of the firms facilitating the deals, Coffey International – speaking on the condition of strict anonymity – said foreign companies have been covertly buying up adjacent farms in Australia for the past year. Most are under the $100 million mark, so they don’t have to be approved by the Foreign Investment Review Board.

  95. Trying to set a record John?

  96. Just posting a few things that may be of interest, or not Sparta.

  97. Caught your link by the way (Lol)

    PM’s cheap money shot
    Malcolm Turnbull | March 07, 2009

    http://www.theaustralian.news.com.au/story/0,25197,25148674-7583,00.html
    NOTHING beats a relaxing summer holiday with a couple of good novels: a time to wander lazily in the world of imagination and fantasy.

    But while the rest of the nation chilled out over the festive season with a light and breezy summer read, the midnight oil was burning at Kirribilli House.

    There, a lonely figure sat hunched over his laptop constructing a political fantasy of his own. The Prime Minister was having great fun. Imagining himself once more in a heroic pose.

    Last year he was Churchill defending us all from “the economic equivalent of a rolling national security crisis”. But during the summer, in his essay on the “the ideological causes of the financial crisis”, he has cast himself as a great socialist hero, carrying the banner of social democracy and striking out against the wickedness of neo-liberalism, 30 years of which, he assures, is the root cause of the global financial crisis.

    Neo-liberalism’s central thrust, he writes, is “that government activity should be constrained, and ultimately replaced, by market forces”.

  98. John

    We do get it, the GFC is bad, but instead of just pasting lots of articles, can you just post the link and then let the blogocrats click on them if they want. We have to me mindful of those who use mobile devices to read this blog (like me when I am away from the PC).

    Because (I am sure I am not alone here) – I do not have time to read every article you post.

  99. JMc, joni’s right…

    …I just read Sparta’s link – completely – by clicking on it – you are just pasting…other people’s work…

    …it takes up too much space and time for busy folk….and makes the thread difficult to read…

    …too many words…and people just DON”T read it…defeats the purpose…

  100. A friend just emailed this interesting link where a US economics professor has estimated a 20% chance of the US depression, yet on the other hand he says “I would guess that the risk of the US having a Japan-style lost decade, where the economy goes in and out of recession for years on end, is more likely than the risk of a catastrophic double-digit output collapse,”

    http://www.thecrimson.com/article.aspx?ref=526999

    From what I can gather there’s a real and mounting concern now that unemployment has gone over 8%.

    Our own doom and gloom Professor Steven Keene copped a hammering from the mainstream media and elsewhere when he dared to raise the D’ word in relation to Australia. I’m under the impression there’s now quite a few who are no longer laughing.

    http://www.debtdeflation.com/blogs/2009/02/02/today-tonight-on-possibility-of-depression/
    Published in February 2nd, 2009

  101. JMc – yep the D word is a distinct possibility…just don’t tell anyone fer gawds sake (and their’s!).

    We’re still dealing with the R word…

  102. John McPhilbin, on March 7th, 2009 at 7:38 pm

    A little bit more on the content and analysis underlying that interesting link to a ‘20% chance’ of the ‘D word’ for Amerika, by <a href=”“>Barro in the WSJ. (Me being me, I question whether the future is necessarily like the past when it comes to Gaussian analyses and etrapolations, but as a narrative, Barro’s work is another pretty story, even if it’s tangential to reality and operates best and only in the realm of the statistical.)

  103. Getting back to one of the original stimulus questions posed for discussion…Is the stimulus package likely to help buffer us against what is obviously worse to come? And if so, by how much?

    Stimulus not so stimulating for Keating

    PAUL Keating has downplayed the benefits of budget stimulus packages, suggesting they have not provided the confidence boost needed to turn around the global financial crisis. “I believe the opportunity for these packages is going to diminish,” the former prime minister told a Sydney forum ahead of next month’s G20 Leaders’ Summit in London. “The good effects we have already had is all we are going to have, and they have not been great effects anyway.”

  104. And a couple of other things to go into the (de)ciphering file for systemic economics and the national and supranational politics for economics…

    The $700 trillion elephant: Gargantuan derivatives market weighs on all other issues

    IMF Urges Global Financial Rules

  105. Legion

    “International evidence suggests there is a 20% chance our stock-market crash will lead to much worse.”

    Thanks for the links, very informative. To me personally this has been a puzzle for some time, and it still is in many ways, although it seems to be getting clearer as various facts and patterns emerge. What I’ve found is that the history of markets and economic booms and crashes is extremely dynamic and unpredictable.

    This is why I try to work from the extremes back into the center. Over the last decade, here in Australia, we’ve seen unprecedented growth in personal wealth (as JWH would say “we’ve never had it better). Capital growth via the stock market and housing markets has been significant as has the support of the resources boom.

    However, underlining all of this has been the unprecedented growth in private debt as well the growth of an economy that has largely been funded by that (private) debt.

    It’s easy to see how we arrived where we are once this is taken into account, what’s not easy to accept is the fact that the easy money that’s been handed out in favourable conditions will now become much tighter and the money borrowed will need to be paid down (with interest).

    Also, our export markets have been flourishing over a number of years which have done wonders for employment and government coffers and they too are sure to contract simply because many of our trading partners are experiencing contractions.

    Barro’s says “I would guess that the risk of the US having a Japan-style lost decade, where the economy goes in and out of recession for years on end, is more likely than the risk of a catastrophic double-digit output collapse”

    And if we apply similar expectations on our own economy, the next decade or so is likely to be very volatile.

    Also Soros’s has made billions over the years on world markets simply because he has a pretty good understanding of how markets really work. He mentioned just recently:

    “The salient feature of the current financial crisis is that it was not caused by some external shock like OPEC raising the price of oil or a particular country or financial institution defaulting. The crisis was generated by the financial system itself. This fact—that the defect was inherent in the
    system —contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting. The severity and
    amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it. To understand what has happened, and what should be done to avoid such a catastrophic crisis in the future, will require a new way of thinking about how markets work. ”

    And as your link points out:

    “There’s a $700 trillion elephant in the room and it’s time we found out how much it really weighs on the economy.
    Derivative contracts total about three-quarters of a quadrillion dollars in “notional” amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.”

    This suggests this crisis has some way to go yet and it’s impact still remains ‘UNKNOWN’. And although it may appear that many countries have become less and less dependent on the US economy for trade , it’s the tight coupling of financial markets that keep us all very tightly bound to one another – especially to the US.

  106. TB

    I sometimes forget just how sensitive some words can be.
    ‘Recession’ and ‘Deficits’ have stirred enough anxiety so the mere mention of the other D’ word probably stirs panic in many people’s mind.

  107. Keating said: “I believe the opportunity for these packages is going to diminish,”

    True…but I think we’re already beginning to see signs of increased savings. I reckon we need to push INFRASTRUCTURE expenditure now in a carefully planned lower carbon emitting fashion.

    Uranium mining & exportation will be essential…but we need to take into account regulations of such, particularly as use of chain reactive bomb experiments may have had deletarious effects on the carbon sinks in the ocean & elsewhere. The lungs that assist oxygen.carbon etc. exchange may have been damaged due to underwater/underground experiments over the years. Best to check timelines on that.

    The more I look at Keating’s superannuation ideas the more i like them. The reduction in mortgage & business loan related interest rates should ensure that we can introduce increased compulsory savings…provided more flexibility measures are included. This will provide more capital for business explorers to draw upon.

    Keating is correct regarding the necessity to expand the membership & participation of the G groups.

    I would fear less recession…& more hyper-inflation in the long run. We had over-heated economies based on some archaic industries. This supposed downturn (depending on sector) is a WAKE UP call. Think USEFUL SUSTAINABLE.

    N’

  108. nasking, on March 8th, 2009 at 4:44 am

    A couple of thoughts…based on things I’ve been watching play out…

    True…but I think we’re already beginning to see signs of increased savings. I reckon we need to push INFRASTRUCTURE expenditure now in a carefully planned lower carbon emitting fashion.

    Every man and his Portuguese hunting dog is banking on a techno-fix to environmental and production issues off in the near-ish up-when; I’m not sure whether or not the bedazzling magic of as-yet-not-invented technology can deliver, or whether it’s a convenient ‘put off till later promissory note’ as substitute to having some rather robust and grounded national and international political chats now about who gets what, when, how, and why.

    Uranium mining & exportation will be essential…but we need to take into account regulations of such, particularly as use of chain reactive bomb experiments may have had deletarious effects on the carbon sinks in the ocean & elsewhere. The lungs that assist oxygen.carbon etc. exchange may have been damaged due to underwater/underground experiments over the years. Best to check timelines on that.

    It is my belief that the big 5 bomb-makers are seeking to entrench their nuclear domain dominance and to create a cartel for nuclear technology with a view to monopolistic rent-seeking in the same way that oil producers do currently. The idea being that consumers can hire-purchase their pez dispenser-reactors, but there is only a common or agreed source for loaned-out pez-nuclear fuel, and certainly none manufactured, loaned, or borrowed outside that cartel to be ‘trusted’ making their own pez.

    The more I look at Keating’s superannuation ideas the more i like them. The reduction in mortgage & business loan related interest rates should ensure that we can introduce increased compulsory savings…provided more flexibility measures are included. This will provide more capital for business explorers to draw upon.

    I have always been in two minds about superannuation from the perspective of life-cycle economics. On the one hand, the idea of enforced saving for retirement generally makes sense. On the other hand, it ceases to make absolute sense knowing those amounts are foregone income and are a savings-and-expenditure opportunity cost during productive working years, especially when those savings and their expenditures on productive investments might return a greater life-cycle yield than that envisaged by sequestering those moneys. I guess it depends on who the business explorers are, and what their sources of capital can or should be, if not their own being sequestered away compulsorily.

    Keating is correct regarding the necessity to expand the membership & participation of the G groups.

    Wouldn’t it be nice if groupies started thinking in terms of a G192? Still, a G20 is getting closer than a G7+1.

    I would fear less recession…& more hyper-inflation in the long run. We had over-heated economies based on some archaic industries. This supposed downturn (depending on sector) is a WAKE UP call. Think USEFUL SUSTAINABLE.

    Sustainable would be nice. Otherwise, thinking that recessions and (hyper-)inflations of several sorts aren’t mutually incompatible and might feed (into) each other.

  109. The news is all bad and unavoidably so – it’s like dominoes falling..

    “preventing an economic catastrophe in developing countries was important for global efforts to overcome the crisis.”

    Japan slump ‘to hit Aussie exports’
    http://www.theaustralian.news.com.au/story/0,25197,25159924-12377,00.html
    JAPAN registered its first current account deficit in 13 years, underscoring concerns about falling demand for Australian exports.

    Exports dived 46.3 per cent from a year earlier to Y3.282 trillion.

    ICAP senior economist Adam Carr said the rapid deterioration in Japan, Australia’s biggest export market, “doesn’t bode well” for Australian exports of coal, iron ore and energy.

    “We saw a large net export contribution to GDP in the fourth quarter and I think it’s safe to assume that’s not going to continue,” said Mr Carr.

    World Bank warns East Asia to suffer biggest fall in trade
    http://www.theaustralian.news.com.au/business/story/0,28124,25159877-5018001,00.html
    THE collapse in world trade will hit East Asia the hardest, the World Bank predicts in a grim report, hampering Australia’s efforts to recover quickly from the global downturn.

    The paper, published for this month’s G20 meeting in London, which Kevin Rudd will attend, warns that the global economy is likely to shrink this year for the first time since World War II.

    The World Bank says global trade is on track to this year record its largest decline in 80 years.

    The bank warns that the sharpest decline will be felt in East Asia and says that growth will be at least 5 percentage points below potential.

    It forecasts that the fall in global industrial production by the middle of this year could be as much as 15 per cent from levels in 2008.

    The report warns that the global financial crisis will have long-term implications for developing countries.

    “Debt issuance by high-income countries is set to increase dramatically, crowding out many developing-country borrowers, both private and public,” it says.

    World Bank president Robert Zoellick warned that preventing an economic catastrophe in developing countries was important for global efforts to overcome the crisis.

    “We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”

  110. Not sounding good, John. Africa gone. Near East gone. Middle East gone. Western Europe gone. Eastern Europe gone. North America gone. South America gone. Africa gone. Far East gone. Oceania? Still too early to use the R-word. That domino effect is becoming more like a tangled Newton’s Cradle, too, as network effects kick in…knock over a domino…skip a couple of dominoes…knock over another domino.

  111. “The news is all bad and unavoidably so…”

    Or is it…

    OMG John…look the housing market is actually picking up!!

    Three-quarters of first-home buyers are planning to buy a house as lower interest rates and cheaper dwellings make their dream more affordable, a survey says.

    The 2009 Mortgage Choice survey of 1012 first homebuyers shows 76% of respondents currently want to purchase a house, up from 54% a year before, with 16% intending to buy a flat.

    Surely this cannot be…??

  112. ” Three-quarters of first-home buyers are planning to buy a house as lower interest rates and cheaper dwellings make their dream more affordable, a survey says.

    The 2009 Mortgage Choice survey of 1012 first homebuyers shows 76% of respondents currently want to purchase a house, up from 54% a year before, with 16% intending to buy a flat”.

    Reb

    Banks are in a mad rush to exploit the first-homebuyers grants. Record lowest interest rates the government covers down-payment requirements etc – dangerous indeed. Lets see how it really pans out.

  113. Question Reb, given current conditions and the obvious rush by lenders such as banks, who know that conditions are deteriorating , just how reckless may this be? Lenders are trying to survive.

    Commonwealth Bank hires staff in home loan rush
    http://www.news.com.au/dailytelegraph/story/0,22049,25157425-5014099,00.html
    * Grant drives home loans blowout
    * CBA on hiring spree
    * Lenders calling for extension of grant

  114. Reb

    Shane’s actively involved in this area and I think he’s spot on.

    https://blogocrats.wordpress.com/2009/03/04/recession-obsession-ii/#comments
    shaneinqld, on March 6th, 2009 at 8:18 am Said:

    Our Banks are going for a cash garb for one reason. They Can.

    While everyone else announces profit falls as a result of the economic dowturn the Banks are determined to mantain their profit at any cost.

    The loss of the smaller funders as a result of the GFC has been a major blow to competition. The smaller funds were unable to pass on the rate cuts to the extent of the major Banks.

    The 4 major Banks used to receive around 50% of loan applications from brokers. They are now receiving over 90% of loan applications and are growing in strength due to this lack of competition.

    While a tightening in financial discipline is a good thing the fallout is far less competition and the Major Banks are now calling the shots and changing their rules daily.”

  115. Legion, on March 9th, 2009 at 3:37 pm Said:

    Not sounding good, John. Africa gone. Near East gone. Middle East gone. Western Europe gone. Eastern Europe gone. North America gone. South America gone. Africa gone. Far East gone. Oceania? Still too early to use the R-word. That domino effect is becoming more like a tangled Newton’s Cradle, too, as network effects kick in…knock over a domino…skip a couple of dominoes…knock over another domino.”

    I agree, and the level of wealth destruction is mind boggling.

    Trillions of world assets wiped out: ADB
    http://news.smh.com.au/breaking-news-business/trillions-of-world-assets-wiped-out-adb-20090309-8t32.html

    The global crisis wiped a staggering $US50 trillion ($A78.03 trillion) off the value of financial assets last year including $US9.6 trillion ($A14.98 trillion) of losses in developing Asia alone, the Asian Development Bank says.

    I think it was you Legion who put me onto this story concerning financial derivatives that meet with the criteria of Ponzi-like financing – many more surprises may be on the way.

    THOMAS KOSTIGEN’S ETHICS MONITOR
    The $700 trillion elephant
    http://www.marketwatch.com/news/story/The-700-trillion-elephant-room/story.aspx?guid=024DB809-8506-4AA9-83BB-B053FD4E1C11
    There’s a $700 trillion elephant in the room and it’s time we found out how much it really weighs on the economy.
    Derivative contracts total about three-quarters of a quadrillion dollars in “notional” amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.

    But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.

  116. Games within games…some more info from a World Bank satellite on the Asia-Pacific region’s slowdown, given ASEAN+3’s recent mutterings about an in-house ‘stabilisation and exchange fund’ (eeks, it’s a bit too much like soft power projection or Chavez’s Bolivarian Bank of the South) to replace the IMF’s dabblings in the region…

    ADB: Trillions of world assets wiped out

  117. I see you spotted the big dollar headline, too…the IMF and World Bank appear to be doing double duty in the lead-up to April. 😉

  118. John Passant was enquiring on an earlier thread about the notion of a crisis of legitimacy…

    A perceived crisis of legitimacy, perhaps, is asking the question, or answering it to forestall others asking it and answering contrariwise for themselves…

    While making a strong case for state intervention to prop up the markets, Summers [US President Barack Obama’s top economic advisor, Lawrence Summers] denied the market was fundamentally broken and needed to be replaced with a completely different model.

