Tell Us What Questions You Want Answered in the DR

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A friend called us this weekend to check up after our Friday note about the ham poisoning we suffered. “Are you okay?”

“Are you really worried?”

“No. But the DR hasn’t arrived yet and I was wondering when you’d finished.”

“Oh. It’s a server issue. It should be out soon.”

“Good. I hope you wrote about the housing market today. I’m tired of reading about AIG and CDOs and global macroeconomic systems theory.”

“You know there are other readers that DO worry that the world is changing in big ways. They like reading about that stuff. Not everyone wants to read about housing prices.”

“So you say. But why don’t you just ask your readers. I’ll be they tell you they’d rather hear more about housing and less about bonds.”

“Fine. We’ll ask.”

You can tell us what you’re worried about here. All worries are welcome.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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Comments

  1. Can you explain where money really comes from? Isn’t that who will ultimately fix the financial crisis (and who caused it)? I’d like to hear more on your thoughts on those topics, especially since you think gold is the answer. Doesn’t that depend on the issuers of money to decide that gold is worth something?

    Reply
  2. What do you reckon would happen to Australian and New Zealand banks if there were to be a banking catastrophe in Europe or the US?

    Bill Flinn
    March 16, 2009
    Reply
  3. School Fees
    Losing Private Health
    Having to sell shares into this market before they rally

    Reply
  4. Keep going the way you are. Prefer a comprehensive, extensive coverage rather than simply housing. Great reading and extremely insightful. Don’t always agree when the charts tell me otherwise but its great to be able to read the deconstructive views.

    Greg Clements
    March 16, 2009
    Reply
  5. I have two concerns:
    1. How important to public confidence is the suppression of gold and silver prices?

    2. How far do the market losses experienced recently ‘balance out’ the current maniacal expansion of the money supply, and the resultant hyper-inflation?

    Thank you, gentlemen.

    Reply
  6. I am worried that I am not being taken seriously by other people (except my father who swears by his copy of None Dare Call It Conspiracy) when I mention my belief that the world in heading in an Orwellian/Globalist/Socialist direction.

    mrdavidlopan
    March 16, 2009
    Reply
  7. Dear DR,

    I am trying to understand how long the ‘bottom’ of this cycle will last if it is indeed the Greatest Depression. As a change management consultant to privately owned companies, we are getting a lot of enquiry due to fear. What everyone wants to know is how badly hit retail will be, will people spend money online… our economies are not comparable to the 1930s. Time to uncover the crystal ball!

    Claire

    Reply
  8. “The price of cheese in china” It’s outrageous!!!

    High Octane
    March 16, 2009
    Reply
  9. 1. The future of gold & silver
    2. The future of oil & gas
    3. The future of commodities
    4. The future of fiat currencies

    Reply
  10. WORRIED???? SURELY NOT ABOUT THE HOUSING.. ACCORDING TO THE DECISIONS BEING MADE REGARDING THE CONTRACTS FOR BONUSES WITH THE AIG PEOPLE THE HOUSING CONTRACTS CAN NOT BE TOUCHED????? A CONTRACT IS A CONTRACT AND IT IS THE LAW????? AND THE GOVERNMENT IS NOT ALLOWED TO BREAK THEM = LOL… SO BONDS AND T-BILLS…YES…THAT IS GLOBAL…EFFECTS NOT JUST OUR ECONOMY BUT EVERYONE’S… WE HAVE TO MAKE OUR OWN MIX WITH HOUSING….INTEREST RATES EFFECTS ABOUT EVERYTHING NOW…

    WILLIAM PEDERSEN
    March 16, 2009
    Reply
  11. My concerns centre on the US dollar.

    If it collapses as I suspect it will then I would anticipate that the US political decision makers may attempt that age old ploy of diverting the public’s attention by starting a war possibly with China. After all if you can’t pay your debt to someone, just bomb them them back to the stone age to teach them a lesson.

    2nd anonymous
    March 16, 2009
    Reply
  12. How come the cretins running AIG just do not get it………how come they can hand over mega $$ of ostensibly bailout $$? I do not care about legal contracts……just can them! Let the execs try to sue for the $$, just like anyone else when a company cannot pay.

    Is the psyche of the FRE execs still in mega $$ mode? How to REALLY change that?

    Peter Harrison
    March 16, 2009
    Reply
  13. Generally you guys are doing a great job, but can we focus more on Australia, rather than what’s happening in the US?

