Dollar is Merely Retreating in Good Order


Remember the famous German general von Kluck, from whom we get the expression, ‘you dumb kluck?’ Von Kluck was chasing the French down the Marne in 1914. Victory looked like it was close at hand. The French were pulling back. Von Kluck, who had orders to attack Paris, decided instead to pursue the French army. He was convinced that they were beaten. All he had to do was keep the pressure on…and they would surrender.

Some of his field commanders, however, noted that they were picking up very few prisoners. Normally, an army that is beaten throws off many discouraged and confused soldiers. Since there were so few, the commanders reasoned that the French army was still intact; it was merely retreating in good order and could turn and surprise the Germans at any time.

The commanders were right. France’s aging general, Gallieni, who was in charge of the Parisian garrison, realized that the Germans were making a fatal mistake. By pursuing the troops down the Marne, rather than attacking Paris, they exposed themselves to a counteract from the city itself.

“Gentlemen,” he is said to have said to his staff. “They offer us their flank.”

The French took the offer. They attacked. Using thousands of taxicabs, they moved troops to the Marne Valley as fast as possible and caught the Germans unprepared. The Battle of the Marne turned the German army around and ultimately cost them the war.

We bring this up now because we have a feeling that the dollar is not broken. It is merely retreating in good order. At $1.49 per euro, it is not at the record low you’d expect after so much negative press. And it is not giving up more ground. Instead, it is holding.

Yesterday, the dollar price of stocks went down. The dollar price of oil and gold went down too. The dollar has not yet counter-attacked. But the dollar bears are vulnerable. We wouldn’t be surprised to see them hit hard in the weeks ahead.

Of course, in the very long run, the dollar bears will prove to be right. We have little doubt that the coin shooter who finds a cache of US Treasury bonds in the year 3,400 – like Mr. Herbert in 2009 – will have tears in his eyes. Though perhaps not for the same reason.

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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  1. It is a form of protectionism. And preferable to actual protectionism. American policy makers can and will begin reversing the process when it suits them. Who will bail out the Fed – The world. Because in the same way that specific American banks were deemed too big to fail by America, the world pragmatically deems America too big to fail. (Central bankers deal in money; Not morals.) IMO.

  2. Pure speculation

  3. PURE SPECULATION…? As in PURE w/o any flaw or pure as in no basis for it…? Ambiguous statements by those accustomed to knee-jerking w/o restraint benefits nor informs no one!
    I fail to see where the world banking institutions have any choice ONE…… & TWO it is a damned sneaky plan to bankrupt China AND India in one single action to announce that the FED nears collapse within hours! The chaos created in Asia would be without equal and their only recourse would be to attack militarily or negotiate, thus giving the FED exactly what it would demand…namely a complete restructure.

  4. Below is Denningers call on Market Ticker joining that underground dollar bull movement and I am going with him. I still have that counterparty fear because market makers outiside the loop are in deeper than capital even after GS front running the mugs on their side.


    If you want to speculate on this outcome levered bets on radical dollar appreciation look like one of the best choices out there, followed closely by bearish levered bets on commodities. I would not consider such a speculative play that is not characterized by defined risk, as this analysis is based on nothing more than observation of behavior by market participants that all point toward their foreknowledge of an event that might happen in the reasonably-near future and is not, at present, backed up with actual significant credit-spread widening or other objective criteria.

    Disclosure: Initiated a small speculative, defined-risk play LONG the US Dollar (UUP CALL options for March 2010)


  5. Thats the problem Bill. Everyone knows that the dollar is doomed in the longer run. So when we get a bounce in the USD, after a little while everyones going to be looking at the long term doomed dollars they have on the one hand and eyeing off the increasingly discounted commodities they could be owning on the other hand. How long will they wait? I’m not sure but not as long as last year I’ll bet. A short sharp rally followed by worsening dollar punishment and PM’s and commods’ nearing “da moon” I reckon. Just a bit of speculation there.
    Hmmmmm wait there how much will I like it when diesel costs me $2/L….oh well, in Fine Mogambo Fashion(FMF), “we’re all freakin doomed”.
    Yes I can see it all clearly now. In the days ahead people will observe the few of us left still affording to drive vehicles and will be heard to whisper,” He must of been on of the ones who went long on commodities” :)

    …..or maybe, hurriedly getting about on a pushbike while elderly onlookers deride me with, ” I’ve always said the safest place for your money was in the bank sonny” :(

    Lachlan Scanlan
    October 24, 2009
  6. Buy a house Lachlan … Even if it is a 70k one on the west coast of Tassie. Hey, what can you lose – 35k if a greedy old man like Steve Keen is right maybe? And at least you’ll have somewhere to call home in Great Depression II. Or a property base to build on if he is wrong.