    “This notion that the economy is self-stabilising is usually right but it is wrong a few times a century. And this is one of those times… there’s a need for extraordinary public action at those times.”

    Summers went on to insist that the existing capitalist system should be returned to health.

    “There will be those who, just as in the 1930s, tried to learn the lesson that market capitalism didn’t work and needed to be replaced with an entirely different model,” he said.

    “I don’t think that’s right.”

  119. Frankly Legion, the markets have there place and we shouldn’t be looking to throw the baby out with the bathwater, however, there are fundamental flaws that obviously need addressing.

    Financier, George Soros expressed his concerns about the inadequacies of global capitalism and the tendency toward increased deregulation having an increasingly adverse effect on our ability to maintain our democratic values. In his book Open Society: Reforming The Global Capitalist System, Soros writes:

    “Capitalism and democracy do not necessarily go hand in hand. There is some correlation: rising standards of living and the formation of the middle class tend to generate pressure for freedom and democracy: they aslo tend to support greater political stability. But the connection is far from automatic. Repressive regimes do not relax their grip on power willingly, and they are often aided and abetted by business interest, both foreign and domestic. We can see this in other countries, particularly where natural resources such as oil and diamonds are at stake. Perhaps the greatest threat to freedom and democracy in the world today comes from the unholy alliances between government and businesses.

    Capitalism is very successful in creating wealth, but we cannot rely on it to assure freedom, democracy and the rule of law. Business is motivated by profit: it is not designed to safeguard universal principles. Most business people are upright citizens: but that does not change the fact that business is conducted for private gain and not for public benefit. The primary responsibility of management is to the owners of the business (and more often than not, themselves), not some nebulous entity called public interest – although enterprises often try, or at least pretend to be acting in a public spirited way because that is good for business. If we care at all about the universal principles such as freedom, democracy and the rule of law, we cannot leave them to the care of market forces: we must establish some of the institutions to safeguard them.

    The protection of the common interest used to be the task of the nation state. But the powers of the state have shrunk as global markets have expanded. When capital is free to move around, it can be taxed and regulated only at the risk of driving it away. Since capital is essential to the creation of wealth: governments must cater to its demands, often to the detriment of other considerations. Chasing away capitalism can do more harm than taxation and regulations could bring.

    The capacity of the state to perform the functions that the citizens have come to expect of it has been impaired. This would not be a concern if free markets could be counted on to take care of all our needs, but this is manifestly not the case. Some of our collective needs are almost too obvious to need mentioning: peace and security, law and order, health, education, human rights and some elements of social justice. Market values express only what one participant is willing to pay another in free exchange and do not give expression to their common interests. As a result, social values can only be served by social and political arrangements, even if they are less efficient than markets.

    “Communism, states Soros” sought to abolish the market mechanism and to impose collective control over all economic activities. Market fundamentalism seeks to abolish collective decision-making and to impose the supremacy of market values over all political and social values. Both extremes are wrong. We need to recognise that all human constructs are flawed. Perfection is beyond our reach. We must content ourselves with the second-best; an imperfect society that opens itself open to improvement. Global capitalism is badly in need of improvement.”

    As far as the current model is concerned, I tend to think it is deeply flawed, as pointed out in a previous thread:

    https://blogocrats.wordpress.com/2008/10/14/ts-meltdown/

    “The model is in trouble—and not just with respect to the mortgage mess, as the United States faces record inequality and destruction of the middle class, a health care crisis, an incarceration disaster, and other problems beyond the scope of this analysis (Wray 2000, 2005).We must return to a more sensible model, with enhanced oversight of financial institutions and with a housing finance structure that promotes stability rather than speculation.

    We need policy that promotes rising wages for the bottom half (or even three-quarters) of workers so that borrowing is less necessary to maintain middle-class living standards, and policy that promotes employment, rather than transfer payments—or worse, incarceration—for those left behind.

    Minsky always advocated job creation programs so that government would act as an employer of last resort—the only way to ensure that the supply of jobs would be adequate to maintain continuous full employment. Not only would this eliminate involuntary unemployment, but he also showed that it could be used to reduce inequality and poverty, while also ensuring that the government’s budget would swing counter -cyclically to offset recessionary forces as well as inflationary forces in a boom.

    Monetary policy must be turned away from using rate hikes to preempt inflation and toward stabilizing interest rates, direct credit controls to prevent runaway speculation, and supervision and regulation—its proper role.

    Minsky advocated support for small banks, and creation of a system of community development banks—the latter only partially achieved under President Clinton—as a viable alternative to the predatory lending practices that did increase the supply of credit to low-income borrowers and
    neighborhoods, but which is now resulting in foreclosures and vacancies.28 Unfortunately, we turned American home finance over to Wall Street, which operated the industry as if it were a casino. The swing toward markets and away from regulated banking greatly increased risk, while at the same time it necessarily extended government assurance to the unregulated institutions for the simple reason that the government cannot allow a financial crisis to threaten the economy.What Bernanke called “The Great Moderation” is also known as the “Greenspan put”—the belief that no activity is too risky because the Fed will intervene if things go bad. Unfortunately, it is Chairman Bernanke who is left to clean up the mess left by years of lax oversight and
    deregulation that operated to the advantage of Wall Street.

    Minsky insisted that “the creation of new economic institutions which constrain the impact of uncertainty is necessary,” arguing that the “aim of policy is to assure that the economic prerequisites for sustaining the civil and civilized standards of an open liberal society exist. . . . If amplified, uncertainty and extremes in income mal -distribution and social inequality attenuate the economic underpinnings of democracy, then the market behavior that creates these conditions [has] to be constrained” (Minsky 1996). It is likely that the current crisis will make it politically feasible to devise and to put into place such institutions.”

  120. The next few months will no doubt be brutal on employment.

    Businesses expect profit slide, will cut more staff say Dun & Bradstreet
    Article from: AAP
    http://www.news.com.au/dailytelegraph/story/0,22049,25161127-5014099,00.html
    March 09, 2009 05:31pm

    * 65 per cent of firms expect profit fall
    * Many will cut more staff

    BUSINESSES say the worst of the crisis is yet to hit as most predict further falls in sales and profits, and a growing need to cut staff, a survey says.

  121. Fear-Mongers Keep Us In Recession : A Show Of Confidence From The Top Will End Economic Turmoil

    …People at every level are afraid to spend because they fear conditions will get worse and they’re going to need the money in the future just to survive. So they don’t spend it.

    One of the big contributors to fear is the big goombahs in the society saying how bad things are. When Mr. Obama or his economists tell us how terrible things are and how they’re going to get worse, they’re shooting fear into the economic bloodstream, and that hurts velocity and kills stocks.

    Notice that recently Ben Bernanke said the recession might end this year, and the stock market rocketed up that day…

  122. Tony

    I don’t follow, what are you trying to say?

  123. John

    I think it is something about the unions having an influence over the ALP.

    😛

    (just pulling your leg Tony)

  124. That depends John. Are you a ‘big goombah’?

  125. Tony

    Thanks for the laugh

    Lol “One of the big contributors to fear is the big goombahs in the society saying how bad things are” Ben Stein

    Watch Ben Stein 4mins into this clip – the guy doesn’t know his arse from his head
    Peter Schiff Was Right 2006 – 2007 (2nd Edition)

  126. “the guy doesn’t know his arse from his head”

    Can we say head here?

  127. Yes – but not guy. MG is over for another year.

  128. Tony

    And Ben Stein was a bad actor as well. Remember Ferris Bueller’s Day Off.

  129. Who did he play? That’s right, it was Principal Rooney, wasn’t it?

    Beuller? Beuller?

  130. joni, on March 9th, 2009 at 10:01 pm Said:

    John

    I think it is something about the unions having an influence over the ALP.”

    Don’t follow Joni, care to explain.

  131. Tony, on March 9th, 2009 at 10:20 pm Said:

    Who did he play? That’s right, it was Principal Rooney, wasn’t it?

    Beuller? Beuller?

    I’ve got to admit Tony, quoting Stein was hilarious.

  132. It might be hilarious to you, John, but Ben Stein is on to you. And your goombah buddies.

  133. Tony, on March 9th, 2009 at 10:24 pm Said:

    It might be hilarious to you, John, but Ben Stein is on to you. And your goombah buddies.”

    Economic reality sucks I know.

  134. Tony

    What does “goombah” mean?

  135. It’s a codeword my mentor Mr Stein uses. You can’t be too careful you know.

  136. Tony, on March 9th, 2009 at 10:31 pm Said:

    It’s a codeword my mentor Mr Stein uses. You can’t be too careful you know.”

    Tony when you use a word to describe someone, you really should know what it means. It sounds offensive, so was that the intent?

  137. John, surely you know I am joking. Stein uses the word to refer to Obama and co:

    “If Mr. Obama and Mr. Geithner, his Treasury Secretary, and Mr. Volcker, his well-respected advisor, and some real superstars like Warren Buffett and Jack Welch all came out and said, “The recession will end within 12 months. We are sure of it,” the recession WOULD end within 12 months.”

  138. Tony

    I don’t agree with the assessment, but I do agree that you were joking. I couldn’t help myself. “Goombah’ is a nonsense word. It’s usage can be used in many different ways. Bit like ‘F%ck”.

  139. D’oh! I am an ID 10 T

    It is Tom of Melb (not Tony) who has the union obsession.

    I blame the jetlag I have from the weekend frivolities.

  140. joni, on March 9th, 2009 at 10:41 pm Said:

    D’oh! I am an ID 10 T

    It is Tom of Melb (not Tony) who has the union obsession.

    Now that makes sense Joni.

  141. “It is my belief that the big 5 bomb-makers are seeking to entrench their nuclear domain dominance and to create a cartel for nuclear technology with a view to monopolistic rent-seeking in the same way that oil producers do currently.”

    Good point Legion. I guess that now Springborg has announced he wants to go full-bore on uranium mining in QLD we can expect that the National Party will become a servant of The Liberals here as well at a State level…& QLD will become the first State to build a nuclear plant &/or go down the enrichment road…remember this?:

    Australian Nuclear Energy is a company established in June 2006 by Ron Walker, Robert Champion de Crespigny and Hugh Morgan (all of whom have very close links to the Liberal Party), with the apparent aim of building a nuclear power station in Australia.(Source Watch)

    and this?:

    Company plans uranium plant pitch to Fed Govt
    Nuclear Fuel Australia (NFA) says it will make a submission to the Federal Government proposing a new uranium enrichment plant in Australia.

    Two sites reportedly being considered for the plant are at Caboolture, north of Brisbane in Queensland and near Port Pirie in South Australia.
    (ABC on-line, Friday, June 15, 2007)

    and it’s not surprising Rupert Murdoch’s ‘Courier Mail’ & such have been biased in their reporting of Anna Bligh’s government:

    Mr Murdoch accused political leaders, particularly state governments, of failing to prepare adequately for the drought-fuelled water crisis.

    He also urged Australia to adopt nuclear power as an environmental and economic measure…

    Mr Murdoch said political leaders had been “very late” in planning adequate water supplies for cities by not building enough dams, allowing water to flow into the sea and not introducing water desalinisation.

    (Courier Mail, Paul Starick and Christopher Russell
    November 15, 2006)

    but interestingly:

    Nuclear Proliferation Keeps Rupert Murdoch Up At Night

    It’s been a very hectic day at the conference here – hence the paucity of postings on this blog – but I’ll try to do some catching up now, and I’ll start with a quote from the one and only Rupert Murdoch, who was on a panel at lunch. Rupert is not a man who’s worried about what he calls “alleged global warming”. He’s not worried about demographics and health-care costs. But he is worried:

    I wouldn’t discount at all the danger of nuclear proliferation, and if Iran gets away with it, there will be half a dozen others and will all end in disaster for us all.
    (Money Movers, Felix Salmon, Apr 24 2007)

    found this to be an interesting article:

    Uranium mining, nuclear power and ‘ethical’ investment
    By Frances Howe

    Posted ABC News-on line, Tue Aug 19, 2008

    http://www.abc.net.au/news/stories/2008/08/19/2339607.htm

    Strange days indeed.
    N’

  142. Billionaire Warren Buffett remains confident that America’s best days are ahead, but he says the nation likely will face higher unemployment and eventually inflation because of the current economic crisis.

    Buffett said the U.S. leaders need to emphasize a consistent message, and they should support President Barack Obama’s efforts to repair the economy because fear is dominating Americans’ behavior…

    …In the wide-ranging interview he predicted that unemployment will climb a lot higher before the recession is done, but he also reiterated his optimistic long-term view: “Everything will be all right. We do have the greatest economic machine that man has ever created.”

    Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said.

    The nation’s leaders need to clear up the confusion before anyone will become more confident…

  143. Thanks Tony, Buffett’s also aware that the level of wealth destruction is and will continue to be enormous, and in the long-run there will be a recovery. The key question is: how long? We still haven’t found a bottom to this crisis yet.

    William Fleckstein, author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve 2008, concludes

    “During Greenspan’s tenure, the creative destruction component of capitalism was routinely suppressed. The main consequence of this suppression was a loss of fear. Thus, the normal risk reduction response to periodic financial pain never occurred, as Greenspan wouldn’t even allow small crises to run their course. Instead, as people lost respect for the idea that they might lose money, risk taking continually escalated until the situation reached a point where it is now: the United States, individually and collectively, is swimming in an ocean of debt that has been rapidly ratcheting higher. At the same time, the country is experiencing a declining real estate market that supports much of that debt, a sinking economy that has been dependent on an unsustainable real estate bubble, and a weak currency. Plus, there are over $500 trillion worth of derivatives that Warren Buffett has described as “financial instruments of mass destruction.” You couldn’t have created a more precarious environment if you had tried “

  144. The simple truth is Tony, the level of toxic assets clogging the system is huge and until they’re clear the system is in major trouble. In the meantime, the chaos it’s causing in the real economy is very real and the possibility of social and political unrest in places like is very real.

    Trillions of world assets wiped out: ADB
    http://news.smh.com.au/breaking-news-business/trillions-of-world-assets-wiped-out-adb-20090309-8t32.html

    The global crisis wiped a staggering $US50 trillion ($A78.03 trillion) off the value of financial assets last year including $US9.6 trillion ($A14.98 trillion) of losses in developing Asia alone, the Asian Development Bank says.

    THOMAS KOSTIGEN’S ETHICS MONITOR
    The $700 trillion elephant
    http://www.marketwatch.com/news/story/The-700-trillion-elephant-room/story.aspx?guid=024DB809-8506-4AA9-83BB-B053FD4E1C11
    There’s a $700 trillion elephant in the room and it’s time we found out how much it really weighs on the economy.

  145. Tony

    Buffett supports what I’ve been trying to say. “people can’t be worried about banks, but they are”.

    Buffett says economy has fallen ‘off a cliff’
    http://business.smh.com.au/business/world-business/buffett-says-economy-has-fallen-off-a-cliff-20090310-8tho.html

    Warren Buffett said on Monday the US economy had “fallen off a cliff” but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.

    Speaking on CNBC television, the 78-year-old US billionaire said the country is experiencing a “close to the worst-case” scenario of falling business activity and rising unemployment, causing consumer confidence and spending to tumble.

    Buffett called on Democratic and Republican policymakers to set aside partisan differences and unite under the leadership of President Barack Obama to wage an “economic war” that will fix the economy and restore confidence in banking.

    He urged policymakers and regulators to communicate their efforts better to the public, though he stopped short of major, specific policy recommendations.

    “People are confused and scared,” he said. “People can’t be worried about banks, and a lot of them are.”

  146. The AUSTRALIAN today also reports:

    http://www.theaustralian.news.com.au/business/story/0,28124,25164750-5017997,00.html
    WARREN Buffett, the billionaire US investor, has described America’s battle with recession as an “economic Pearl Harbour”.

    Mr Buffett said the meltdown, which has seen US unemployment hit a 25-year high, was an “important war which could be won”.

    Japanese planes attacked the US Naval base at Pearl Harbour, Hawaii, on December 7,1941 in a surprise strike which drew the country into World War II.