    Like;
    1. How are the regulators going to stop this happening again? What actions will the Aust Fed Govt take (if any) and when?
    2. Why are shareholder votes on executive salary package “non-binding”? How can we make them binding?
    3. Why is Australia’s immigration rate at record highs, while the economy struggle? (are we “importing unemployment?)
    4. Why are we (the taxpayers) continuing to guarantee the Aussie banks, while the banks continue to increase their margins and become even more profitable?

    Reply
  14. I totally agree with Dan.
    The problem with money creation is that every thinks they have a piece of the puzzle, but not many have got the full picture..

    So, I would suggest a story (not a book, but a summarised version. a few pages??) including what lead to the famous events of 1913, roaring twenties, great depression, gold seizure, WWII, Bretton Woods, Korean War, Kennedy (including reintroduction of silver certificates 101?) Vietnam war, closing of gold window, 1971 and more recent events leading to the NOW….

    Perhaps an article with FOCUS on Australia / RBA creation of money
    (eg) Why are the Medicare cheques drawn by the RBA / Is the RBA an agency of the government and are they audited and where are the P&L etc..
    Why was the RBA created ???

    Mizou Carillo
    March 16, 2009
    Reply
  15. I enjoy the DR pretty much how it is. The contrarian view has given me confidence in the already anti-pack views that I hold against populist life decisions.
    That being said, apart from mining, housing and the real estate service industry would have to be the next greater part of the Australian economy (at least from some of the ABS stats I have glanced over).
    I hear and read many different viewpoints on the subject of Australian housing, and some quite convincing ie shortage of supply increasing demand due to immigration number, credit crunch really on affecting housing $800K and above.
    In short I guess I am saying that some contrarian view counter arguing more popular arguements would be appreciated.

    Ken

    Ken Harrison
    March 16, 2009
    Reply
  16. Hmmm… I am worried that the financial instituion in which I have my money goes bust and they tell me Oh, that money is gone now. Also, I worry that the US debt is so huge that either the exchange rate for the US $ will plummet against all other currencies or there will be hyperinflation in the US.

    Kathy Krassa
    March 16, 2009
    Reply
  17. Well, I’m 52 and about 12+ years out from retirement and my super looks like an abyss. So I’ve decided to take my very considerable equity in the family home and (try) create some property wealth. But I remain uncertain about the future of property in Perth Western Australia. Rental vacancies are very low around 2-3% and there is reportedly an under-supply of around 30,000 dwellings in the state with a capacity to produce only 22,000 dwellings pa.Plus our state unemployment is about 3.5%. Is property a good longer-term proposition in WA?

    Reply
  18. I am concerned about my eventual retirement plans in terms of:

    a) Medium term impact of the global recession on my Aussie superannuation fund which has suffered disastrously in the last year.

    b) Medium term impact of the global recession on my more modest share portfolio, mainly in the context of ability for companies to maintain a dividend stream, as I am not a trader.

    I don’t have any concerns about housing, as my investment property mortage is manageable and I was in positive cashflow long before the recession (wasn’t everyone else?… tut, tut if you weren’t). I see the drop in house prices as a great buying opportunity, not that I’m dipping in, for other reasons. Rents have held firm, so why should I worry? I’m not a seller.

    My biggest concern is the apparent willingness for governments of the US and UK and elsewhere to print money. “Go the Chinese”, I reckon, for taking control of cash and assets that other countries obviously couldn’t afford. Nations shouldn’t be printing money, real or in kind. The effect of increased “unreal” money will only make things worse for people, eventually. Let’s tighten our belts and learn to live within our means. I’ve never had a problem with doing that, personally.

    Ex-pat Aussie
    March 16, 2009
    Reply
  19. O B A M A
    and his band of merry chameleons.

    Reply
  20. O-B-A-M-A
    and his band of merry chamelones

    Reply
  21. Equities, gold, corporate debentures, broad trends, risks of inflation/deflation/hyperinflation.
    I think I’ll just hang onto my house, thanks.

    Reply
  22. I’m worried that you call him a friend.

    Reply
  23. The balance is right – I’m much more interested in the big picture for context. In my opinion housing prices (or groceries, fuel, you name it) are just symptoms of the disease (although I’m as interested as the next person in the “value” of my home).