  7. Ned?

    It isn’t like Steve is alone. Even if Steve’s suspicions are not realised, there are plenty of other reasons that housing is in a bubble.

    FYI – a bubble means it is not sustainable in the long term.

    So that is pretty awful advice as it doesn’t provide context.

    Here’s the context:
    – buy anything you want without debt, because you are risking your own currently existing money.
    – buy anything with credit and you are risking future money, aswell as relying on future credit conditions (interest rates, insurance, ability to pay debt, etc)

  8. You’ve still got to get the basics right Pete – And a house to call home is part of the basics. Be it ever so humble. At the risk of being “marked down” for revealing too much about my personal circumstances maybe (which I don’t give half a fig over) I bought in early 2008 (after returning from o’seas) fully expecting a whack – I got lucky – Krudd helped me out – But either way I’m up maybe 10% and have lived rent free since. Sure it’s a “bubble” – But bubbles can resolve themselves via other means than bursting … And such an outcome is starting to look likely.

  9. Howdy Ned. Whats wrong with us chatting into the weekend? No mans an island eh (home alone today)
    “And such an outcome is starting to look likely.” At least in the short term nobody could prove you wrong on this Ned, however the implications of this answer longer term would be such as improving employment, business conditions and wages growth to ensure a reversal in private credit conditions. If government spending is used longer term to fill the current void then I believe inflation will occur in the presence of worsening business conditions. In this scenario housing prices will be left far behind because home ownership would not be a priority.
    If it suited me to move to Tassie Id agree that such a house at may be a very fair proposition (since in anyones terms 70k is very little) but pending an answer to the following question…ie have these houses escaped the bubble or are they just terrible houses or are they in a place nobody would want to live?
    Could it be the cold water, cold air and great white sharks that ail the place?

    Lachlan Scanlan
    October 25, 2009
  10. Or you could move to one of those country towns that were offering free land. I wonder if that is still happening? I reckon even here in Japan $70 would get you a home out in the sticks somewhere, maybe on the side of a “quiet” volcano but maybe that is safer than dealing with the sharks? ;)

    Greg Atkinson
    October 25, 2009
  11. G’day Lachlan – It is all pretty confused and confusing at the moment. Deflation or inflation? Asset price increases or decreases? (Even in which countries?) And even more important, “when” might such things happen? 2010 when the Oz gov does some tweaks based on Henry’s tax review? 2011 as the American Alt A loans start to bite? 2012 as the Financials cop some regulation? Or just maybe China stimulates again? 2014 as ever more boomers retire? How will immigration to Oz impact on all of this over the period? Could Asia have its own credit bust up and recession etc …

    Too big, too complex for me – So back to basics I reckon. With a house being a good thing to have – For most people anyway. If it can be had for minimal debt. On the West Coast of Tassie? Maybe not. But most of us usually have options of some sort or other.

    Maybe I value home ownership inordinately highly? But given that, I surely would be feeling to hedge some risk in that regard if I didn’t own one – Namely the risk of not owning even the most basic of ones should they continue to go up. That said, I’d still be waiting (for now) to see what happens as the FHOG drops off and interest rates go up and to see what Henry’s tax review says. But ultimately knowing that in our soiety being a long term renter wouldn’t suit me personally.

  12. Ned:

    I just think it is poor advice to recommend property – without context. If you are encouraging anyone taking on debt in the midst of a bubble, that seems irresponsible to me. If they have the cash though, that’s another story.

    You never know who reads this stuff.

    As for the ‘bubble’, you generally know my thoughts on this.

    If the Gov plays games and tries to prop up property (with immigration), this country may wind up being a less-than-wonderful place to live in, due to:
    – unaffordable housing
    – increased support costs for waves of immigrants
    – increased costs of living (more demand)
    – increased unemployment
    – increased foreign ownership of property (land banking, profits going overseas)

    This is a bubble. For every action that is taken to prop it up, a distortion in the economy will result. Then they try to fix the distortion, causing other distortions. Eventually you have a completely disfunctional economy that has it’s priorities all wrong.

    I certainly feel ashamed for voting Labor anyway. Not that the Libs would have been any good at this stuff either.