    The US put aside “partisan stuff” then and should do so again, Mr Buffett said. “We knew if we stuck together and followed leadership we would prevail,” he added.

    The comments from the Berkshire Hathaway chairman formed part of a wide ranging interview on CNBC. In the interview he also recommended the toxic assets held by banks as a good pick and urged consumers not to condemn executives who use corporate jets.

    Mr Buffett said the degree of the global economic turmoil had come as a surprise, even to him, representing his own “worst-case scenario”.

    The financial sector, he forecast, would not return to health for five years.

  147. Tony

    That $700 trillion in derivatives have a of what are known as CDS’s (credit default swaps). From last count it was approximately $55 trillion

    Australian corporate default risk at all-time high
    http://www.theaustralian.news.com.au/business/story/0,28124,25162684-643,00.html

    THE credit risk of corporate Australia has blown out to an all-time high as the domestic financial market remains fractured and at the mercy of international fluctuations.

    Credit default swap spreads in Australia, which measure corporate risk, are now trading at 432 basis points on the local iTraxx index as fears about the global financial system worsen.

    The spreads are at least four times as wide as they were before the worst of the credit crunch emerged last year.

    The most prominent moves in spreads, which chart the cost of insuring debt, have occurred among Australia’s banks, despite their relatively safe position compared with their global peers. ”

    In fact, On the 30th of September, Fortune Magazine asked the question:

    The financial crisis has put a spotlight on the obscure world of credit default swaps [CDS] – which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?

    As Congress wrestles with another bailout bill to try to contain the financial contagion, there’s a potential killer bug out there whose next movement can’t be predicted: the Credit Default Swap.

    In just over a decade these privately traded derivatives contracts have ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they’ve played a critical role in the unfolding financial crisis. First, by ostensibly providing “insurance” on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble.”

  148. What I’ve found disappointing in these discussions is that had we been discussing them on Blogocracy Tim would have been much more open on the issues. Personally, the feeling I get here is that certain people have gone into ‘lockdown’.

    ‘Lockdown’ doesn’t alter the facts nor does it help work through the issues. In fact, these issues are now at the heart of political debate in this country and around the world, and if our own politician’s can’t sort there shit out on how to tackle these problems, what chance do we have.

  149. John

    Actually I think people (like me) have gone into lockdown because there is no new information being posted – it is just the same information be presented in different ways.

    And so we have eyes and minds that have are no longer able (or willing) to focus on the posts. And not because we do not care or are concerned, just that nothing new is appearing.

  150. Joni

    Then how about the differing views of our politicians on the crisis? Which views do people follow and who do they believe? Is Rudd full of crud and is Turnbull any better?

  151. The nation’s leaders need to clear up the confusion before anyone will become more confident…

    The simple truth is Tony, the level of toxic assets clogging the system is huge and until they’re clear the system is in major trouble.

    Arguably, the longer the bad fuel stays in “the greatest economic machine that man has ever created” and hidden in the shadow (banking), the more pitted the machine and confidence (as a practical and social heuristic) becomes generally.

    And so we have eyes and minds that have are no longer able (or willing) to focus on the posts. And not because we do not care or are concerned, just that nothing new is appearing.

    I don’t think it makes it any easier that the ‘challenge’ is mostly ‘abstract’ because ‘the greatest machine that man ever created’ is most apparent only in the ‘abstract’. Otherwise, arguably, it’s abstracted like a memory; a peak or trough event measuring frame-by-frame in real-time, good events more deeply etched than bad, but soon fading into an indistinct blur of homogeneous unity of event. In this instance, the (re-)labelling of plural events of myriad kinds under the rubric of ‘GFC’ serves as a mental cover-all.

    I can also see why some, mostly economists and political economists, would persist in comparing new, emerging, descriptive facts which concretise the abstracts with the predictions of theory; and in the iteration of new descriptions, predictions, and indeed theory(ies).

    Gotta remember that Buffett is a jingoist, too, and cannot think outside his frame-of-reference and what he understands, which is Americana; closer to home, PJK keeps repeating that America, federally and many of its federates states, is effectively bankrupt in the present, remains so in the medium-term, and is therefore at severe risk of sovereign default on debt.

  152. Joni

    “And so we have eyes and minds that have are no longer able (or willing) to focus on the posts. And not because we do not care or are concerned, just that nothing new is appearing.”

    Who is ‘we’?

  153. I think a few of us on here. I know that reb certainly falls into that camp too. And I was referring to those people you said had gone into “lockdown”.

  154. “I know that reb certainly falls into that camp too.”

    Indeed I do.

    It’s not that we’re denying what’s going on John, it’s just that I see no merit in constantly going over the same point over and over again.

    It’s like being at a relentless wake.

    At some point, we have to pick oursleves up and start examining how we move on in this new “world order”.

    There is no shortage of doomsayers. There never has been and there never will be, however the people who are successful in the future will be the ones who see opportunity in what is happening now.

    For example, look at the amount of press coverage the little old homegrown underwear company Aussie Bum is getting as a result of Pacific Brands decision to move their manufacturing off shore.

    Can’t imagine it will be doing Aussie Bums’ bottom line (so to speak) any harm at all…

  155. And if Aussie Bum takes their business offshore then I will be first in line to spank them.

  156. Reb

    “r the people who are successful in the future will be the ones who see opportunity in what is happening now.”

    Absolutely, I agree. However, so many have and will continue to lose significant portions of their wealth will struggle to make ends meet. And the one’s who are most likely to take advantage of opportunities are those who already have capital to burn. As they say ‘the rich get richer and the poor get the picture”.

  157. In fact Reb, wait until the market really bottoms out and invest in a low cost index fund – I”d suggest that 3,000 and below would be a time to invest incrementally even as if it continues to fall. Leave it for the long run and you’ll do just fine. That, however, doesn’t help all those people who have invested their money in the many markets that have been overheated for some time.

  158. Just got this via email form the ASX.

    Interesting and never even knew it existed let alone since 1937.

    http://www.asx.com.au/resources/newsletters/investor_update/20090310_time_for_the_investment_clock.htm

  159. Who can afford Aussie Bum? At least not in XXXL size, anyway. 😉

  160. Sans Blog, on March 10th, 2009 at 11:59 am Said:

    Who can afford Aussie Bum? At least not in XXXL size, anyway.”

    Perhaps Joni can whip your butt into shape (lol)

  161. John McPhilbin, on March 10th, 2009 at 11:54 am

    3000 hmmm. ASX or DJIA? 😉

  162. The ASX Legion

    3000 hmmm. ASX or DJIA? 😉

    Also, the housing market will really throw up some real bargains over the next 12 to 18 months.

    AT the end of the day though, it’ll be the few people with money to spare who’ll get on the next train.

  163. I’ve highlighted the downside via the level of wealth destruction and I’ve been labeled a doomsayer. I can quite easily highlight the upside, but that will be limited to those who remain financially viable – If I emphasise this I fully expect to be labeled a ‘vulture’. What can I say?

    Even as confident as I feel about the level of wealth destruction and the significant opportunities that will arise, nothing is written in stone.

    Tony recently pointed out some interesting statistics, he claims:

    Average length of a recession in the US: 11 months

    Average length of an expansion: 6 years”

    These statistics will be interesting to watch as to whether they will play out now. I have my doubts given the magnitude of current problems. I’ve had a few friends who have been quoting similar statistics. I’m betting there could be a lengthy delay on this occasion. However, the fact remains, it’s not the end of the world just because some painful adjustments need to be made.

    We’ve had a long period of expansion which is likely now to be counter-balanced.

    I tend to think that there will be a rather large blow-out in recovery time against the historical average, so much so that it will create a new average.

    Also the US stock market’s recovery from 1929 took roughly 25 years to reach its previous record high of 1929 after the market bottomed in 1932 – in 1954 the market broke even. Can we expect a similar recovery period? I certainly hope not.

    Also consider this

    DOW JONES INDUSTRIAL AVERAGE:

    December 31, 1964 (874.12)
    December 31, 1981 (875.00)

    And according to Warren Buffett, during this period the economy grew fivefold, yet the stock market went nowhere.

  164. Frankly< I don’t think a great deal has changed since posting the attached comments:

    Failures catastrophic for US economy
    Julie Bishop blogs exclusively for BusinessDay
    http://blogs.theage.com.au/business/juliebishop/2008/09/29/failurescatast.html?page=2#comments
    * John McPhilbin
    * September 29, 2008
    * 03:04 PM

    The sad reality for many is there’s every possibility now that we will see an acceleration of foreclosures similar to what’s been happening in the US and the UK, in my opinion.

    Increased living costs, the rising threat of unemployment, tighter credit conditions and a refusal by banks to pass on interest rate cuts in line with the RBA are all distinct possibilities.

    Head Residex statistician John Edwards has said housing affordability was at its lowest.

    “Distressed sales are everywhere now,” he said. “The decay is making its way into the middle- and upper-income areas as well.”

    Mr Edwards calculated that it takes 53.5 per cent of the average gross take-home wage to pay off a home loan and 37 per cent of the average gross take-home wage to pay off a unit.

    “Australian families are carrying about as much debt as they can handle,” Mr Edwards said.

  165. And I’ve not been afraid to confront the nonsense coming from the Coalition on this issue.

    Costello reforms help Australia weather financial storm
    October 07, 2008
    http://blogs.theage.com.au/business/juliebishop/2008/10/07/costelloreform.html?page=5#comments
    Julie Bishop blogs exclusively for BusinessDay
    * John McPhilbin
    * October 07, 2008
    * 09:12 AM

    On ‘All points West’ today’s question is: Is Australia’s economic miracle a mirage?

    My answer is simple yet my explanation more detailed.

    Mirage! was my answer and to quote Michael West:

    “The shape of the world economy has changed in the last 18 years. China has boomed.

    Although Australia’s GDP growth has historically tracked the US, this time we are in a particularly fortunate position of having a mining boom (although commodity prices have begun to come off sharply). And Government debt is not an issue.

    That said, Australia like the US is a current account deficit country (currently 6.2% of GDP) which means our banking system borrows from the rest of the world to support our lavish lifestyle.

    No longer can this country rely on a debt-funded spending spree to fuel a recovery. This is bad news for both the banks [business] and the consumer.”

    I know Howard and Costello laid claim to being the masters of the economy and interest rates but that is simply no longer a viable claim, and it never really was. They were simply riding a favourable economic wind.

    They were also front and center when it came to cheering Australian who took advantage of artificially low interest rates by taking on boatloads of debt. Nor did they monitor the lending practices of the financial sector, in spite, in spite of the obvious lending lunacy that was going on.

    Our banks assure us that we are in a stronger position than the US to cope with any fallout, I tend to be more skeptical. Our banks have surely been aided in earning record profits off the back of complex and risky debt arrangements with other lending institutions, businesses, and individuals in recent years? This has been a global issue, not just one relating to the US alone.

    Rewind back twelve months and I can still hear Howard repeating the same dangerous mantra “interest rates are lower and people can borrow more.”

    Howard said the heavier debt burden reflected rising affluence.

    “It is the case that people are buying ever more expensive houses, and they are doing that because of a number of factors,” the Prime Minister said. “One of them is that interest rates are lower and people can borrow more.”

    Yes, our hero was pushing a dangerous mantra indeed. In his opinion, it seemed as though a new era had arrived under his leadership.

    He then went on to say: “Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property.”

    At around the same time the Reserve Bank’s figures on household finances showed that assets were rising faster than debt (in spite of many Australian’s carrying record levels of debt). Households, they claimed had assets, including housing, superannuation and other investments, that are equal to eight times their annual income.

    Mark Davis, author of The Land of Plenty writes:

    “Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion – about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.”

    It just doesn’t get anymore succinct and to the point than that. And it was the Howard Government that have left us in this precarious position.

    In fact it was reported just recently that our “economy is even more vulnerable to an economic downturn than the struggling US, leaving us facing the spectre of soaring unemployment, falling house prices and a long-drawn out economic slump.

    Experts say the only way to head off a crisis is to quickly cut interest rates and improve household finances decisively.

    The bleak picture is painted by economists who point to a series of data showing how we compare to the US.

    Australia has some of the most expensive property in the world, relative to incomes, according to the Demographia International Housing Affordability Survey.

    It says the median Australian house price is 6.3 times median household income, higher than the US, Canada, New Zealand, Ireland and Britain. A median Sydney property will cost nine times the average Sydney income.

    Australia also has more debt per household than the US, with Australians owing 177 per cent of household income in mortgage and other debts compared to 138 per cent in the US.

    This is coupled with the fact Australians save an average of 0.5 per cent of their income compared to 2.6 per cent in the US.”

  166. No matter how correct I turn out to be, I still don’t like what’s happening – but the facts can’t be ignored.

    Weak job ads, business conditions fuel rate cut bets
    http://www.theaustralian.news.com.au/business/story/0,28124,25165587-643,00.html
    THE total number of job advertisements in Australia fell 10.4 per cent last month, signalling a collapse in the labour market.

  167. Reb and Joni, I totally agree with you!

    It is time to start talking about how we are going to weather this financial cyclone, not just staring at the gathering storm clouds and wringing our hands.

    Personally, I reckon it won’t be a great depression. However it probably will be more prolonged than we would wish, and especially if we all talk ourselves into a funk over it.

    As for concrete actions for difficult times, numero uno is to get rid of debt and build up a savings buffer.

    At the moment there are few investment options delivering a reliable return. If we have any spare cash, then the most reliable return is to remove credit card debt, personal loans and mortgage principle. If we put the money somewhere else, then it has to make at least: interest rate + tax + inflation. Less than than that, and you are losing money by putting it on the wrong horse.

    A savings buffer of a few months living costs is always a sound move, but especially if there is any danger of being retrenched. It takes time to get a new job, but the bills keep coming in. Centrelink payments wouldn’t keep a field mouse in the style to which it is accustomed.

    Next item is to cut unnecessary expenses, like eating out at restaurants (especially snooty expensive ones). The good old BBQ with friends is as much fun, and much much less expensive. Also unnecessary to getting by are those regular subscriptions to magazines/newspapers that are barely read. It’s better to buy one occasionally when it has an article that is particularly interesting. There are heaps of items like this that we all habituate to in good times. They aren’t essential, and can but cut back until times improve.

    Finally, as Richard Branson says, in his experience many small businesses have their best chance in a downturn. It seems counter-intuitive, but the dominant players control the market in good times. When they are on their knees, so to say, then fresh ideas and new players can enter the market. We were getting horribly stale in a lot of respects, with the world that was, and horribly shallow.

    Think of those stupid society women in New York virtually catfighting over who had the most expensive Prada bag for $9000 or whatever. Rediculous. And the men spent even more on their cars and boats (which sat in the docks month-in, month-out). People were spending huge amounts of money, including on credit, to boost their egos by buying STUFF with no regard to value or meaning.

    It was insane, and it was giving Generations X, Y and Z a very distorted set of values. I will be immensely glad if a more wholesome lifestyle comes out of the need to rationalise for a while.

    Who knows, more of us may even get into making our homes sustainable with solar panels, solar heating, watertanks, wide Aussie verandahs, growing our own herbs, fruit trees and veggie patches, etc? How bad can that be?

  168. Can’t ignore the facts, can we John?

    ECB chief Trichet says a pick-up could be near:

    http://www.theaustralian.news.com.au/business/story/0,28124,25165276-36418,00.html

    Richard Branson says now is the time to make your millions:

    http://www.news.com.au/business/story/0,27753,25160278-5017672,00.html

    Buffett sticks to his view that shares
    are best long-term investment:

    http://www.guardian.co.uk/business/2009/mar/09/warrenbuffett-dowjones

    So, John, which “facts” are we talking about?

  169. How bad can that be?

    and especially if we all talk ourselves into a funk over it.

    QED.

    as Richard Branson says, in his experience many small businesses have their best chance in a downturn. It seems counter-intuitive, but the dominant players control the market in good times. When they are on their knees, so to say, then fresh ideas and new players can enter the market.

    Is Branson a goombah, or the person who believes Branson’s Virgin Pandemic is a small business, or that small businesses ill-equipped to draw on credit in a credit squeeze or sustain their supplier and purchaser defaults are the recipients of a recessionary windfall? 😉

  170. Yep, Branson is a past master at promotion, including a wee bit of self-promotion. Reminds me of a circus promoter at times…an enthusiastic showman and certainly OTT.

    Still he has been good for shaking up old businesses with new ways of doing things, and he has a good point, I reckon.