    Worries? Financially – Protecting what I’ve worked hard for so far (from inflation, government, etc), maximising the return on my hard work in the future, whilst ultimately leaving a world behind where my (and everyone else’s) kids have the same or better opportunities. Life generally – keeping perspective (money is purely a means to an end) and making time for the really important things in life…

    GDH

    Reply
  24. How is it that so much wealth can be “lost” by the lumps all around the world, much more than is being pumped into the system by most governments, yet this “pumping” will cause inflation in the future. As a simple non economist I am worried that I cannot understand this equation ….. Wealth Lost (stolen destroyed) cannot = all the bailouts, stimulas packages etc = inflation!
    Thanks to DR

    David Conallin
    March 16, 2009
    Reply
  25. HI
    In addition to the Agora gang I am a long time student of von Mises, who ages ago predicted the eventual collapse of fiat money based credit schemes. Plus I study David H. Fischer – The Great Wave’ in which he noted the late 1990’s blow off of the 20th century great inflationary wave and the soon to begin massive deflation era. I think your views on the current deflation and efforts of governments to stop it and when significant inflation will recommence would be most valuable
    thanks
    john sloan

    Reply
  26. When are we likely to see real deflation in housing in the lower end of the market?

    Why hasn’t the USD crashed since the money supply has doubled? Is China going to pull the pin soon sending gold to record levels? If I buy gold in AUD I’m worried that the AUD will fall further even if gold goes up because we are losing exports and other countries real interest rates are rising.

    Reply
  27. Amongst my many concerns:-

    To what extent is the GLD ETF likely to influence the gold market, particularly if the big institutional investors were to start takinng sizeable positions, especially short ones?

    The recent rally in the Baltic Dry Index and more recently the technical break-out of copper: the resurgence of the economic ‘raging bull’ or just a ‘flash in the pan’ due to China getting shot of US$s in return for real, tangible, raw material stockpiles (along with half of Australia’s mineral reserves).

    The likelihood of an IMF/World Bank controlled, new global monetary system, including the possible final removal of gold (confiscation plus ‘nationalization’ of miners and thus in-ground reserves), to be introduced, thus freeing the US$ to devalue (collapse) so that the debt can be inflated away.

    Keep up the good work gentlemen!

    David Wilkinson
    March 16, 2009
    Reply
  28. Concerns:

    Housing
    Australian Banks after the 3 year government guarantee
    China’s foray into Oz minerals

    bob salijevic
    March 16, 2009
    Reply
  29. 1)One concern is getting the major figures right, and getting them in perspective. I read so many apparently different figures and interpretations. I was all aboard the hyperinflation scenario until I read that the decline in wealth in the US household sector so far is 55 trillion, and that the few trillions allocated for bailouts and stimulus are insufficient. Is 55 a valid figure? What are the really key figures in this global situation? OTC derivatives, more than half of which are still outstanding, I saw recently estimated at 650 trillion, I think it was. What is the NET figure? US GDP I recently read is 11 trillion. Chinese holdings in US Treasury securities are about 0.8 trillion of their 2 trillion in foreign reserves, most of which are denominated in dollars. (I haven’t been able to find out what the non-Treasury reserves are) This is large but does not seem as potent as I previously thought as a factor in the US desire to suppress gold and support the bond market. Or is it?

    2) I worry that most commentators seem reluctant to impute malice, preferring to assume that too much ill-judged intervention or too little regulation, or both, have been the unintentional causes of the current situation. Sudden financial shocks cause a massive transfer of wealth to those positioned for it in advance. Who stands to benefit from this? Who are the real shareholders of the US Federal Reserve, for example? Who sold down large positions at the top of the boom or took out major positions in OTC derivatives at the right time? It is probably impossible to do more than guess; the main players have powerful links to defence industries, security services and key Government officials, and are beyond investigation. They have secret loyalties which transcend national boundaries and they certainly are hostile to any attempt to scrutinise their activities. But it seems naive to me to assume that this breakdown is all bottom-up

    John Weymouth
    March 16, 2009
    Reply
  30. -Discussion on what the visible trigger points may be when we go in the currencies from deflation to inflation or hyper inflation.
    -Things that can be done to minimise losses or make gains when the trigger point occurs
    – What to do with the good old house motgage preferrably just before this happens

    Otherwise keep up the way you are going, it broadens our knowledge on all aspects of the markets

    Thank you

    Reply
  31. Some big worries I’d like to hear more about are:
    1. fresh water;
    2. fertile soil;
    3. food security; and
    4. that modern agriculture is fast running out of the cheap energy needed to keep up its 200-year struggle trying to prove the ideas of Thomas Malthus wrong.