  13. Have to agree with Pete. If you can buy a house with minimal debt, fine. It’s a bad financial decision, but not a disaster. However, taking on a big mortgage for a non-productive asset is just stupid right now. Deflation: houses go down. Inflation: houses go down, at least in real terms. Interest rates will see to that. Ordinary essentials of living will rise, cost of money will rise, money left for housing will fall, probably a great deal. Maybe some idiot’s 95% leveraged $1m house will still be worth $1m in 20 years, but that will be small comfort if petrol costs $10 a litre.

    The only way housing can be a good decision is if we continue to have increasing debt to GDP, be charged low interest rates for that debt, and keep the large structural supports for housing at the expense of the real economy. I’m sure with enough government meddling we can manage this for a little while, but we can’t have the whole world borrowing. Eventually this perpetual motion machine will break down, the only question is when.

  14. I spoke in terms of a property for $70k fellahs – Specifically in an attempt to give context – And even highlighting it perhaps – In that there aren’t many properties around for 70k. But without wanting to say outright “Debt is bad” – When for people who have more financial savvy than me, debt can obviously be good.

  15. Dan M, in the US under severe inflation where consumers have mainly fixed rate loans the Fannie and Freddies and then later the banks and wrappers go under. If it happens in the US as a result of the excess liquidty then deflation will follow as a result of the inevitable emergency stability measures pushed by the bankers. If that happens our current account also receives its call. Inflation won’t happen in Australia because it involves a sovereign call as a result of our guarantees. There is deflation around all the corners

  16. Interesting Ross; Ta – For mine, you, CA, BP and GA are the wisest financial voices on DRA (with Dan getting my vote for compassion).

  17. I don’t think Ned was giving advice to anyone, just sharing with us his personal observations. Goodness me, the DR writers push gold every second day without any context and few people seem too worried!

    Greg Atkinson
    October 25, 2009
  18. But Greg, DR don’t suggest borrowing money to buy gold.

    Currently the ‘standard’ way of purchasing property is using credit. We all know this – so there is a clear distinction to make if that is not intended.

    Anyone who has a couple of thousand dollars can buy gold. In fact, you don’t even need that much (although there’s not much point owning $400 worth of gold).

  19. Morning Ned .
    I have to laugh as you mention all the economic events coming up on the future radar. Its funny how everyone here just loves all this economic/investment chaos, in a sense its like watching a reality TV show. But better we all get our thrills from the real deal rather than mind numbing episodes of Neighbours or something.
    Commodity charts look very bullish in the face of generally poor economic outlook, in part leeding to my conclusion of some unhealthy variation of inflation (prior to deflationary collapse). Granted the market looks due for correction now but I’m looking forward to a brief pullback then further strong buying. So investing on pretext of inflationary type currency events (predominantly US generated). Granted like most Im also vigilant for a reversal in the trend (USD rally). Yes it is confusing. Have a good one Ned.

    Lachlan Scanlan
    October 26, 2009
  20. I had a chat with an American on a flight from Singapore to Dubai in 2005. He was heading back to work in Iraq – Where he drove fuel tankers. The expression on my face on hearing that must have seemed to him to require a bit more info as he hastened to add that it wasn’t as dangerous now as he only drove “empty” ones and that he was only doing it on a three year contract to get his house paid off. He obviously didn’t like long term debt either – Good for him. And assuming the opposing team didn’t slip one up his tail pipe and he got his house paid off and is living happily in it now, I doubt he’s too worried that the price of it has maybe dropped 30% or thinking in terms of heck I really only needed to spend two years in Iraq to get what I wanted if only I’d timed it better – No, he’ll be saying I did what was required, got what I wanted and life’s not bad.

    In 2007, I got an invite to visit Iran – Pop over and see some Russian friends for 5 days. With the one who was based in Iran being there on a 2 year contract teaching the kids of Russian embassy staff – Again, because she figured that would let her buy a little apartment debt free back home. (Nice offer, but I squibbed at the time.)

    Then I know two Aussies who valued home ownership so little(?)/liked the prospect of easy returns from stocks so much(?) that they became clients of Storm Financials – Where the basic business model was to use the equity in your home to buy lots of stocks on leverage. I’d be a bit surprised if either of those blokes are still home owners – More likely renting their houses back from the CBA perhaps? (One of them recommended Storm to me but I squibbed on that too.)