  171. Just another thought to ponder vis-a-vis John’s observations about those who pre-booked their off-shored, low-or-no-taxed profits-taking and ‘savings’ plans, but with the twist of deflation and medium-term relative values thrown in. Does your calculus…

    interest rate + tax + inflation. Less than than that, and you are losing money by putting it on the wrong horse.

    …necessarily apply to all or only to some?

    I guess I’m suggesting that the Soroses of the world, depending on which hat their wearing, like for people to make those sorts of calculations; as do Chinese sovereign wealth funds, etc. 😉

  172. Elise

    “ECB chief Trichet says a pick-up could be near: ”

    You’ll note, the guy is praying.

    I don’t think you’ve read some of my previous comments about the long term. Or are we jumping in prematurely?

  173. Elise

    “Can’t ignore the facts, can we John?”

    I hadn’t realised just how thin you were willing to spread your arguments.

  174. A crisis in the making? I think so, which ever way you look at it. Many homebuyers are likely to get crunched as interest rates, inflation and and unemployment rises and housing prices fall further. A few more bargains in the making for those willing to hold off buying.

    Australian Finance Group says homeloan levels fired up
    http://www.theaustralian.news.com.au/business/story/0,28124,25166107-643,00.html
    FIRST-HOME buyers are rushing to take advantage of a one-off boost in the federal Government’s housing grant before it ends in three months, the nation’s largest mortgage broker said.

    Australian Finance Group today said the number of loans arranged by the firm rose by 36.8 per cent in February to 7673 loans, valued at $2.67 billion.

    Of those, 26.1 per cent were taken out by first-home buyers, up from 25.8 per cent in January. That compared to February last year, when the number of loans AFG sold rose 17 per cent in the month to 7574, with only 11.5 per cent going to first-home buyers.

    However, AFG general manager of sales and operations Mark Hewitt warned that if the government grant top-up was not extended, the market may be heading for a cliff by the June 30 deadline.

    “The dramatic increase we’ve seen in first-home buyers over the past four months is a double-edged sword,” he said.

    “It’s positive in that it underpins the future recovery of mid-level property markets by getting significant numbers of people onto the property ladder.

    “But we’re concerned that if the Government doesn’t announce an extension to the grants fairly soon, we’ll continue to pull demand forward, and will be left staring over a cliff come the end of June.”

  175. Legion, I’m talking about people who have relatively normal salaries and balance sheets, not the Soros’s and people with offshore accounts.

    The comment about making sure that your investment can beat loan interest + tax + inflation was meant particularly for people who are worried about the advice of financial planners with vested interests, who are basically salesmen on commissions. Not all financial planners are honest brokers, even with the banks. This makes it hard to be sure you are getting sound advice.

    Incidentally, most Aussies are on modest salaries and have modest assets. For example, the ABS (Australian Bureau of Statistics) figures for 2006 showed that 85% of Aussies earn $75k or less per year, and their net assets are about the same as the median house price.

    Only 2% have a net worth over $1m, and are likely to use hot shot accountants and financial analysts to work with them personally. These types have a totally different investment style, because they have money beyond the normal household needs of paying off a house and car and saving for retirement.

    The financial basics for most households are really basic, not rocket science. Simple guidelines are really all that most of us need to stay out of trouble.

    I have a huge collection of books on finance and investing, and have done a lot of study, looking for the magic answer. Better half collects tools, and I collect books – a pair of packrats! Most of the finance literature is repetitive, and “guaranteed success formulas” are not always sound. In fact, the more hype, the more dubious.

    A financial advisor said recently, in an online blog, words to the effect that he could write the basics of household money management on the back of a business card. Very possibly a slight exaggeration. He also said that, for most people who came to him with financial woes, the root cause of the problem seemed to be 80% behaviour and 20% financial understanding. The main problem was that they did really silly things with their money, not that they needed sophisticated financial knowledge.

    Even financially smart people can do amazingly dumb things – check out Babcock and Brown executives, or Lehman Brothers executives, or RioTinto executives, or countless other examples.

    How many times do people have to learn not to overextend, not to take on huge risks with high gearing, and not to overpay for “investments” in overpriced assets?

    I would propose that the underlying behavioural issues are similar, regardless of the number of noughts in the numbers. Sad really. The emporers have no clothes, and now we can all see it, but at our own expense.

  176. From The Daily Reckoning:

    –Ignoring the fact that Branson’s Australian outfit Virgin Blue has the worst-performing share in the Asia Pacific airline sector in 2009, the man still has great point. If the downside of Creative Destruction is the unplanned obsolescence of companies like GM and AIG, the upside is that something new replaces the something old (or at least the something that is no longer fit for purpose).

    –A real recovery in the economy will be led by new production, not phoney consumption. Phoney consumption has been the problem all along. Goosing the money supply leads to artificial growth. It creates false demand and the appearance of economic activity. But it’s simply growth for growth’s sake because, frankly, that’s what gets politicians elected.”

    I couldn’t have said it better myself. Hence the reason for such a significant contraction before real and sustainable growth can re-start.

  177. Good luck John.

    I wish you and the MSM well with your negativity.

    I know why the press does it – bad news increases circulation. The problem comes when we take the press stories as the whole truth about life, and as being a faithful reflection of reality.

    I have only had personal dealings with the press once (newspapers and TV), on a technical story which I knew intimately well. It was no end of amazing to discover the extent to which they wished to bend both the facts (you know, data) and the implications (you know, conclusions which could be reasonably drawn from the real data, not their misrepresentation of it), to make a drama out of it.

    Others could probably tell similar stories.

    We are relying on a MSM echo chamber which seems to regularly and willfully distort reality for its own ends.

  178. With apologies..a very late clock in re John’s This is coupled with the fact Australians save an average of 0.5 per cent of their income compared to 2.6 per cent in the US.”

    And so why was Rudd’s last stimulus deemed a failure (or at least the press said so) because people used the money to either save or to pay debts???

  179. Well said Elise.

    And let’s not forget – Australia isn’t officially “in” recession yet!!!!

    And by the time it is made official, it’s possible that world markets will start to recover.

    Which would make last year’s predictions of a “brief” and “soft” recession in Australia likely during the third and fourth quarters of this year quite likely.

  180. John, my last (3:38 pm) was in response to your comments of 3:12 pm. It seems that central bankers opinions and those of Buffett, based on large amounts of data their teams process, are not considered relevant by you. It’s a thin line of argument? You would prefer to quote an Aussie associate prof as your preferred source of wisdom? That would be a thick line of argument, I suppose?

    It seems that you had a more positive viewpoint by 3:28 pm. Certainly agree with those comments from The Daily Reckoning.

    Creative destruction is a widespread phenomenon. It may be an overused term by the economists, but it is nonetheless true in many cases.

    On a domestic level, better half and I are currently engaged in the creative destruction of our kitchen. It is not possible to create a new kitchen without ripping out the old one and suffering a period of disruption before creating the new improved version. We suffer the inconvenience because we want something better.

    We will be suffering the creative destruction of the oil industry in just a few years time, according to my understanding of the data.

  181. Elise

    “It seems that you had a more positive viewpoint by 3:28 pm. Certainly agree with those comments from The Daily Reckoning.”

    Consider my prediction of almost 12 months ago on Blogocracy:

    “My sanity saving approach has led me to look at the whole problem in more general terms, simply because there is no avoiding the pain brought about by our addiction to debt:

    We will, in my opinion, continue getting snapshots that are aimed at providing greater hope and optimism about the economy and our wealth status. I’m just hoping people take a more realistic view of what is really happening. Nobody wants to see a major panic or excessive pessimism, however, we’ve had well over a decade where it seems nothing could stand in our way.I personally think that our average wealth will decrease (taking away previous gains through heated housing and stock markets), credit card spending will have to slow significantly and therefore consumer spending will decline, and housing prices will continue to fall. For how long? anywhere from between 18 months to 5 years – seriously (and the 5 years is a conservative guess). The problem that some people are not seeing clearly is that many of us are leveraged to the hilt with debt and we now need to start shedding much of the excess debt we’ve been carrying – this could be a lengthy process.”

    And creative destruction on a large scale? Your example holds true. And the pain is unavoidable. And there will be many who won’t be able to afford a new kitchen or be able to afford to retire when they intended. In fact, many retirees will have to go back to work.

    “On a domestic level, better half and I are currently engaged in the creative destruction of our kitchen. It is not possible to create a new kitchen without ripping out the old one and suffering a period of disruption before creating the new improved version. We suffer the inconvenience because we want something better.”

  182. Min

    “And so why was Rudd’s last stimulus deemed a failure (or at least the press said so) because people used the money to either save or to pay debts???”

    Paying down record levels of debt is crucial for many.

  183. The impression I get Elise and Reb is that you are both very firm believers in market fundamentalism. The markets know best and will therefore correct themselves.

    As far back as 1998 John K. Galbraith issued a warning:

    This is the warning of the present time. We had a slight indication of that in August and September. It’s a warning that everybody should have in the back of her or his head. The effect of the speculative collapse is something which economists have not yet, even to this day, fully appreciated, because it is not the collapse that causes the trouble, but the further effect on investment, and also the further effect on consumer spending.

    A very large part of our present consumer spending is based on debt creation, credit cards, or the impression given by stock market gains or real estate gains. If and when the end comes, the economic effect will be the drying up, the slump, in consumer expenditure and, of course, the economic effects of that

    In fact, Keynes expressed it well when he said:

    When the capital development of a country becomes the by- product of the activities of a casino, the job is likely to be ill-done.

    And, the alleged father of the ˜free market philosophy’, Adam Smith was keenly aware that the human propensity to take risks (gamble) propelled economic growth, he also feared that society would suffer when the propensity ran amuck. He as actually careful to balance moral sentiments against the benefits of free markets (something that gets overlooked by some who refer to his writings).

  184. Financing of new projects is now a major issue of concern at the moment and for the foreseeable future:

    “The worst recession since World War II has slashed demand for minerals and forced producers to delay or shelve projects as banks reduce lending”

    China’s slump threatens $10b in mines
    http://business.smh.com.au/business/chinas-slump-threatens-10b-in-mines-20090310-8tw3.html
    China’s slowing appetite for iron ore threatens plans to develop more than $10 billion of low-grade iron ore projects in Australia, the nation’s commodity forecaster said.

    A forecast drop in contract iron ore prices may combine with the global financial crisis to delay magnetite ore projects, Jammie Penm, chief commodity analyst at the Australian Bureau of Agricultural and Resource Economics, said in an interview.

    The worst recession since World War II has slashed demand for minerals and forced producers to delay or shelve projects as banks reduce lending. Atlas Iron and Gindalbie Metals are among companies planning magnetite mines in Australia as Chinese steel mills, the world’s biggest producers, press for the first iron ore price cut in seven years.

    ”A major consideration is the cost and there will be issues in terms of financing,” Penm said from Canberra. ”There have not been a significant amount of announcements about cancellations yet, but they could come and we are closely monitoring that situation.”

  185. On the issue of self-funded retirees:

    Retirees face cut in dividends income
    http://news.smh.com.au/breaking-news-business/retirees-face-cut-in-dividends-income-20090310-8tyw.html
    Self-funded retirees are set for tough economic times as the global economic downturn will result in a steep drop in company dividends, financial industry heads warn.

    The head of consulting at investment advisory firm JANA, John Coombe, said historical data suggested company dividends fell by about 30 per cent during a recession and could fall by a greater amount than that during this downturn.

    “That will have a big impact on the retiree community because they live and breath off the dividends that they receive,” Mr Coombe told the annual Fidelity Australian Equities Summit in Sydney.

    “So they may well have to sell other assets to keep funding their retirement at the level that they have.

    “I hope history repeats itself and that they really do only come off 30 per cent because we’ll have a much bigger flow-on effect if they come off a lot more than that.”

  186. Wave, wave to John:

    John McPhilbin, on March 10th, 2009 at 4:35 pm Said:
    Min

    “And so why was Rudd’s last stimulus deemed a failure (or at least the press said so) because people used the money to either save or to pay debts???”

    Paying down record levels of debt is crucial for many.
    ~~
    John, obviously the point was why was Rudd’s last stimulus deemed a failure when it was used to either save or pay off debts.

  187. Min, on March 10th, 2009 at 5:26 pm Said:

    Wave, wave to John:

    John McPhilbin, on March 10th, 2009 at 4:35 pm Said:
    Min

    “And so why was Rudd’s last stimulus deemed a failure (or at least the press said so) because people used the money to either save or to pay debts???”

    Paying down record levels of debt is crucial for many.
    ~~
    John, obviously the point was why was Rudd’s last stimulus deemed a failure when it was used to either save or pay off debts.”

    Sorry Min, you’re right. And I doubt very much whether the next handout will be spent frivolously as well. I’m betting though that many on the receiving are grateful for the money which will assist them in the short term.

  188. Min, I didn’t mean to be dismissive of your comments previously, in fact, I agree wholeheartedly with your observation. I’m not so quick as those who claim it’s a failure to rush to judgment. We all have a number of options on what to do with the money, and with personal debt being so high, savings so low, the idea that people would do what the government intended the payments for (to spend, spend, spend) was a little naive. On the other hand, by saving and paying down debt many people are now acting rationally and responsibly, which is something that’s been missing for some time.

  189. Min, Lindsay Tanner has a point.

    Stimulus will take time
    March 10, 2009
    Lindsay Tanner blogs exclusively for BusinessDay
    http://blogs.watoday.com.au/business/lindsaytanner/2009/03/10/stimuluswillt.html
    Most of the money involved will not have been spent immediately, but much of it will be spent in the ensuing three to six months. How? Many people will “save” it initially, but change their saving/spending behaviour subsequently. Hence the net effect is more spending. And it doesn’t all come in one week (which hardly causes employers to keep people in jobs) but is spread out over several months.

    The true story of the October-December 2008 period lies in two figures; household savings and inventories. Savings soared to 8.5%, the highest level since 1990 and inventories shrank by $3.8 billion, knocking 1.6 percentage points off GDP growth for the quarter. That demonstrates the impact of the huge hit to business and consumer confidence from the global financial crisis in late 2008, particularly in October. Consumers saved more, and business ran down stocks assuming consumers would be spending less.

    Had it not been for the Government’s payments, the overall outcome would have been significantly worse. The same will apply in the first part of 2009. Falling confidence is dampening economic activity dramatically. The Government’s stimulus packages are designed to counteract this, getting more money flowing throughout the economy. The intersection point of these two forces is simple; jobs. That’s what it’s all about.

  190. John…you are never dismissive..a little over the top at times and cute. Anything that might be interpreted as dismissive is because you have a topic which is true to one’s own heart.

  191. Interesting article, it gets back the the old consumption/ production imbalances that exist.

    Deadly recession cure
    http://www.theaustralian.news.com.au/story/0,25197,25162471-7583,00.html

    The implication is that fixing the fundamental global imbalance behind the crisis requires American belt-tightening as part of what some call a “grand bargain” between the world’s biggest debtor, the US, and its biggest creditor, China.

    Under the bargain, Beijing would tap its $US2 trillion of foreign reserves to stoke domestic demand, build infrastructure and construct a social safety net underneath 1.3billion Chinese. Instead of drawing on Chinese savings to finance US consumption, Washington would rein in its budget deficits. China would let the yuan strengthen against the greenback, boosting Chinese purchasing power and helping American industry narrow the US trade deficit.

    Global recovery would be driven by Chinese consumers and American net exports, so correcting the fundamental imbalance. The US would consume less but would save American jobs. The Chinese would export less but live better. But, rather than balance Beijing’s $US586 billion budget stimulus with US belt-tightening, Obama has embarked on massive New Deal-style spending. Disguised as a recession cure, this will widen this year’s US budget deficit to $US1.2 trillion or 12per cent of gross domestic product and lift net public debt to 60 per cent of GDP or $US13 trillion in a decade.

    Even this requires rosy economic forecasts and a big run-down in defence spending. No wonder the confidence effects from Obama’s fiscal stimulus “have not been great”, Keating said. “Is American default on the cards? If not, who is going to buy the bonds?”

  192. Min, on March 10th, 2009 at 5:59 pm Said:

    John…you are never dismissive..a little over the top at times and cute. Anything that might be interpreted as dismissive is because you have a topic which is true to one’s own heart.”

    I love you to Min

  193. John, obviously the point was why was Rudd’s last stimulus deemed a failure when it was used to either save or pay off debts. Min

    I can answer that, Min. As a taxpayers and a SFRs who are not eligible for any handouts and who have worked, saved and managed their life savings to be in the the postion we are – we object to having to pay off the credit debts of people who have not.