    Reply
  32. seriosuly i have been reading DR since before you arrived in Aust.
    i enjoy it because you dont cover housing. Also private health, school fees are not exactly what i’d be looking to read about.

    i could watch Today Tonight and find out about all these topics. Which says a bit about the people that care about this.

    anyway keep the macro analysis and contrarian views flowing. Also the grilling of certain emailed letters is also entertaining.

    and gold and silver analysis should be standard.

    skinny pete
    March 16, 2009
    Reply
  33. You have to keep an eye on housing. It’s the next bubble to burst in Australia, and the sooner, the better.

    Dick from Sydney
    March 16, 2009
    Reply
  34. Over regulation. I fear that politicians will seek to cover their backs by implementing a raft of new measures that will stifle business and not prevent any future problems anyway. We already have plenty of regulations, they are just not enforced very well.

    Continued panic. A lot of the coverage about this crisis is just over the top fear mongering. Okay we are taking some hits from a nasty economic bubble, has happened before and it will happen again. It is not the end of the capitalist system or the start of a new world order. It will all be worked out of the system and we will then happily create another bubble sometime in the future. To see a true recovery in the global economy we need to shift out of doom and gloom mindsets and get on with the rebuilding of economies.

    Reply
  35. I’d appreciate it if you could fill in the gaps in my understanding.

    How do government bonds/debt affect central bank interest rates? Or do they?

    With governments going into ever more debt, how does this affect a) the bond market b) the money supply c) interest rates d) the value of currencies? That is how are all these things inter-twined, and how will the credit-crunch and government debt play on the stability central banks and their currencies?

    Reply
  36. 1.For those with idle cash/non-working equity, which area for aussies is safest/best to invest in for the eventual recovery?
    2.For my adult kids, is it best to change investment spreads in public super funds to “capital guaranteed/cash” to avoid further losses and change back to “growth” later when the market settles?
    3.The purchase of a house is the largest expenditure many aussies will ever make – so an ongoing forecast of the real estate market is A1.

    Barry Fitzhenry
    March 16, 2009
    Reply
  37. My worry is interest rates. After the financial institutions have lost so much money how high will rates need to go in order for them to recover their losses? Alternatively,do they have any oher means to recover their losses?

    Reply
  38. I reckon, a lot of Daily Reckoning readers are Aussie expats like my self, I live in New York. I’m most concerned about exchange rates. Would love to here your thoughts on the AUD/USD matchup over the next few year or so.

    Reply
  39. 1. Timing my sales into the bounce so as not miss it but not to sell too late

    2. Jobs

    Reply
  40. Hunter/gather by nature humanoids do not know when to quit. So when it’s good they go for more, more, more! Few other creatures express this propensity for limitless consumption – read greed. Evolved on the plains of the Serengeti our truest nature combined with our scary technologies leaves me less than optimistic. Good luck humanity you’ve missed the point.

    Hugh Stewart
    March 16, 2009
    Reply
  41. What’s happening in New Zealand?

    Reply
  42. Continuing from your DR today regarding oil and in particular the proven reserves. What do you think will happen to the economies of the world and more particularly our way of life when the world realises the reserves of oil are not as high as published. How will businesses continue to make money when most of their profit forecasts are based on cheap oil continuing into perpetuity.

    Reply
  43. Where should one put cash? it can’t go in real estate as it is still sinking, it can’t go in stock, the market is still falling and companies are failing, it can’t go under your mattress because it loses value daily. Should money be in canned food or dried cereal in case food becomes scarce or very expensive? Should it be in fixed interest loans as a car or some such necessity? Should it be in gold coins? They could go up or down in value and their is a premium on the buy and sell side. Should it be in gold in the stock market? Thats quicker to liquidate on the down side. Is a bank safe if their comes a world currency? Paper money could be devalued.
    These are some questions I have.

    Reply
  44. I bought some “GOLD” shares in ETFS Metal Securities.
    How safe is that compared to physical gold