    As to the merits of stocks, well if I knew what the likes of CA and Ross and GA and Pete do then sure, I’d be tempted to play. But I don’t. As to gold, I own enough to cover off on my foreseeable possible uses for it.

    PS: The house I bought to live in in 2008 was bought debt free. I don’t love debt. But I do love home ownership. Steve Keen and I agree on one of those points but not the other maybe?

  21. You too Lachlan – I’m going to go down to the local creek and grab some weed to set up a couple of fish tanks today – That’s way more fun than trying to fathom the unfathomable mysteries of the financial world. Cheers!

  22. Ned:

    Nice stories. People taking risks to earn lots of money that they chose to spend on houses. And a nice tale about Storm Financial clients. Know anyone who was knee deep in Centro or Backcock and Brown shares? (while we are on the topic of extremes).

    I would hope that someone of your age would be able to buy a place debt free, or close to it – given that you have had both plenty of time and very favourable market conditions over an extended period.

    Unfortunately for others, the favourable market conditions are not going to continue indefinitely. In fact I would go so far as to say that they are well and truly over, with the property market at, or close to, its peak.

    So, like any asset, you can buy at the top of the market and not worry at all…providing you had the fortune of not requiring credit to purchase that asset.

    But, I think in reality people who do buy at the top of the market (without credit) will still be upset.

    Let’s say a house drops in ‘value'(?) by 30%:
    – that is 30% less equity
    – 30% less room to move on your mortgage with repayments
    – 30% less value should you be forced (or choose) to sell
    – 30% more cash you could have had left over for other things (assuming you bought at the top)

    If you have ever bought an item from a shop, just to find it is reduced (by say 30%?) the next day…you feel a bit silly. “If only I had waited”. Let’s not pretend that home buyers wouldn’t be feeling that.

  23. Ned/Pete, on asset classes and share portfolio investment and longs, the danger is most often a lack of active management of the portfolio. And if I had the time, I would like to chart recommendation performances of vanilla advisories from the likes Commsec and Huntley’s which even in this bull market I believe is shocking (and with Commsec their advisory’s always support their trading bank’s exposed debt positions). So you need to do your own research and read well limiting yourself to specific corners like CA. Since early to mid 08, mine have been in ag and infrastructure engineering services with just a few positions in energy and health that I can cut to when I don’t want to retreat too far into cash.

    Risk increases from investor sloth and an inability to track an excessive no. of positions, but disaster is usually down to the thing Prozak describes ie: his disdain for people’s emotional attachments and their lack of ability to take a loss, or their faith based happy clapping. So many that were caught in B&B made their way in via Alinta which itself proved itself a dud needy of a bad way out and so many held on way past their knowledge that it was as crook as Rookwood. The “any fool can buy a stock, but only the best pick when to sell” rule applies. One way bets long have been pretty handy in the past 18 months, and I had intended going far shorter before now expecting a shorter cycle on this “stimulus version of a Greenspan put” but have stayed long with the hot money. The banks have closed on me lately in terms of long performance but you would need to talk with prozak about effective positions to ride that front running short if you agree with DR’s contentions. Beside a stake in recent days in ELD and watching for opportunity in BLY/AAC/CXG (seems like forever before they will hit my stability/price baseline) I am hold with a view to sell in my portfolio. VTA at CAD$10 on the Toronto board if it gets down there would also be a go because I like the currency v the AUD.

  24. I don’t know anyone who did the Centro or Babcock thing Pete – As a Queenslander Storm was reasonably close to home for me though. I am not even sure if the American would have lost all that much – I have a vague recollection of him saying he was from Iowa or Idaho (???) – one of those states with short little names starting with an “I” – depends whether prices there boomed and crashed like elsewhere maybe) – I was more focussed on his job so wasn’t paying too much attention to other details at the time.

    I agree with your basic contention that Australian house prices are high. And Yes, I’d also be dissappointed if at my age (51) I didn’t own my home outright for all the reasons you mention. But regardless, I know others who don’t – Things like marriage breakups and dipping into their home equity over the years being fairly typical causes – With the two blokes who did the Storm thing being a bit of an exception as you suggest – But then, it is understandable that blokes can start to feel a bit pressured with retirement coming on given all the focus various Oz governments have put on the need to provide for one’s dotage. (One of them had actually retired – I’m told he’s back at work now – In a mine in Cambodia if my recollection is correct.)

    House prices up? House prices down? I don’t know. I’m just making the point that a house is a handy thing to have regardless. And you appear to be making the point that a person doesn’t want to go into too much debt to get one – No arguments from me on your point!