    The money should have been saved to assist those people who will be thrown out of work over the next 18 months, not given away to support people who have jobs and are capable of supporting themselves. If businesses cannot survive without a government handout then maybe they shouldn’t be in business.

    We have not borrowed since 1989 and have never paid interest on our $4000 pm credit card, but our income is now running close to zero thanks to other people’s greed.

    As I’ve said before, no-one will be untouched in the GFC. Even the frugal will pay.

    Throughout my career I have said that I do not object to paying taxes but I reserve the right to object at the way they are spent. This is one of those times.

  194. John, where on earth did you get this idea?

    “The impression I get Elise and Reb is that you are both very firm believers in market fundamentalism. The markets know best and will therefore correct themselves.”

    I have very little faith in leaving the markets entirely to themselves. They need regulation and continual oversight. Not excessive regulation, which strangles the system in red tape, but enough to prevent obscene abuses and major bubbles. ASIC and APRA need real teeth, and should use them.

    I think those finance kingpins and CEOs in the US who have been saying, in essence, “bail us out, but don’t you dare intervene, we know best how to run our business…” are a total joke. They should play their comments back to themselves. If they are so damn good, then why are they broke?

  195. John McP..it seems that you might need to book a berth at Mig’s bbq. Aqua is bringing the seafood. And TB is bringing his family and his kids and their kids and their kids.

  196. Spend, spend, spend was intended to catalyse aggregate demand (and liquidity circulating and multiplying as it passed through multiple hands in the supply-purchase-supply-purchase chains) for present and future goods and services (and by implication, the present and future jobs involved), not to pay down past consumption of goods and services which won’t maintain present or future jobs or act now as a preventative to disruption and destruction of those supply-purchase chains caused by fall-off in demand, etc.

    ————————–

    On the other hand, by saving and paying down debt many people are now acting rationally and responsibly, which is something that’s been missing for some time.

    Acting ‘rationally’ at the wrong time of the cycle, as ever, I’d argue. Ditto for governments, and ideologies. They’re almost counter-rational because they’re reactive not pro-active.

  197. Min, on March 10th, 2009 at 6:08 pm

    Hey, Min, that’s one too many “thier kids” – I only begat two and that was less than one generation ago (still 75 isn’t it?)

  198. Hey Migs, you having a BBQ? – with all that super wine?

    I’m in, mate. Just let me know – worth the petrol!

    Don’t forget the Wagui…only red meat we eat these days…

  199. Just another rabbit-hole for the adventurous or the unwary…

    Vox: Research-based policy analysis and commentary from leading economists

    Some of their analyses of the political economic aspects of emerging global (financial) governance, especially institutional aspects likely to be raised through the G20 for financial architectures and mechanics, look interesting for anyone interested in such things.

  200. TB..hubby and I have never had a credit card..because I figure that if you can’t afford to buy it then you don’t need it..that if it’s something that you need then you should save to buy it.

    I feel very sorry for the young’uns who have mega debts..fortunately none of my crew but they have friends plus cousin’s children who are deep in debt.

  201. TB..I have offered the BBQ or we can meet up somewhere in the middle, between Bris and south.

    Migs is in Canberra and so we will have to fit in with him, when he can manage time off.

  202. Elise of Perth, on March 10th, 2009 at 6:06 pm Said:

    John, where on earth did you get this idea?

    “The impression I get Elise and Reb is that you are both very firm believers in market fundamentalism. The markets know best and will therefore correct themselves.”

    I was fishin in the hope you’d provide the answer you did, because at the bottom the ‘free – market’ obsession brought us here and over a prolonged period. Hence the level of creative destruction we’re seeing and will continue to see. Had markets been appropriately regulated instead of increasingly deregulated the level of pain we’re seeing now would have been spread out over time in the form of minor corrections.

  203. TB Queensland, on March 10th, 2009 at 6:03 pm Said:

    John, obviously the point was why was Rudd’s last stimulus deemed a failure when it was used to either save or pay off debts. Min

    I can answer that, Min. As a taxpayers and a SFRs who are not eligible for any handouts and who have worked, saved and managed their life savings to be in the the postion we are – we object to having to pay off the credit debts of people who have not.

    The money should have been saved to assist those people who will be thrown out of work over the next 18 months, not given away to support people who have jobs and are capable of supporting themselves. If businesses cannot survive without a government handout then maybe they shouldn’t be in business.”

    I’ve been thinking about the overall level of debt, yet, TB is right to express his dissatisfaction with the way the handouts are being handled. All of these self-funded retirees who have done the right thing surely must be thinking ‘and for what?’

    This says it all TB, my father is a self-funded retiree who has worked hard all his life and done the right thing as well:

    “We have not borrowed since 1989 and have never paid interest on our $4000 pm credit card, but our income is now running close to zero thanks to other people’s greed.

    As I’ve said before, no-one will be untouched in the GFC. Even the frugal will pay.

    Throughout my career I have said that I do not object to paying taxes but I reserve the right to object at the way they are spent. This is one of those times”

  204. Legion, sharply perceptive as ever!

    “Acting ‘rationally’ at the wrong time of the cycle, as ever, I’d argue. Ditto for governments, and ideologies. They’re almost counter-rational because they’re reactive not pro-active.”

    It seems to be a case of being between a rock and a hard place. There are no easy answers, as far as I have read or thought on this issue. A real bugger of a situation, from most angles you care to look at it.

    The early millenium is not going to win any popularity contests for “You never had it so good”, nor for the wisdom and soundness of the US financial system, when the history books are written.

    The current setup is bubble-prone: dotcom boom/bust, housing boom/bust, and now wider financial boom/bust. It is an underdamped system and inherently unstable. It needs an overhaul urgently, and the insertion of automatic negative feedback to dampen bubbles before they get out of hand.

  205. Legion

    “On the other hand, by saving and paying down debt many people are now acting rationally and responsibly, which is something that’s been missing for some time.

    Acting ‘rationally’ at the wrong time of the cycle, as ever, I’d argue. Ditto for governments, and ideologies. They’re almost counter-rational because they’re reactive not pro-active.”

    You’re sharp alright Legion. Acting ‘rationally’ at the wrong time is right. Hence the reason JWH used to really get up my nose with his comments about low interest rates and never having it better – he was the head cheerleader for ‘irrational spending’.

  206. John,

    “I was fishin in the hope you’d provide the answer you did…”

    You should know me better, after all this time.

  207. Did someone say BBQ and Migs’ ?

  208. Elise of Perth, on March 10th, 2009 at 6:46 pm Said:

    John,

    “I was fishin in the hope you’d provide the answer you did…”

    You should know me better, after all this time.”

    I was actually trying to get a point across Elise, devious, I know, I won’t do it again (wink). Lol I knew the answer before you said it.

  209. Elise

    Not sure about reb though? Lol

  210. “Did someone say BBQ and Migs’ ?”

    Throw me on a vege burger, onion & chunks of tomato migs…I’ll bring the rolls, Tabasco sauce, Canadian dill pickles, flatulence & movie soundtracks…and tape player…:)

    Might as well party as the Titanic sinks…right John…:)

    N’

  211. “The impression I get Elise and Reb is that you are both very firm believers in market fundamentalism. The markets know best and will therefore correct themselves.”

    Not sure about reb though? Lol

    Assumption, as a friend once told me. Is the mother of all f**k ups.

  212. N’

    Might as well party as the Titanic sinks…right John…:)

    N’

    Cheeky bastard…pass the mustard.

  213. Reb

    “Assumption, as a friend once told me. Is the mother of all f**k ups.”

    I used the word ‘impression’ and when I use this word I follow it up to seek confirmation. If I’d assumed I wouldn’t have bothered asking.

  214. “Goosing the money supply leads to artificial growth. It creates false demand and the appearance of economic activity. But it’s simply growth for growth’s sake because, frankly, that’s what gets politicians elected.”

    Well yes, globalization in a nut shell…….Welfare is welfare……Again, kind of hard to stimulate anything when most are strapped with the sums of debt out there. The “stimulus” does nothing but keep some hanging on a little longer “slow the bleeding for a bit” but that is all, hardly a stimulus. The folks are clueless and take the bait every time….If anything; this fiasco just highlights the inherent dangers of putting all of our economies on one ship along with “turning the other cheek”. Yet Brown, Rudd and Obama are trying to keep the circus going.

    The markets will adjust accordingly over time but I doubt you will see the same zeal over a “global economy” that you have in the past once this thing finally stabilizes a bit though the true believers continue to try and sell it warning of the dangers of “protectionism” now. Globalization was the fairy tale here along with the illusion of wealth it helped prop up.

    We had a trend here I find fitting to this crisis and one I think highlights what I am trying to say:

    A kid would show up at the door selling boxes of candy bars for a 300% mark up telling you it went towards helping to purchase uniforms for his soccer team on the other side of the tracks etc.. You thought, well hell, it is going to a good cause and I am after all getting something for money even if I don’t really need them….Now take a look at your entertainment system, the oversized vehicle in the car port, the 56 inch plasma etcetera… You just bought uniforms for soccer teams across China, India, Pakistan etcetera who are now using what use to be your money to keep you buying more candy bars and hence more uniforms a bit longer but with “interest” now as the “real” money has run out….See a familiar problem with this scenario?
    “Global Welfare”, gotta love it, after all it is for the children……….

  215. Reb

    Also, it’s best not to assume everything will be alright without the need for some major reviews of the system and interventions by governments in this crisis in order to halt the halt and reverse that chaos and carnage. The other danger is assuming they’ll get it right any time soon. This process was bound to be very demanding.

  216. Sparta

    Time for a major re-think on many levels me thinks.

  217. John,

    “I used the word ‘impression’ and when I use this word I follow it up to seek confirmation. If I’d assumed I wouldn’t have bothered asking.”

    Hair-splitting my friend. You should get a new conditioner.

  218. John,

    “I used the word ‘impression’ and when I use this word I follow it up to seek confirmation. If I’d assumed I wouldn’t have bothered asking.”

    Hair-splitting my friend. You should get a new conditioner.”

    Would that apply to someone with no hair?

  219. “Cheeky bastard…pass the mustard.”

    English Hot, Dijon, French, wholegrain, honey American, Australian, Chinese?

    I think I’ll go w/ the Irish mustard:
    Irish mustard is a blend of wholegrain mustard with honey and/or Irish whiskey.
    (Wiki pedia)

    Or mebbe just have HOT & a bottle of whiskey.

    John, I’m as “keen as mustard” to hear about the ‘life raft’ plan.

    The constant bad news is giving me a neck ache…and if the Borg gets in here in QLD, gawd forbid!, I can see them ransacking the public service…whilst in tandem w/ the WA govt. purposely putting pressure on inflation to try and ensure rates increase so the Fed Labor govt. is blamed. I just don’t TRUST the right-wing govts these days.
    N’

  220. N’

    “John, I’m as “keen as mustard” to hear about the ‘life raft’ plan. ”

    I trusted you to keep it as our secret, now everyone will want a seat. . TB, Min, Legion, Migs, Sparta and families have kept quiet about it. (wink). Lets not discuss this anymore N’ Lol

  221. But you know I’ve booked room on the raft for my CD & Sci-fi/horror book collections right?…:)
    N’

  222. John,

    “Would that apply to someone with no hair?”

    It appears that my advice comes too late…

  223. John,

    Bugger the life raft.

    You’ll be needing one of those North Sea deep-sea-diving types of life boats. Hermetically sealed. Designed for real full-on crises, such as you are anticipating. 😉

  224. …Elise, there are untold advantages of having no hair when one is required to abandon ship and swim for dear life…a Tsunami has nothing on this crisis, it is but a ripple (wink). The sea of debt is certainly a large one and whilst we watch it seem to retreat at times, the bastard is simply building up in the background.

    Dramatic and entertaining enough? (lol) Not funny for those without a life jacket or can’t swim though. Okay, so I’m trying to be sarcastic. The end is nigh I tell you (wink). But seriously…it’s pretty bad don’t you think?

  225. nasking, on March 10th, 2009 at 7:37 pm Said:

    But you know I’ve booked room on the raft for my CD & Sci-fi/horror book collections right?…:)
    N’

    I did say no money back guarantees N’ just behave yourself and the room is yours. I’m thinking of upgrading to something like Elise mentioned. There’s no way my raft will survive the carnage….pass the mustard again please..

  226. John,

    “But seriously…it’s pretty bad don’t you think?”

    Yep, it is pretty bad. Sooo, what shall we plan on doing? How did people manage before?

    How about: DIY, home brew, shepard’s pie, make-do-&-mend, barter, etc?

    This household subscribes to DIY – it has a fully-stocked workshop, good quality sewing machine (and more patterns than yours truely will ever use), fruit trees, veggie patch, solar panels, wide verandahs, water-saving toilets and showers, etc.

    Our last electricity bill was $25 for mid-summer, incidentally, thanks to the solar panels. Hey, how much fun is that?

    It will be OK John, don’t worry.

  227. Elise

    Back to basics sounds like a good idea.

    Interesting article by Paul Krugman – I’ve highlighted the second half but you may want to read in its entirety.

    Op-Ed Columnist
    After the Money’s Gone
    http://www.nytimes.com/2007/12/14/opinion/14krugman.html
    It’s easy to get lost in the details of subprime mortgages, resets, collateralized debt obligations, and so on. But there are two important facts that may give you a sense of just how big the problem is.

    First, we had an enormous housing bubble in the middle of this decade. To restore a historically normal ratio of housing prices to rents or incomes, average home prices would have to fall about 30 percent from their current levels.

    Second, there was a tremendous amount of borrowing into the bubble, as new home buyers purchased houses with little or no money down, and as people who already owned houses refinanced their mortgages as a way of converting rising home prices into cash.

    As home prices come back down to earth, many of these borrowers will find themselves with negative equity — owing more than their houses are worth. Negative equity, in turn, often leads to foreclosures and big losses for lenders.

    And the numbers are huge. The financial blog Calculated Risk, using data from First American CoreLogic, estimates that if home prices fall 20 percent there will be 13.7 million homeowners with negative equity. If prices fall 30 percent, that number would rise to more than 20 million.

    That translates into a lot of losses, and explains why liquidity has dried up. What’s going on in the markets isn’t an irrational panic. It’s a wholly rational panic, because there’s a lot of bad debt out there, and you don’t know how much of that bad debt is held by the guy who wants to borrow your money.

    How will it all end? Markets won’t start functioning normally until investors are reasonably sure that they know where the bodies — I mean, the bad debts — are buried. And that probably won’t happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.

    Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be sorely disappointed.

  228. Wow, how time flies. Krugman wrote that back at the end of ’07, and it’s now ’09? And they’re still peddling the GFC as a ‘subprime crisis’; passing bailout bills with obscure, secondary aims; pretending to examine the books of banks; thinking about but not regulating the hedgehog pirates which operate in completely unchartered waters, and blocking anyone who would; etc? Someone doesn’t seem to be trying very hard to ‘find the bodies’; someone appears to want a Decade At Bernie’s.

  229. Legion

    And his conclusion is spot on:

    “How will it all end? Markets won’t start functioning normally until investors are reasonably sure that they know where the bodies — I mean, the bad debts — are buried. And that probably won’t happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.”

  230. ’bout five I think, JMc and moi, estimated last year…

    …wait now for recession to become depression…

    …history is repeating itself…

    …and Sparta is correct, stimulus packages of “free” money (not infrastructure/capital works) is just delaying the inevitable…

  231. TB Queensland, on March 11th, 2009 at 10:22 am

    TB, I’d argue Sparta is not even wrong. It’s the same thing I’ve been banging on about for months, even if the Shanes of the world scoff at its presentation. It’s the domino effect in John’s China piece. It’s the ‘perfectly sounds small businesses going to the wall’ in Branson’s latest promo. Those small businesses represent existing infrastructure and capital and the meat and potatoes of society, sunk costs and all; and are the nearest thing to the freemen envisaged by both laissez faire classical liberals and socialists alike. The so-called free money is going into maintenance of existing infrastructure; big ticket substitutes are precisely that, substitutes, and come at an opportunity cost, with the idea being that to allow the ‘invisible productive infrastructure’ to collapse would be entirely short-sighted.

  232. Legion, just transfered my comments from the IR blog.

    I sincerely believe that the Rudd Government are trying to ease the pain short -term as Gittin’s has also mentioned.

