As a sixth generation Australian, I’m truly blessed my forefathers chose to call Australia home.
It’s a wonderful country.
For me, every day is Australia Day.
Our country is on the must see list of most travellers.
Whenever you travel overseas, people invariably say ‘I would love to come to Australia one day. I hear it has such beautiful beaches. But it is just so far away.’
We may be geographically removed from the rest of the western world, but we are most definitely connected financially.
While we are blessed with natural resources, beautiful landscapes, democratic institutions and first world living standards we have also succumbed to the western world debt disease.
Australian households have the dubious honour of being one of the most indebted (as a percentage of GDP) in the world.
Unless history somehow manages not to repeat (or rhyme) itself, we can expect the great Australian dream to turn into our worst nightmare.
Every debt bubble in history has always ended badly…some worse than others. It can take decades and even centuries to recover from the subsequent economic collapse.
It’s for this reason I wrote the book The End of Australia: The Real Story Behind Australia’s Coming Economic Collapse and What You Can do to Survive it.
While I love this country, I am not blinded to our shortcomings and the risks these pose to everyday Australians.
Warning people about the dangers of living beyond our means as individuals and a nation is not a message the mainstream addresses…until it is too late.
Perhaps it was a case of preaching to the converted, but the overwhelming response to the book was positive. The letter from Peter D. was typical of the feedback received:
‘I have just finished reading End of Australia. Please allow me to congratulate and thank you. A simple, but yet wonderful explanation of where we all are and what the end game will be.’
For those who haven’t read the book, the following is an extract from the Introduction:
‘Australia is still one of the greatest nations in the world to live, work, and raise a family in. And it’s a country I’m proud to call home.
‘For that reason, putting into words the hardship I think Australia is going to face in the coming years has been more emotional than I expected it to be.
‘Australia is a wonderful nation filled with great people. However, we’ve allowed ourselves to be seduced by the powerful ‘buy today, pay tomorrow’ propaganda machine.
‘For decades we’ve lived beyond our means, courtesy of a financial system offering all sorts of credit facilities — home loans, credit cards, payday lending, 48-month interest free financing, and so on.
‘Year after year, debt levels have increased while savings dwindled. It’s been one hell of an indulgent party — McMansions, new cars, holidays, furniture packages, the latest electronics, white goods, luxury goods, the trendiest fashions and plenty of expensive dinners out.
‘And even as the party ended for many nations around the world after 2008, Australia kept dancing. Thanks to China, a mining boom and a supposed ‘miracle economy’, there was no need to stop.
‘We purchased things we didn’t need, with money we didn’t have to impress people we didn’t know. Weekend garage sales bear testimony to the amount of excess ‘stuff’ that clutters our lives.
‘But all good things come to an end.’
The fallout in global share markets in recent weeks, in my opinion, is the beginning of good things coming to their end.
There’s no question China’s awakening from its economic slumber has been truly transformational for the Chinese and the rest of the world.
However, somewhere along the way genuine momentum was hijacked by lies and excessive levels of stimulus.
Fake GDP figures and an official US$28 trillion debt level (it’s probably a good deal more) have come back to bite China on the backside.
China’s economic achievements are no different to the performances of East German athletes in the 1980s. At the time nearly everyone marvelled at their strength and superior efforts, but it was a fraud. Whether your drug of choice is steroids, human growth hormones or vast quantities of debt, the end result is a system breakdown.
China’s inability to continue bulking up its economy has somehow come as a shock to the world. People wanted to believe the lie. They had built lives on the lie. They had taken on debts and made promises on the lie.
The lie is so much better than the truth.
Living beyond our means is a wonderful lie…until the credit dries up or government largesse is withdrawn.
Then the truth becomes brutal…houses lost, retirements delayed indefinitely, businesses close the doors, jobs gone.
In the end the truth always wins out. Better to acknowledge this fact early. Making the adjustments voluntarily is much better than being at the whim of market forces and unfriendly bankers.
Tough times are coming. The world has reached a stage of ‘peak debt’. The debt and unfunded welfare obligations that have built up in the system are toxic.
As unpleasant as it is, we have to deal with these issues. Ignoring them will not make them go away.
Unfortunately there is no political willpower to make the hard decisions…raising taxes on the wealthy and not cutting spending is about as hard as it gets for our political masters.
Therefore you must control your own destiny. Build your own ark to keep your household as safe as it can be from the flood of redundancies, bankruptcies and broken promises that are coming our way.
Please take the time, effort and discipline to get your house in order.
Australia’s day of reckoning awaits us.
For The Daily Reckoning