    Hi ho, it’s off to the creek I go – If you should happen to read about a grey bearded old man being found drowned in a Brisbane creek please advise the police as to your suspicions regarding the identity! :)

  25. Ned I would rather own a home than two cars but it seems pretty common these days for households to want a home, two cars, mobile phone plans and the overseas trip these days. At the end of the day I reckon it is all about living within your budget and giving yourself plenty of wriggle room if anything goes wrong. I don’t see debt as evil as long as it can be managed and used wisely.

    What truly worries me about the situation in Oz is that there are a lot of people who have never experienced a severe economic downturn and probably do not have the room to handle a few bad years. This situation is made worse when people like Ken Henry rattle on about a “golden era” which makes many people even less inclined to build up their own little economic buffers.

    Good luck at the creek. I am going to soak away my worries at the local public hot baths this afternoon, so if you hear a news report about a strange foreign guy floating face down in a Japanese bathhouse you know who it is ;)

    Greg Atkinson
    October 26, 2009
  26. Thanks Ned.

    Greg, I agree very much with your comment.

    “I don’t see debt as evil as long as it can be managed and used wisely.”
    is easier said than done.

    For instance, when we say “managed” what do we mean? Within an interest rate range of 6.5% to 10.5%? Or all the way to 20%?

    I strongly doubt that most people can manage debt ‘wisely’, given that interest rates have so many variable factors:
    – changes in cash rate (RBA)
    – changes in currency exchange rates (affects interest rates on overseas credit)
    – changes in bank risk appetite/tolerance for individuals
    – changes in bank risk appetite/tolerance for an asset class
    – political posturing/influence (usually brings rates down)
    – competition between banks
    – government guarantees (increases risk appetites which decreases rates)
    – changes in insurance premiums/requirements (for banks)
    – changes in bank reserve ratios (banks may need more capital, want to lend less, means rates go up. Or conversely they might want to lend more, meaning rates go down)


    Personally I think debt is quite useful. But it should be very much respected for what it is: someone else’s money.

    If we make sweeping statments about it, then I think we risk oversimplifying it. Debt may seem simple for most people in western society, but I see the potential for a lot of volatility and some very surprised (and unfortunately upset) faces when they realise that leverage up is joyous, but leverage down is disastrous.

  27. Pretty interesting Ross (and very concerning if our Gov starts doing that proportionately as much as the US is)

  28. Hi Pete I treat debt as a liability that impacts cash-flow. So managing debt to me involves being able to handle repayments even if interest rates rise and being able to pay it down if required. I know this seems a pretty basic approach but there are plenty of companies that have treated debt as almost a bottomless pit of money and have amazingly been able to borrow more even when they were not cash flow positive.

    As you said, debt is other people’s money but sadly some of the way loans have been pushed in the past seem to convey the message that the money is actually the borrowers. (i.e equity in their homes) When people start to borrow against their home to buy a new car, boat or travel overseas this is where things get a bit silly in my view. What ever happened to saving up for such things?

    Greg Atkinson
    October 26, 2009
  29. I agree Greg.

    I guess my point was that it is easy to say “as long as you manage debt” but I have heard that a lot from people that I am sure cannot manage extremes in debt – such as sharply rising interest rates.

    The idea of people “managing debt” with a tolerance of only say 2% is pretty poor in my opinion. And the idea that debt is so great because it gives you the prosperity of the future – right now(!) sounds like pure consumerism to me. I don’t think consumerism should involve debt.

    And as you say, when people start to use home equity is when there is trouble. I have spoken to many young people who are overjoyed when their house price goes up…because now they can get it revalued and borrow into the equity. They treat equity like it is their money, yet it is far from it.

    Personally I think that debt has allowed consumerism to extravagant degrees…even to the extent that I think many property sales are consumerism too.

    “I’d really like to live in a mansion, and if we pay interest only we can afford it by using 60% of our joint salaries! It’s a dream come true!”. Etc. It doesn’t need to be a mansion to qualify.

    And yes, then comes the cars, the boat, the swimming pools, the new furniture, the extravagant renovations, etc.

    Incidentally, I keep seeing these ads on TV from “Motor Finance Wizards”. Basically they are saying that no matter who you are, we’ll approve your credit. Unemployed? No problems. And they show some poor bloke with a good looking lass egging him on saying “Wow I love your car”. It is clearly aimed at young adults.