    Longer term solutions are elusive simply because we don’t know where all the ‘bodies are buried yet’ – I mean bad debts.

    Who knows? The government may, in the end, be throwing good money after bad but surely their attempts to buffer us has got to be better than doing nothing at all and allowing the economy and markets take their course? The argument I think you pose is that debt is debt whether it’s government or private – therefor we need to consider Total Debt.

    We know the private debt is a major concern, however, the banks have not been as upfront as they need to be about the full extent of their exposures – i.e. private and business lending as well as exposures to international markets and the potential fallout.

    Gittins has also done an admirable job in explaining why this isn’t any ordinary recession. The hardest thing most of us are trying to come to grips with is ‘the unknown’ and which way this is all likely to turn. It’s been assumed for a long time that recessions come as go and booms that turn to busts will once again turn to booms and so on. This is all fine in theory, however, it’s the experience of large scale losses that brings real pain with it. Many of us have had no direct experience of this type of pain.

    I also refer back to a previous post, it’s also to consider that the Rudd Government have been remarkably upfront about their concerns and yet, they’ve taken pre-emptive action, in the hope they can save jobs.

    Wealth plummets, Private Debt Rises
    Posted on January 22, 2009 by johnmcphilbin
    https://blogocrats.wordpress.com/2009/01/22/wealth-plummets-private-debt-rises/

    THE wealth of average Australians has plummeted by a record 9 per cent – or about $19,000 for every man, woman and child – as the global financial crisis bites. New figures show national wealth in property, shares and other assets sank to $4956 billion in third quarter of last year, from $5281 billion 12 months ago.

    The average Australian is now worth about $231,000, down from a high of $250,000 in September 2007.

    The massive financial toll comes amid predictions of a looming recession which would wipe even more off battler’s bank balances.

    Fears of mass layoffs were fueled yesterday with the announcement by mining giant BHP Billiton that it would axe 3300 Australian jobs.

    “What we are seeing today is a sober reminder of the unwinding of the mining boom, caused by the global financial crisis and in particular the slowing of the economy in China,” Treasurer Wayne Swan said.

    The Government is now under increasing pressure to unveil its second round of stimulus measures to keep the economy ticking over.

    CommSec said the Federal Government should respond to the drastic circumstances by temporarily cutting the GST and bringing forward scheduled tax cuts to March.

    Prime Minister Kevin Rudd yesterday vowed to be frank with Australians on the impact of the financial crisis. “I don’t intend to guild the lilly one bit,” he said.

    “What I intend to do is to be upfront about the impact of this global financial crisis on the economy and on jobs all the way through.

    ” But despite promising a week of speeches setting out the Governments plans to deal with the crisis, Mr Rudd offered no new measures to help Australians keep their head above water.

    The downgrade in Australian wealth, revealed in Australian Bureau of Statistics data, was the biggest since records began in 1960.

    At the same time, private debt was on the rise, up 5 per cent during the September quarter to $616 billion. Per capita debt rose from $27,450 to $28,000.

  233. Who knows? The government may, in the end, be throwing good money after bad but surely their attempts to buffer us has got to be better than doing nothing at all and allowing the economy and markets take their course? The argument I think you pose is that debt is debt whether it’s government or private – therefor we need to consider Total Debt.

    John, my longer run analysis of Gittins’ piece, where he gets to present a ‘heads, I win; tails, you lose’ revisionism is that he avoids telling important bits of the story, which are masked by a chuckle, and an acknowledgement that the economy would have been stronger if people had used the stimulus as intended, before letting them off with a ‘don’t feel guilty’. Arguably, that continued ‘selfishness’ has systemic consequences including job losses and a reduction in multiplier effects, including a tangential multiplier which meant government was able to recycle recaptured stimulus money to continue its program of stimulation to prevent the very pain that people fear and are saving against, now.

  234. Good points Legion.

  235. Legion

    From a previous Gittins article on the stimulus, he argues that without the package things would be a lot worse now:

    Stimulus is Three T’s and sympathy
    http://business.smh.com.au/business/stimulus-is-three-ts-and-sympathy-20090206-801i.html?page=-1
    The fiscal package itself will cost $42 billion, with about a third of that coming this financial year, more than 40 per cent next year and about a quarter in 2010-11, with only minor costs in the fourth year.

    In truth, however, the lion’s share of the money is intended to be spent in calendar 2009, when it will be equivalent to about 2 per cent of GDP.

    This shows how huge the package’s stimulus to the economy will be. It makes me confident you won’t find a bigger package in our history. And it comes on top of the December package that, with a cost of more than $10 billion, was equivalent to about 1 per cent of GDP.

    Of course, just because you spend an extra 2 per cent of GDP doesn’t mean you’ll increase GDP – the total value of the goods and services the nation produces during a period – by the same amount.

    That’s because some of what the Government spends will be saved and some will leak into imports.

    I doubt we’ll escape it but, like most of the economists, I don’t doubt the recession would be a lot worse without the various stimulus packages.

    In preparing this week’s package, the Government has sought to comply with the Three-Ts rule of fiscal stimulus: measures should be timely, targeted and temporary.

    The timely principle says governments should apply their stimulus as early in the downturn as possible. Because things tend to snowball (economists would say multiply) in a downturn – with my cutback in spending reducing your income and thus prompting you to cut back, so reducing my income – the notion is that the earlier you act, the less things unravel. A stitch in time …

    Similarly, the targeted principle says the stimulus should go to those people or on those purposes most likely to get the money spent quickly. This favours governments spending the money themselves so that, at least in the first round of the money’s flow around our circular economy, all the money is spent on consumption or investment.

    This explains the support for spending the stimulus on capital works (now grandly named “infrastructure”). Trouble is, major capital works programs such as expressways, bridges and railways can take years to plan and get approvals for.

    Almost 70 per cent ($29 billion) of the $42 billion is going on capital works projects. But Swan has tried to ensure the money is spent quickly by targeting it towards lots of quite small building projects.

    Half the money is going on repairing and adding new facilities to every school in the country. The rest is going on fixing black spots on the roads, building boom gates at level crossings and building 20,000 new social housing and Defence Force homes, with about $3 billion going on a small business investment incentive.

    All these projects are worth doing in their own right, they should be easy to get going and they should give a boost to employment in the small businesses that dominate the building industry.

    The remaining 30 per cent ($13 billion) is going on cash bonuses – transfer payments – of up to $950 to most taxpayers, parents of school children, single-income families, some students and farmers. Many households will get multiple dollops of $950.

    The way to think of this is as a once-only, lump-sum tax cut. Whereas ordinary tax cuts are doled out at a few dollars a week, this one comes in an upfront lump.

    Another difference is that low- and middle-income families will get a lot more (and high-income families a lot less) than had the tax cuts already planned for July this year and next merely been brought forward.

    Clearly, Swan’s approach scores well on timeliness and reasonably on targeting, although this time the cash bonuses are going to many middle-income families who’ll be more inclined to save them than would poorer people.

    Malcolm Turnbull’s argument that people would be more inclined to spend a “permanent” tax cut than a once-off bonus – based on the economists’ “permanent income hypothesis” – isn’t a strong one empirically.

    Finally, the temporary principle says everything you do must be a once-off (even if spread over a few years) so that it leaves no impediment to getting the budget back into surplus once the economy is well clear of recession. Swan gets full marks on that bit.

  236. Malcolm Turnbull’s argument that people would be more inclined to spend a “permanent” tax cut than a once-off bonus – based on the economists’ “permanent income hypothesis” – isn’t a strong one empirically.

    Yes, well, neither Malcolm nor Gittins it seems have a monopoly on arguments or insights into the empiricals of behavioural economics. There were those who questioned why those in dire need and most likely to spend, ie the existing unemployed, were left off the gratuities list; ditto, those who suggested that a windfall lump sum transfer requiring no temporal exchange or particular effort was bound to be either applied or kept as a ‘pre-saved’ lump, for reason that dissipating an accumulated lump feels like a ‘loss’ of a ‘gain’, which is different, again, from Malcolm’s argument although somewhat related.

  237. Legion,

    “an ungrammatical sentence in which two or more independent clauses are conjoined without a conjunction”

    I am the last person to be on about grammar on such a forum but for the love of god………..

  238. And where would Sparta think he’d be inserting an elliptical conjuction which would temper meaning, as opposed to my preference for semi-colons, which would allow my conjoining independent clauses into a never-ending sentence?

  239. Legion,

    Regarding the saving of lump-sum payments, and your comment:

    “Arguably, that continued ’selfishness’ has systemic consequences including job losses and a reduction in multiplier effects, including a tangential multiplier which meant government was able to recycle recaptured stimulus money to continue its program of stimulation to prevent the very pain that people fear and are saving against, now.”

    Maybe it is economic heresy, but I am inclined to believe that people who are overextended “on the 1 day ice” are absolutely sensible to save the money.

    As Buffett said recently, borrowers who run into trouble generally have no more than minor savings to tide them over if adversity hits. In his words:

    “The major cause of delinquency or foreclosure is the loss of a job, but death, divorce and medical expenses all cause problems…Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do NOT occur because a house is worth less than its mortgage…Rather, foreclosures take place because borrowers can’t meet the monthly payment…they walk when they can’t make the monthly payment.”

    Given what we have seen in the US housing market, and what Buffett is saying, the Aussie housing market is best protected by making sure that people can meet their repayments.

    That means, to my simple way of thinking, that they need to keep their jobs and they need to have some buffer in case they are retrenched and have to look for something else. If saving the cash handout helps to reduce the number of foreclosures, then surely that is a good thing for both the households concerned and the housing market in general?

  240. Elise

    “Maybe it is economic heresy, but I am inclined to believe that people who are overextended “on the 1 day ice” are absolutely sensible to save the money.

    As Buffett said recently, borrowers who run into trouble generally have no more than minor savings to tide them over if adversity hits. In his words”

    Completely agree. High levels of personal debt and little savings is the real killer.

  241. Therein lies the rub…

    That means, to my simple way of thinking, that they need to keep their jobs AND [my emphasis] they need to have some buffer in case they are retrenched and have to look for something else.

  242. Elise, it all gets back to the ‘margin of safety’ principle as far as financing goes. The simple question: what if things change, how will we handle it?.

  243. Legion,

    Regarding your emphasis – totally agree!

    Therein lies the rub indeed.

  244. What I’m not sure about, Elise, is the failure of individuals at a very microeconomic level to process the implications of their hoarding a component of a stimulus vis-a-vis the macroeconomic effects on their own jobs once a multiplier kicks in. There’s a fine line between battening down the hatches and the little boat on Sydney Harbour being crushed on the rocks because the energy of the wave pushed against solid resistance instead of merely passing through.

  245. Legion

    Try to think of it this way: what if the government does nothing? Would we be worse off or better off?

  246. John McPhilbin, on March 11th, 2009 at 2:04 pm

    Worse. That’s NOT the argument I’m making; the one I AM making relates to how people relate to each other, and to government, and economy as a whole. Social capitalism only works if people register that what they do or don’t has systemic, or social, implications.

  247. Legion

    Okay, what happens if a large percentage of people, this time around decide to either pay off their credit cards or put it aside for when they need it – in other words they don’t spend it frivolously. This will obviously affect jobs and I don’t think much can be done to prevent that from occurring.

    With still high levels of debt and still little savings many will continue to struggle.

    So, in the end it’s about jobs, jobs, jobs.

    That’s where other parts of the stimulus are also aimed at maintaining. The other issue is this is just the first round of government spending – depending on how long and deep the crisis goes they may reach anywhere up to $200billion.

    If this is the case, the government will continue to target areas where they think there is the best likelihood of saving jobs.

  248. So, in the end it’s about jobs, jobs, jobs.

    Is there any empirical evidence that where job losses are occurring matches Government’s targetting?

  249. Legion

    At this stage this current stimulus is a pre-emptive strike, as Gittins highlights:

    “Almost 70 per cent ($29 billion) of the $42 billion is going on capital works projects. But Swan has tried to ensure the money is spent quickly by targeting it towards lots of quite small building projects.

    Half the money is going on repairing and adding new facilities to every school in the country. The rest is going on fixing black spots on the roads, building boom gates at level crossings and building 20,000 new social housing and Defence Force homes, with about $3 billion going on a small business investment incentive.

    All these projects are worth doing in their own right, they should be easy to get going and they should give a boost to employment in the small businesses that dominate the building industry.

    The remaining 30 per cent ($13 billion) is going on cash bonuses – transfer payments – of up to $950 to most taxpayers, parents of school children, single-income families, some students and farmers. Many households will get multiple dollops of $950.”

    I guess as various industries show increasing strain the government may seek to assist. This is all new ground Legion.

  250. Legion

    Here’s another concern, both the federal and state governments have got their razor’s out as far as jobs go.

    Razor gang will keep cutting: Tanner
    http://www.theaustralian.news.com.au/story/0,25197,25171009-601,00.html
    “FINANCE Minister Lindsay Tanner has defended his razor-gang approach during tough economic times and warned of more public service cuts to come.

    “In the midst of the most savage global downturn in decades, we don’t need less reform, we need more,” he told the National Press Club today. “

  251. All these projects are worth doing in their own right, they should be easy to get going and they should give a boost to employment in the small businesses that dominate the building industry.

    So, no, government hasn’t matched spending to job losses per se, because it doesn’t know where job losses will be occurring in an incomplete market with large ranges of uncertainty, but has certainly targetted something for sake of certainty about expending public moneys on substitute jobs.

  252. Legion

    The pre-emptive attempt aside, and you do make a good point, because no one really knows yet whether it’s money worthwhile spent, especially if job cuts across the public and private sectors far exceed those created.

    Consider the following, I’m betting it’s a scandal in the making of mammoth proportions. One of the most significant weaknesses we have today, and especially in this climate, are state government’s like NSW, in my opinion. They’ve grossly mismanaged state finances over the last decade not to mention health, transport, education etc, and they’ve got the gall the hire more spin doctors to try and create the illusion that they’re competent and in control.

    In NSW alone the following stories have broke:

    $1m extra a year for advice
    http://www.smh.com.au/national/1m-extra-a-year-for-advice-20090307-8rvs.html
    THE Premier Nathan Rees’s mega-ministry is costing $26 million a year, with the wages bill for political advisers and spin doctors increasing by $1 million a year under his stewardship.

    Despite his pledge to cut the number of advisers working in ministerial offices, Mr Rees presides over a gargantuan government where staff numbers have blown out to 239.

    Royal North Shore Hospital’s $1 billion bungle
    http://www.news.com.au/dailytelegraph/story/0,22049,25169144-5006009,00.html
    STATE Labor’s $1 billion RNS Hospital project is in a shambles with the discovery that its operating theatres are too small for major operations.

    Derailed: no power for new carriages
    http://www.smh.com.au/national/derailed-no-power-for-new-carriages-20090309-8tc5.html
    THE CityRail network has insufficient electric power to run the biggest order of new trains in Australia and has been forced to spend more than $1 billion to fix the problem and to pay for other essential upgrades.

    NSW is a money pit simply because the government are complete incompetents.

  253. Robert Gottliebsen, point out a disturbing trend, banks and businesses are no doubt aware of this problem:

    The contagion of distress
    http://www.businessspectator.com.au/bs.nsf/Article/Dun–Bradstreet-$pd20090309-PXR24?OpenDocument&src=kgb
    Behind the 2009 fall in bank shares is a serious deterioration in the number of Australian companies that are facing financial distress but have yet not fallen into administration.

    Anecdotally a number of companies have told me that their customers, incredibly including government-linked bodies, have slowed their rate of account payment significantly.

    Slow payment is developing into an Australian contagion which, unless reversed, will spread through the entire business community and stretch capital resources.

    Australia’s leading debt rating/collection agency Dun & Bradstreet raised the financial distress alert last month when they reported that the number of companies rated as having a high risk of financial distress or failure was up 12 per cent on the previous year and was 20 per cent up on 2007 figures. D&B reported a 40 per cent rise in debt referrals in November and December and a sharp increase in payment terms which took debtor days to the highest level since 2001.

    Since then there has been a significant further deterioration and the level of impending financial distress among business enterprises has risen to levels that D&B have not seen since the early 1990s

  254. John McPhilbin, on March 11th, 2009 at 3:22 pm

    I imagine much closer scrutiny will be paid to bureaucratic excess, or even simple expenditure, by the public in times of relative scarcity than in times of abundance where those lapses, like Ponzi schemes, can be better hidden. Sometimes that will be pennies wise and pounds foolish; and other times that will be warranted in its revelations of rank incompetence and tendencies towards nepotism and bloat well-deserving of criticism, inclusive of spin to slap more lipstick on the pig.