    Reply
  45. Worries: Many and varied.
    * What happens if China’s efforts to maintain growth prove fruitless – growth leadership is shifting/has shifted east but what happens if that growth falters?
    * The loss of “ownership/control” over Australia’s strategic mineral assets – where is the Future Fund or Aust Gov’t now that funding is required? Free markets? All for them but the rules must change when certain parties use free markets for their own advantage rather than embrace them as concept they also offer to others.
    * Another leg down in “toxic” asset prices/US property prices and another round of large writedowns at US banks which obliterates the slither of belief that they are turning profitable again from last week.
    * Competitive currency devaluations kick in – was just reading about the Swiss Franc
    * The ultimate cost of all of this stimulus and the risk it is spent on useless assets, goods and services which adds little
    * Politicians – the people in charge of the world are not the best people for the job – they’ve all been found wanting
    * The insipid connection of politicians to big businesses under threat (Autos, the Banks, big oil) and their unwillingness to let the weakest be cut loose and for the strongest to survive – the world’s capacity is built on a world where credit was freely available to those that should not have been given it – those people have now been taken out of the consumption equation, yet the capacity remains and western gov’ts can’t face closure and unemployment. Let the cleansing occur and we’ll all know the worst will be put behind us, not in front of us.
    * The next 6 months – job losses have been mounting over the past 6 months or so and I get the feeling that people’s “reserves” are being depleted – hence the potential for another push down in assets prices (foreced selling) and further consumption declines.
    * Yield – will yield generating assets actually deliver the return? Nothing is certain now
    * Spinner – we need to find a front-line offering before The Ashes
    * I could go on but need to get back to worrying elsewhere

    Reply
  46. To sell or buy shares overseas is tempthing but Pershing llc charges 65 or more if uneven.I have already figured out Bush was secretly a Marxist and rumours are so is Obama.Seeds of destruction withing capitalism if Barky is also is looking strong.Class stuggle means bankers are making out very very well-secretly, if big ones anyway and do not have to worry about making gigantic mistakes as they get bailed out.

    Reply
  47. I’m not really worried, just confused….. Exactly where did all this money go, was it really there in the first place? Also, I’m worried that this could be one of the most exciting times in the history of the financial world and I can’t get onto the Forum to chat and hear other peoples’ opinions – I’m definately missing out on something. Please keep the information coming, you guys are just wonderful.

    Reply
  48. Things I’m curious about:
    1. Peak Oil – a prioritised or chronologically listed set of ramifications of declining production.
    2. Population growth – I’d like an audit on the required fundamental resources actually required to sustain the current and future population growth.
    3. Alternative energy – an overview listing of how much energy can be garnered per hectare of arable (or otherwise) land from Oil Palm, Coconut Palm, Rape Seed, canola, olives, algae etc. Is there any credible alternative to 85M barrels of oil per day?
    4. What would’ve been the REAL downside to just letting banks fail? If the government had simply said “No – bugger ya – you lent out the money to people you knew were unlikely to be a good bet, so you take the fall and we’ll kaap the taxpayer’s purse to ourselves”?
    5. Fiat money, usuary, the rumour that the Yanks have started minting an alternative currency (the “Amero”) – an overview of money, who is involved – are they the same group that Jesus kicked out of the temple? Was one of Bernie Madoff’s ancestors in that crowd? :)
    Cheers,
    Ped

    Pedro M Carlson
    March 16, 2009
    Reply
  49. By nation — E.Europe + PIGS (Portugal, Italy, Greece, Spain) — what is the outstanding government debt? AND What is the estimated CDS exposure to each?

    Reply
  50. The future of money maybe back to basics and the standards of gold and silver within the boundaries of sovereign borders, externally the standard won’t work that well i don’t think. We will need to regrow economies – Aus has a high energy materials per capita ratio (em/capita) unlike China or India.

    So what concerns me is the way China with such low em/capita will not be able to sell its industrials and will blackmail the US and in convincing the rest of the world increase its em/capita by taking over Aus.

    I know this sounds weird but do you think for one minute that the rest of the world would allow China to starve with its idle western utilising industrials, whilst Aus lay about doing what ever not effectively utilising its high em/capita.

    There is a way out, Govt can take over the compulsory super that is part of the Commonwealth tax receipts and defend Aus with new technology industrials……….but that is doubtful we don’t have the time.

    Aus is tied to the rest of the world and we cannot stand alone, the world are running out of cheap labour economies to service the human and industrial endeavours – neo capitalism/communism/socialism is irrelevant. The process of a higher em/capita inevitably absorbs sovereignties to stream world industrial capacity output.

    And the biggest depression will be in nature coping with human exponential growth and the ensuing human war to end all wars.

    Charles Norville
    March 16, 2009
    Reply
  51. My biggest fear at the moment is preserving wealth. I have worked long and hard to build a good size investment portfolio, much of which will be used to eventually retire on (but that is 15-20 years) away. Between volatile markets, taxes, etc, etc. It is very hard to know where to turn. And this is from someone who actively follows the markets and your (and other reputable) commentary.

    anon.

    Reply
  52. Yes tell us more about housing prices in the USA & Australia
    Talk about the long term (100 years) Case-Shiller graph.
    Have the guts to publish it; if you don’t have a copy I will send you one
    Talk about the foreclosure of houses in California USA now
    Why have house prices there dropped 50% and more.