    A year or so I saw a news piece where they interviewed some young adults who had bought these fancy new sports cars with all the trimmings. These people had lost their jobs and couldn’t pay off the car. So they had to sell the cars, and then still owed money on them. The rates offered are quite extreme, but young adults (possibly lacking guidance or better judgement) don’t think twice about it.

    Anyway, thats my rant. I know there is not much of moral value in the world, but it still seems a shame when you see someone being taken advantage of due to their lack of knowledge. Like the majority of the Australian public for instance.

  30. I’d like to live in a mansion. I really like your car. (With BB’s boy saying a while back one of his life ambitions was an attractive blonde wife.) Get yourself a prenup (namely a Binding Financial Agreement aka BFA in Oz.) Just could be the only half decent financial observation I’ve ever made on this site … :)

  31. Pete I agree with your rant :) In many ways debt has led to people becoming more greedy and created a culture where we start to think we “deserve” things rather than have to work for them.

    I have always been worried about the way that equity in a home has been marketed as some sort of cash pool people can use for just about anything.It just sends the wrong message in my opinion, but then again maybe I am just not “hip”.

    Greg Atkinson
    October 26, 2009
  32. Unfortunately, people have their positions, the global macro economy is a sea of western debt and now we (govts and people) have to ride our positions. Savings short term will fuel the deflation, spending or reflating will break fiat currencies. Today’s VIX follows wheat last week.

    Oil is sharply down. Chaos that central planners can’t control, they are just fighting their corner and looking more like the communist central planning committee at each turning. They are on the streets protesting against bankers in Chicago today.

  33. Pete, two questions if I may:
    1) Do you have a “Plan B” for home ownership in Oz if house prices here don’t fall significantly (and if so, what is it)? and,
    2) Do you have an exit strategy from gold/bullion (and if so what is it)?
    Thanks in advance.
    (Or telling me to mind my own business is OK too.)

  34. Ned:
    1) The way I see it, either
    a) house prices fall and the market resumes normal operations, or
    b) house prices are propped up and Australia becomes an economic abomination that is not a nice place to live.
    Either way, I will buy a house to live in, if the price is right. I would even invest in property…if the price was right. At the moment, they could hardly be further from right. Maybe I will be renting for a very long time.

    2) I don’t own any gold bullion.
    I ‘probably’ will within approximately 12 months time, assuming things go as I expect.
    The exit point for gold is the point at which it either
    a) becomes completely mainstream (not ETF’s, I mean bullion), or
    b) at the height of hyperinflation, before another currency is adopted.

    c) And option C is some other time that appears convenient. Being too ‘idealistic’ would certainly be a weakness.

    I think Australian’s assume that the “Australian Dream” is home ownership. It is not my dream. Homes are nice, but so is financial freedom and flexibility.

  35. Thanks Pete – Appreciate the reply. I’ll chew on it for a while if that is OK – I know I’m not the “sharpest tool in the shop” – Cheers.

  36. Pete – One of the thoughts that has gone through my head (amongst lots of others) is that what we are looking at just could be “the new normal” re Oz house prices – State governments reliant on the income from them, C’wealth gov reliant on the CGT and tax turnovers from the building and allied industries, Oz pollies who are way more interested in What could happen to my property portfolio if prices drop than Is it hard for an existing Aussie to get a house, Do existing Aussies have what it takes to compete with new Aussies etc … Dunno – I’m waiting on Henry to see if he sheds any long term light on any of this. (That’s not my reply to your earlier response – Just a musing in the interim – I find that I learn best by writing my thoughts out. Apologies to all DRA readers that PO’s – I probably should do it in private!!! :) )

  37. If that is the case Ned, then we will have realised 1b).

    Debt requires servicing. Large debt requires a lot of servicing. Debt levels will only continue to increase over the longer term if interest rates are falling.

    But that is a catch 22. Because if interest rates are falling, the capital required for the debt will be harder to come by.

    Perhaps I could coin a term “peak debt”. I doubt i’d be the first though.

  38. Another thought that flicked through my mind Pete is just what happened to Yank house prices back in periods when she was booming (the 1910’s maybe; or the 1950’s maybe – As opposed to the 1930’s and 40’s) – Too much to research I’m afraid. One day maybe … So many questions; So few answers … Given that as one wise man said “It is always different!” Hmmm … Shutup Ned … I promise not to write anything else until COB Friday when me and Lachlan might chat :) :) :) !!!


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