  255. Legion

    “inclusive of spin to slap more lipstick on the pig”

    Lol

  256. Legion,

    Totally accept the concept that we have a potential situation of individual logic and collective folly.

    The same could be said about trade embargos of one sort or another – it can make individual sense for each country to avoid increased unemployment by preferentially giving jobs to their citizens, but affects their trade partners, which ultimately affects them in the end.

    It is a short-term gain, long-term loss argument.

    However, I would venture to suggest that we are seeing the problem too much as A or B, and not enough of a more nuanced A & B.

    There is an argument for a least worst option, where some people would be better off saving or paying off bills, rather than losing their home and being forced onto the streets.

    Others of us already have $0 credit card debt, $0 personal loans, $0 margin loans, and a savings buffer, due to being more cautious bears during the boom. Those Aussies in this more fortunate situation can indeed continue spending and thus support the economy.

    So the bears are perhaps supporting some wounded bulls?

  257. Elise

    “Others of us already have $0 credit card debt, $0 personal loans, $0 margin loans, and a savings buffer, due to being more cautious bears during the boom. Those Aussies in this more fortunate situation can indeed continue spending and thus support the economy.

    So the bears are perhaps supporting some wounded bulls?

    I’m wondering about the ratio of bears to bulls Elise, and will this be enough?. I’m assuming that many of the cautious bulls are close to or have retired – I think many will want to hold back as well, given their invested funds may have taken a significant hit.

  258. John,

    Cautious bulls, now? Is there such a beast?

  259. Yep, agree up until you separate the A&B nuance back out into polarised A’s and B’s again, when A’s and B’s aren’t necessarily so arranged based in actual need, but arrange themselves according to perceived need present and future, which is behavioural….

    There is an argument for a least worst option, where some people would be better off saving or paying off bills, rather than losing their home and being forced onto the streets.

    Others of us already have $0 credit card debt, $0 personal loans, $0 margin loans, and a savings buffer, due to being more cautious bears during the boom. Those Aussies in this more fortunate situation can indeed continue spending and thus support the economy.

    …I don’t know empirically, and the relationships between micro-segments and macro-aggregates remains one of the conundrums for orthodox economic models. Who are the somes and who are the others in a macro model which presumes the somes and the others will rationally respond alike, or even just predictably, to a request based in macro reasoning and measured in macro terms?

  260. Legion,

    No I didn’t. You are tangling up the argument.

    A & B are hypothetical end-members of a continuum, separated purely for the purposes of making the case that not everyone has to act identically.

    We do not have to argue to the death whether EVERYONE should save a windfall, or EVERYONE should spend it. Nor should we expect that all Aussies do the same thing. That was my point.

  261. Elise

    Got me! I meant ‘cautious bears’

    Legion

    I find your confusion interesting, simply because the questions posed assume a linear relationship or a simply cause and effect feedback loop. This type of analysis works fine in some instances if you add 1 to 2 you get 3. However, the reflexive (human element) often defies simply logic and therefore reacts in a non-linear fashion – which is unpredictably.

  262. Elise, or said another way:

    A & B are hypothetical end-members of a continuum, separated purely for the purposes of making the case that not everyone has to act identically.

    We do not have to argue to the death whether EVERYONE should save a windfall, or EVERYONE should spend it. Nor should we expect that all Aussies do the same thing. That was my point.”

  263. John,

    Que???

    That looked like copy-paste. Did you forget something?

  264. Precisely. Any non-specifically directed about of $s is always going to be subject to the vagaries of human reaction.

  265. Whoops, amount not about.

  266. Legion

    Elise makes a good point. An experiment some years back with a mathematical model that was designed to understand market behaviour yielded some pretty interesting insights.

    The Efficient Market Theory holds that all participants are rational and the market embodies all the knowns and in many cases unknowns. This theory is hopelessly outdated and does not explain the obvious irrationality of market behaviour.

    A team of economists worked at isolating various approaches to investing i.e such as momentum investors or those who watch price charts and try and anticipate the next big price move and ‘value investors’ those who seek to buy at bargain prices when stocks and are willing to hold for many years.

    With just these two types of investors, and and excluding the many variables real markets include, the model started behaving in completely unpredictable ways.

  267. Elise of Perth, on March 11th, 2009 at 5:06 pm Said:

    John,

    Que???

    That looked like copy-paste. Did you forget something?

    I don’t follow – did you mean the following? – I thought you expressed the concept quite well.

    Elise, or said another way:

    A & B are hypothetical end-members of a continuum, separated purely for the purposes of making the case that not everyone has to act identically.

    We do not have to argue to the death whether EVERYONE should save a windfall, or EVERYONE should spend it. Nor should we expect that all Aussies do the same thing. That was my point.”

  268. Min, on March 11th, 2009 at 5:08 pm Said:

    Precisely. Any non-specifically directed amount of $s is always going to be subject to the vagaries of human reaction.

    Precisely. Exactly Lol

  269. Really? So what can we learn from continua of indeterminate segmentation and skewness in advance, or non-linear stochastical processes, when considering a presumably neo-Keynesian stimulus package being sold as, well, linear and somehow determinate?

  270. It should be pointed out that since Keynes’ days the economies and markets have gone global and there are so many new factors involved that it renders much of what Keynes’ proposed as questionable under various circumstances. This is something Minsky, who was an admirer of various aspects of Keynes’ thinking, points out as an evolving structure in which yesterday’s cures may no longer be valid when the system evolves.

  271. In a nutshell ya’recon John 🙂

  272. Legion

    I think my previous post explains somewhat as to why things are also different. Our government isn’t the only government at a loss as to how to deal with this crisis simply because it is so damned complex.

    Why This Aint No Ordinary Recession Concern
    Posted on February 28, 2009 by johnmcphilbin
    https://blogocrats.wordpress.com/2009/02/28/why-this-aint-no-ordinary-recession-concern/
    And what does Gittin’s article conclude?:

    Punchline: as everyone from the International Monetary Fund to the US Federal Reserve chairman, Ben Bernanke, has warned, until the Americans fix their blocked banking system, no amount of fiscal stimulus or interest-rate cuts will make any difference.

    Our economy will remain in trouble until they do.

    Type Three – The Global Ponzi Financing Boom Led By The US

    The crisis that arose from the failure of Lehman Brothers in mid-September last year was like a global heart attack. For a while the heart stopped beating, credit stopped flowing and we went perilously close to a global financial collapse that would have wreaked untold destruction on economies around the world.

    Point is: that doesn’t happen in every recession. In fact, we haven’t seen anything so life-threatening since the Depression of the 1930s. That’s what’s so different this time.

  273. Min, on March 11th, 2009 at 5:33 pm Said:

    In a nutshell ya’recon John 🙂

    Yep 🙂

  274. Legion, on March 11th, 2009 at 5:25 pm Said:

    Really? So what can we learn from continua of indeterminate segmentation and skewness in advance, or non-linear stochastical processes, when considering a presumably neo-Keynesian stimulus package being sold as, well, linear and somehow determinate?”

    If what I think your saying is indeed what you are saying Legion, then yes. But those are the risks and it doesn’t render the package as a complete waste neither. It just won’t work out to be a nice neat solution.

  275. Elise of Perth, on March 11th, 2009 at 1:30 pm

    Elise, just come back to this thread and read your comment.

    If people are in trouble, going to be in trouble, or expect to be in trouble in the next 12 months – $900 is not going to help them with mortgage payments…it really is chicken feed…

    However, not all those people WILL be in trouble…but any money that could have helped those IN trouble is now spent…gone…conservative economic managers my @r$e…

    The alternative approach (for example):

    100 people all getting $900 who don’t really need it now, the government gives away $90,000…

    If unemployment reaches a high of 10% – that’s ten people (out of the 100) who we could have helped to the tune of $9000 EACH – to help maintain their mortgages…

    Too much, too soon, to the wrong people – knee jerk decision making…by Kevin Rudd & Co…

    …just like a blanket guarantee for three years to the greedy bastards who started this mess in the first place…no expected outcomes, no requirement to follow any RBA decisions, no expected standards – just a giveaway guarantee…silly people…

    …pity we can’t competency train and assess politicians and beaurocrats – who couldn’t even run a fish & chip shop in Ipswich…by the looks of things!

  276. TB, well said.

    Not a word on how these stimulus packages are going to repaid, there is no more assets to sell so it looks like the next generation will have to pay higher taxes for what???

    This is our watch and we should take the pain!

    Now, back under my rock.

  277. Welcome scaper

  278. Ta, scaper! Nice to see the avatar again.

  279. Assuming he’s anywhere near right, this is an astonishing estimate.

    Stephen Schwarzman says 45 per cent of global wealth written off by financial crisis
    http://www.news.com.au/dailytelegraph/story/0,22049,25170415-5001028,00.html
    PRIVATE equity company Blackstone Group CEO Stephen Schwarzman has said that up to 45 per cent of the world’s wealth has been destroyed by the global credit crisis.
    “Between 40 and 45 per cent of the world’s wealth has been destroyed in little less than a year and a half,” Mr Schwarzman told an audience at the Japan Society. “This is absolutely unprecedented in our lifetime.”

  280. John McPhilbin, on March 11th, 2009 at 7:22 pm

    Wealth, JMc, or greed (“fiat” money – it didn’t exist in the first place)…?

  281. TB Queensland,

    You are right, of course.

    $900 is chicken feed for those in DEEP manure. The money would have to be more targetted, to help people who have really got themselves in deep. Better half and myself had mused on exactly that topic earlier.

    Some, who had really seriously exposed themselves to margin loans and refinancing to play the stock market, would not be saved from themselves, even with a very generous handout of say $500k. There is a potential moral hazard of encouraging bad money management if there are no consequences for some types of activity.

    I guess what I was trying to suggest, was that it was rather absurd to tell people who were teetering on the edge to spend a windfall gain, in order to save a third party, or the economy in general, or even Chinese manufacturing exports.

    If they were simply running on the bones of their behinds, almost making it, then the windfall gain might give them encouragement to keep going. Just as “respite care” allows family carers a breather, so they can continue their arduous role.

    Most likely though, $900 is too small to be particularly useful for any objective we could think of, except flag waving and feelgood activity by the Rudd Government. As such, it is really wasted taxpayer money.

  282. Elise of Perth, on March 11th, 2009 at 7:39 pm

    As I said, Elise, nice to have to back!

    …but then we agreed more often than disagreed…!

    Seriously, this is an awful time and it will get worse – the only redeeming feature I can see over The Great Depression is that nations talk more…

    …what astounds me though, is that there are not more “crisis committees” around the world – OR – why aren’t we privy to them?

  283. “Between 40 and 45 per cent of the world’s wealth has been destroyed in little less than a year and a half,” Mr Schwarzman told an audience at the Japan Society

    “Easy come easy go” for some eh? Shame they had to screw over so many honest & hard working people in the process.

    Back to the basics for many people’s kids I guess…can’t hurt:

    Moby – Spiders

    “Let peace & beauty reign, and bring us LOVE again, like you can.”

    Not a particularly religious fella but i like the sentiment.
    N’

  284. “Most likely though, $900 is too small to be particularly useful for any objective we could think of, except flag waving and feelgood activity by the Rudd Government. ”

    You tell that to my wife who is looking forward to painting her car roof.
    N’

  285. I thought this was an interesting piece:

    Irrational Depression

    Newsweek, by Allan Sloan

    August 2001

    There are times when it’s probably a good thing that the U.S. economy isn’t run by logic. Because if you applied logic to the news these days, the logical conclusion would be that the economy has fallen off a cliff and is about to splatter itself all over the canyon floor and take us with it.

    Friday’s newspapers, for instance, carried stories about more than 30,000 technology workers getting fired–forget the word “layoffs”; we’re talking firings. Yech. And an astounding $45 billion write-off by JDS Uniphase, a onetime high flier now fallen to earth. JDSU, whose stock is down around 95 percent from its peak, has decided that companies it bought are worth $45 billion less than it paid for them.

    Earlier in the week there was yet another huge round of firings at Lucent Technologies, once touted as a premier supplier …
    —————–

    N’

  286. N’

    I rest my (and JMc’s) case!

  287. “Friday’s newspapers, for instance, carried stories about more than 30,000 technology workers getting fired–forget the word “layoffs”; we’re talking firings.”

    Well don’t get me started on this one…….At the same time I am sure your government, like my own and big business are screaming there is a shortage of IT workers as they lay off….Hmm…..you almost get the impression it is self made?

  288. TB Queensland, on March 11th, 2009 at 7:28 pm Said:

    John McPhilbin, on March 11th, 2009 at 7:22 pm

    Wealth, JMc, or greed (”fiat” money – it didn’t exist in the first place)…?

    Ponzi, Ponzi Ponzi Finance TB, It didn’t exist in the first place – false affluence. Exactly.

  289. Check out the date of the article. August 2001. Just before 9/11…& then the housing boom.

    It’s often about perception. And debt. And access to credit. And where government & private investment money flows.

    But have they shot off all their wad this time?

    I don’t think so. A young(er/ish) generation spurred on by the need for innovation, and hormonal bursts of energy,
    and being bored to tears by the moaning of oldies, and fear of being shoved into the military, and feeling the need to exercise their imagination, and to find moolah to fill their desires & addictions…will BLAST us out of this deep recession.

    Ironically, some of the innovation & technology will probably flow out of the military industrial complex.

    Think Silicon Valley.

    Cheers
    N’

  290. Elise of Perth, on March 11th, 2009 at 7:39 pm Said:

    Very well said Elise.

  291. It amazes me of just how deaf dumb and blind the world became to the troubles brewing in the US financial system Lets backtrack to 2001 in the US, one scandal after another broke as some of the largest companies in the world either went close to the edge or over.

    And why? Well I think William Flannagan, former writer and editor for Forbes, The Wall Street Journal, and author of ‘Dirty Rotten CEOS ‘How Business Leaders Are Fleecing America’ message should have rung alarm bells with investors and governments the world over, but nobody seemed to take much notice. In 2003 Flannagan warned: ‘Wall Street never likes to dwell on its fiascos. When its miscreants are caught, they usually admit nothing, yet promise never to do it again. They pay some fines, lop off a few heads, then everyone gets back to business as usual. But the latest corporate scandals have created too much carnage to allow a quick return to normalcy. Tens of millions of investors were badly burned; trillions of dollars evaporated; hundreds of thousands of jobs vanished. Not since 1929 have Americans had their faith in corporate America rocked so severely. Don’t expect them to flock back into the stock market any time soon. It wasn’t just a market cycle that caused all this damage. It wasn’t the popping of the dot.com bubble. It wasn’t the slowing global economy. It was the cupidity and stupidity of CEOs who were out to make themselves billionaires. Screw everyone else, from stockholders to employees to regulators, the business leaders seemed to be saying. Like dispatches from the front, the press reports of the corporate scandals were filled with grim numbers as one major corporation after another fell dead or was gravely wounded. Enron. Arthur Andersen. Global Crossing. WorldCom. AOL Time Warner. Tyco. Adelphia. Qwest. Even Citigroup, the largest bank in the world. For months we were bombarded with stories of fraud and recklessness that involved bankers, directors, brokers, analysts, consultants, politicians, and lawyers, as well as the chief executives themselves. It became hard to tell the players without a scorecard. (The Forbes List of Highest Paid CEOs could have served as one, however.) In the end, it all became a blur for many readers and investors. Newspapers, magazines, and TV hammered the scandals until they became as depressing as opening up your 401(k) statement. Readers welcomed the comic relief of Tyco’s Dennis Kozlowski and his $6,000 shower curtain, Adelphia’s John Rigas and his $13 million private golf course, and the laid-off Women of Enron posing in Playboy to pay the rent. But the evil these men did shouldn’t be simply swept into history’s dustbin (the one marked “recycle”) and forgotten until the next time. We need to view slow-motion replays of some of the ugliest moments in American capitalism so that they won’t be repeated. If you go beyond the headlines, it becomes clear that what happened was, sadly, inevitable. The outrageous award of stock options was the common denominator in all of these grim tales. Wave enough money in the faces of enough CEOs, and too many of them will do anything to get it. Couple that with puppet boards of directors, greedy moneylenders, ignorant investors, and sleepy regulators¿and presto! you have the critical mass for disaster. What can you do as a hapless investor? Read this book, remember its lessons, and in the words of the Albert Finney character in Saturday and Sunday Morning, “Don’t let the bastards grind you down.” You have stockholder rights; use them. You have brains; think before you invest. You have votes; don’t waste them. You should be mad as hell, not only because most of these dirty rotten CEOs will get away with what they did. They robbed you blind. Don’t take it anymore. Stop them before they steal again.”

  292. …And I should add, the fiascos Flannagan wrote about were quickly forgotten then it was on to the housing boom and more financial insanity…and here we are.

  293. How would you like this man managing your money for you? Talk about comic relief.

    Capitalism is not dead, says Adler
    http://news.smh.com.au/breaking-news-national/capitalism-is-not-dead-says-adler-20090311-8uxl.html
    Disgraced businessman Rodney Adler says he doesn’t believe the current global financial crisis signals the death of capitalism.

    The former director of HIH Insurance served two and a half years in jail for his part in what was Australia’s largest corporate collapse – the $5.3 billion failure of insurance giant HIH in 2001.

    In the latest issue of BRW magazine, out on Thursday, Mr Adler speaks about life after jail, as well as executive salaries and capitalism.

    “All the politicians and leading people are saying that this is the death of capitalism,” he said.

  294. Here’s a great article for anyone who’s interested. Very insightful – I get the sense that Wolfson could see the writing on the wall.

    Minsky’s theory of financial crises in a global context
    By Wolfson, Martin H
    Publication: Journal of Economic Issues
    Date: Saturday, June 1 2002
    http://www.allbusiness.com/accounting/1082161-1.html
    Minsky’s theory of financial crises is set within the context of an expanding economy. As the expansion develops, optimism increases, and conventions about the proper level of debt and risk begin to change. Prices of financial assets rise and the general level of speculation increases. Speculation is taken to be the attempt to bet on the future direction and psychology of the market (Keynes 1936, 158), and also the more general process of financing assets whose value depends on future developments (Minsky 1975, 120-23).

    As attitudes about risk and proper liability structures change, the financial system becomes increasingly fragile. Minsky’s view is that fragility grows as debt levels increase, the proportion of short-term debt rises, liquidity declines, and speculative and Ponzi firms increase (Minsky 1977, 142).

  295. How would you like this man managing your money for you? Talk about comic relief.

    Well, we wouldn’t want anyone ‘overburdened’ with the onerous task of self-regulation by for-profit bankers of for-profit bankers would we, while we’re seemingly busy still dithering and making a play for more centralised powers which continue the blurring of interests and regulatory capture? Especially, not now that Alan has had his epiphany and everyone has wised up.

    As for placing responsibility for overall systemic risk with one authority, Mr Bernanke noted that “some commentators have proposed that the Federal Reserve take on the role of systemic risk authority” while “others have expressed concern that adding this responsibility would overburden the central bank”.

    Whether the Fed’s right for the job depends on how Congress defines the role of the new authority, Mr Bernanke said. “As a practical matter, however, effectively identifying and addressing systemic risks would seem to require the involvement of the Federal Reserve in some capacity, even if not in the lead role,” he said.

  296. The problem is John there are far too many who have an interest in archaic & polluting industries, including corporations, shareholders, Unions…and companies/private equity non-Labor/Dem supporting…and even those who want to own a share of the UPCOMING PIE…that are interested in derailing or owning the Rudd/Obama governments…dictating agendas…

    and consequently they might find it worthwhile to constantly “talk down the economy” for now…part of an overall strategy….

    the perception of a “deep recession” …and subsequent calls for “whatever it takes” policies & ventures…is possibly an effective way of smashing thru Union walls, cutting costly public servants, and reorganising the public education and other research funding in order to retain their privileges and energy/transport stranglehold whilst maneuvering their way into the so called “Clean Green” driver’s seat.

    It’s a race to OWNING the future…the GAMES some people play eh?…whilst the HERD does what HERDS DO when told to PANIC.

    Found this interesting:

    NY Times

    Obama’s ‘green jobs handyman’ ready to serve

    By MICHAEL BURNHAM, Greenwire
    Published: March 10, 2009

    Van Jones is an author, activist and agitator on environmental and human rights issues.

    But when he starts a White House job next week, just don’t call him the green jobs “czar.”

    The 40-year-old founder of Green for All — a national organization dedicated to lifting people out of poverty through environmental jobs and innovation — will start March 16 as an adviser to President Obama on green jobs, climate and energy initiatives (Greenwire, March 10). Working within the White House’s Council on Environmental Quality, Jones will advance the president’s agenda among the federal bureaucracy and the public…..

    Jones: HUD has somewhere in the neighborhood of $10 billion to do energy-efficiency retrofits and weatherization. I know [HUD] Secretary [Shaun] Donovan is going to be passionate about getting that money spent well. But I’m not in a position now to comment on all of the details, the particulars of how the various agencies are planning to spend the money.

    E&E: A Rutgers University report published today suggests that most green job openings will not be new occupations, but rather traditional occupations with a new layer of “green” skills and credentials. For example, laborers and building contractors who need specialized training and certification to perform home weatherization audits. Do you agree?

    Jones: Yes. That’s one of the exciting things about this. Sometimes people think we’re talking about some exotic occupation from Mars that nobody’s ever heard of. That we’re talking about George Jetson or Buck Rogers when we’re thinking about green jobs. We’re not talking about solar ray-guns; we’re talking about caulking guns as one of the major tools we’re going to need to be smarter with energy. Those are jobs our existing work force, with a little training, can start doing right away.

    E&E: Going forward, what role should the private sector play with regard to creating and keeping green-collar jobs?

    Jones: The president has made very clear that he wants the majority of these jobs to be private-sector jobs. I think that’s appropriate. Entrepreneurship, innovation and the free market will solve a lot of these problems. We just have to get the rules right and get the supports in place so our new industries can take off.
    ————————
    In the midst of all the confusion who will emerge w/ the goodies?

    And after the cyclone, who will hold the first RAY OF LIGHT?

    How many will have been SACRIFICED for the glory & rewards of THE WIN?
    N’

  297. “is possibly an effective way of smashing thru Union walls”

    Might add, some walls may need to be broken…sadly. Let’s hope it can be done in a compassionate, rational way…fair payouts/compensation, retraining opportunities, counselling, affordable health opportunities etc.

    Thinking Unions VS Companies is just too B/W these days.

    But SERIAL greedy buggers should not be permitted to play THE GAME anymore…they should be forced to SERVE the COMMUNITY.

    As THE CYCLONE of CHANGE follows the CYCLONES of MISMANAGEMENT & UNSUSTAINABILTY…it will serve our governments & their visionary allies well to protect the vulnerable…whilst shining THE LIGHT brightly onto the path to the NEW WORLD. And ease the pain of the undeserving.

    The Rudd government seems pretty capable I reckon of assisting THE TRANSITION & lessening the impact. And PREPARING us…for THE INEVITABLE.

    Let’s hope their courage doesn’t falter now. And they find sensible allies from various political persuasions…

    Time to cross that bridge…as the winds batter…TOGETHER…we can do this…

    Leave behind the fear-mongers & the saboteurs & their poisonous money trees…leave them to their toxic fixations…and inadequate shelter…& delusions.

    N’

  298. “nasking, on March 12th, 2009 at 1:15 am Said:

    The problem is John there are far too many who have an interest in archaic & polluting industries, including corporations, shareholders, Unions…and companies/private equity non-Labor/Dem supporting…and even those who want to own a share of the UPCOMING PIE…that are interested in derailing or owning the Rudd/Obama governments…dictating agendas…

    and consequently they might find it worthwhile to constantly “talk down the economy” for now…part of an overall strategy…

    There even doing it in China N’ – We should call it the “Great Talking Down’

    China hit raises fear of great recession”

    http://business.smh.com.au/business/china-hit-raises-fear-of-great-recession-20090311-8v9e.html

    THE “great recession” is hitting China harder than expected, threatening to prolong the bust in the commodities sector and worsen the domestic downturn.

    Chinese exports fell almost 26 per cent last month, a far cry from the small increase that had been expected, as a collapse in global demand hit Australia’s second-largest trade recipient.

    Evidence of the slump came after the head of the International Monetary Fund said the world was heading towards a “great recession”, and predicted the global economy would shrink this year.

    For Australia, the chief concern of the decline in Chinese exports would be if it triggers further falls in commodity prices.”

  299. There I go, I meant: They’re even doing it in China N’ – We should call it the “Great Talking Down’

  300. I suspect the Rudd Government have realised they may be fueling another crisis.

    First-home grant to end
    http://www.theaustralian.news.com.au/story/0,25197,25174266-601,00.html
    THE Rudd Government is resisting requests to extend its highly successful increase in the first-home buyer’s grant, raising fears of a housing slump once the scheme is terminated on June 30.

    A record 26.5 per cent of new home loans went to first-home buyers in January, and the scheme appears to have reversed a five-year decline in the new home building industry, softening the effects of the recession.

    While Prime Minister Kevin Rudd hailed these results as evidence of the success of the stimulus package, two key ministers sought yesterday to douse expectations the scheme would be extended.

    Finance Minister Lindsay Tanner told the National Press Club he was delighted the scheme was being so successful and said its future was open to debate as the May budget was developed.

    “But I’d have this to say; it’s going to be a very tough budget and there are lots of other issues that we also have to give consideration to. So I don’t wish to fuel any expectations about that.”

  301. Rather than encouraging young couples into large debts perhaps it’s time the government stopped ignoring this country’s housing shortages for lower socio-economic groups, without over-inflating existing housing prices and rents. It all comes back to affordability across the board.

    Housing shortage will hurt the poor
    http://www.theaustralian.news.com.au/story/0,25197,25174266-601,00.html
    The Government has justified the temporary boost to the grant as a measure to bring forward purchases in the face of economic crisis.

    But the council’s report highlighted the country’s long-term housing shortage, the burden of which would fall predominantly on poor families.

    Owen Donald, the chairman of the council, said a lack of land on urban fringes of cities did not appear to be driving the shortage, contrary to industry claims.

    Instead, Dr Donald said, state governments had failed to provide enough social housing. They had also contributed to prolonged planning and development approval constraints on “infill” land in built-up areas.

    New research prepared for the report showed a lack of affordable housing for low-income renters. These renters need 237,000 dwellings, the research found.

    But across the country there are only 91,000 affordable houses or apartments. Of these, higher-income households occupied 56,000, leaving a shortage of 202,000 affordable houses and apartments.

    The Minister for Housing, Tanya Plibersek, said the report showed that government and industry responses could begin to close the gap between housing demand and housing supply.

    “Certainly, the argument that the previous federal government mounted that it was all the states’ faults and it was all about land supply, I think is disproved by this report.”

    Dr Donald said the worst-case scenario of a 1.5 million shortage in houses was unlikely to eventuate, as the Government and industry responded to the problem.

  302. Spoken like a true politician

    Fall in super savings temporary: Tanner
    March 12, 2009 – 8:04AM
    http://news.smh.com.au/breaking-news-national/fall-in-super-savings-temporary-tanner-20090312-8vja.html
    The federal government says a collapse in superannuation savings is only a short-term problem, after the International Monetary Fund (IMF) warned of an associated blowout in pension costs.

    The IMF this week warned Australian retirees are the most heavily exposed to the global financial crisis.

    But Finance Minister Lindsay Tanner says the problem isn’t permanent and has refused to say whether the government would consider lifting the retirement age as suggested by the fund.

    “There’s no question that we’ve got a longer term challenge here about retirement incomes,” Mr Tanner told ABC Television.

    “(But) it’s also important to remember those superannuation problems are not permanent.”

  303. So the IMF is now calling the GFC – The Great Recession…

    Only one letter to go…

    The trickle is starting to become a waterfall – if we could only get the banks, managed funds and insurance companies to come clean with their bad debts (toxic?) then we can get on with the clean up…

    …and get ready for N’s, BRAVE NEW WORLD…

    +++++++++++++++++++++++++++
    But Finance Minister Lindsay Tanner says the problem isn’t permanent and has refused to say whether the government would consider lifting the retirement age as suggested by the fund.

    So who runs the IMF? The Robber Barons…

    We serfs are just so much cannon fodder…

    Work ’em longer…work ’em harder…work ’em to the grave…

    The game never ends…

    If a social system “needs” greed to function (it broke because too many people were chasing money for nothing rather than being “productive” and now we need to throw more money to keep it churning) then its time we changed it…

  304. LOL

    Laissez-faire enough, crows Adler
    http://business.smh.com.au/business/laissezfaire-enough-crows-adler-20090311-8v9q.html
    Michael Evans knows everyone’s entitled to their opinion.
    NOTHING’S grander than delusion.

    Now Rodney Adler has taken up a gig as a spokesman on the future of capitalism.

    As if free markets weren’t in enough trouble.

    Still, capitalism needs all the friends it can get. And in what’s a relief to all lovers of laissez-faire, Adler doesn’t think capitalism is dead.

    “All the politicians and leading people are saying that this is the death of capitalism,” he mused in a magazine interview. “I actually have a different view.”

    Adler, of course, knows a thing or two about greasing the oils of commerce and keeping things ticking over. Particularly when he was locked away and just trying to help the kids do their homework

  305. Some major losses among the mighty.

    Frank Lowy, James Packer see fortunes plunge in financial crisis
    http://www.theaustralian.news.com.au/business/story/0,28124,25175317-20142,00.html
    Clive Mathieson | March 12, 2009
    Article from: The Australian

    THE financial crisis has trimmed the ranks of Australian billionaires and more than halved their fortunes.
    Lowy, Packer lose billions in crisis

    Just 10 Australians have made it onto the annual Forbes list of the world’s US dollar billionaires, down from 14 last year. And their combined fortune has collapsed from $US38.4 billion ($60 billion) to just $US16.2 billion.

    The biggest loser has been iron ore miner Andrew Forrest, who has slipped from 145th on the list last year to 376th this year as his wealth, mainly the value of his stake in Fortescue Metals Group, slumped from $US6.5 billion to $US1.9 billion.

    Westfield Group founder Frank Lowy, the biggest owner of shopping malls in the world, is the highest ranked Australian this year, with his fortune of $US2.7 billion (down from $US6.4 billion) ranking him No234 on the list.

    He is followed at No261 by casino owner James Packer, whose fortune has fallen from $US5.7 billion to $US2.5 billion, and iron ore heiress Gina Rinehart with $US1.9 billion


    MODERATOR MODE: John once again, can you please refrain from cutting and pasting editorial articles. A couple of sentences is fine – with a link to the main article – together with your perspectives. If people want to read the entire article they can go to the link. Please do not simply reproduce the entire article in your comments. Thanks.

  306. Where did I reproduce an entire article? What I cite is relevant to the subject under discussion.

    MODERATOR: Scroll up. People are interested in your opinions John, not just simply reading a large amount of text that you have cut and pasted from some other article. Please just provide the link to the orginal article together with your views. If people want to read the article they will click the link.

  307. This has been an extremely productive discussion in my opinion, and if the moderator finds the topic distressing then he has every entitlement to avoid it altogether. Please don’t moderate for reasons that are frivolous.

    MODERATOR: It is common courtesy for other readers, both here and at Blogocracy, for commentators NOT to cut and paste large amounts of text from another article. Despite repeated requests, you still continue to do this. All I am asking (once again) is that you simply provide a link to the original article.

  308. Umm, John, I happen to agree with the moderator here. You have been extremely productive of cut-paste.

    There is something important here, that Tim also tried to tell you earlier, several times, along with others. People are still trying to tell you and you are not listening.

    Sometimes your posts look more like a porridge of regurgitated negativity.

    Most of us also read the online news independently, so there is no value-add from cut-paste of the same articles.

    It might be better if you digested the opinions in these articles, and then summarised or dissected them for key points and flaws in their analysis?

    You are a clever and thoughtful man, John McP, but you are drowning us in lengthy, negative, cut-paste posts. Please hear the requests for a change in style?

  309. A lot worse…yes…

    what kind of sick fcks are out there?

    ‘Oily wasteland’

    http://www.abc.net.au/news/stories/2009/03/13/2514896.htm

    Anything to prove a point eh?

    Anything to win.

    You SOBs.

    N’

  310. nasking, on March 13th, 2009 at 8:01 am Said:

    A lot worse…yes…

    what kind of sick fcks are out there?

    ‘Oily wasteland’

    http://www.abc.net.au/news/stories/2009/03/13/2514896.htm

    Anything to prove a point eh?

    Anything to win.

    You SOBs.

    N’

    Exaclty

  311. Are we there yet?

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