    Will Australia house prices drop the same when unemployment reaches 10%?

    Paul T Hutchinson
    March 16, 2009
    Reply
  53. What I’d like to have from DR is a plain and simple explanations of the mechanics of printing money. Most of us know that modern day printing money isn’t done by cranking up the printing press and giving it to public servants in their pay packets, so how do they actually go about increasing the money/currency supply? Is it from issuing bonds then buying them back, or some other similar deal?

    Reply
  54. So much of what we hear and read seems to be US centric, i.e. What the citizens of the US should do to survive the collapse of their economy and currency. There are even a number of good books on the subject, but not all of the advise is suited to Australians.

    I’d like to know more about how this will affect us specifically in Australia and importantly what we need to DO here in Australia to protect ourselves.

    I’d like to understand more about how Gold may perform as an $AU investment considering exchange rate factors.

    I’ve read plenty about the possible collapse of the US$ and the need to get out of US$ denominated assets and investments, but isn’t Gold a US$ denominated asset?

    What about the Australian Dollar? Is it also likely to collapse? And if we see a massive inflationary event in places like the US and UK where they are printing money, how will that affect Australians and the Australian Dollar?

    Please continue with the current format of your newsletters, I am happy to keep reading as you work through your thoughts and explain the breakdown.

    Reply
  55. Hi DR,

    I am concerned about the level of government intervention and whether it is actually going to achieve anything. In my opinion, the government has no place in the economy, isn’t a government’s job to essentially ensure law and order for it’s people? (I know this is a rather simplistic view)

    I am also concerned with how money is controlled and made. Surely there has to be a better system than a bunch of non experts deciding when to and how much money to print? This then leads me to ask what is this going to do to the value of our money?

    Reply
  56. 1) The governments’ ‘fix’ that’s focussed on creating more debt. It doesn’t make sense.
    2) How the governments will pay for 1. Whom and what will they tax? How will it impact on our children?
    3) How those of us who are +55 will recoup hard earned savings across all asset categories; and what that will mean for retirement etc.
    4)That it will get worse before it gets better and that because of politics we don’t have the best minds solving the financial crisis.
    Mostly, it boils down to no sense of clarity and therefore confidence to make decisions about investments in general.

    Liz Barrett
    March 16, 2009
    Reply
  57. I am worried that everybody is acting on only one part of the information that they need in order to decide whether there is a crisis or not. Everybody looks at share prices but fewer look at volumes sold. What proportion of shares are being traded at today’s low prices and how does that compare to the volumes traded when things are/were good?

    Gerard Brennan
    March 16, 2009
    Reply
  58. What worries me currently?

    1. The potential eastern European collapse and its likely effect on Western Europe’s already impoverished banks
    2. The effect that further catastrphic writedowns by western Eurpoean banks would have on the european economy
    3. The implications that an even sicker Europe would have on US world trade prospects and the US economy
    4. The implications of a 2nd degree hit to the US economy resulting from weak trade with Europe
    5. Implications for China if US economy suffers a 2nd degree hit
    6. Implications for Australia if all this comes to pass!

    I also worry about China – the last man standing. How is China going to single-handedly pull the World out of recession when its major trading parters (the US and more particularly Japan and South Korea) are hurting so badly? Are we talking about de-coupling again?

    Reply
  59. G’day DR,
    Australia is short on affordable housing and houses in particular, especially in the Northern Territory where we need at least 4,000 new homes. WE have $505 million from the federal government to stimulate infrastructure growth, nonetheless this is deficit funding. Our crisis is one of too few affordable houses and in reality this funding is only a catch up measure.

    Do you think that this injection into our local economy by the federal government will increase interest rates as the stimulus will be funded by government borrowing? Will this make it harder for the small private businesses that drive the NT economy to get bank credit and thus get the opportunity to participate effectively?
    Thanks in anticipation.

    Reply
  60. With stock markets,overseas housing markets, interest rates, etc, etc all making new lows. Is now really the time go with the herd, to increase savings and reduce personal debt? Or with the cost of servicing debt going lower and lower, is now the time to get more debt and load up on beaten down assets? How long do you see interest rates remaining at record lows? Your thoughts on the Australian housing market will be appreciated. Is the Australian Housing market the only housing market that has been created by a real underlying physical demand as opposed to pure speculation?

    Reply
  61. I’m worried about what you tell me to be worried about.

    Reply
  62. Easy.
    More Australia, more world, less USA.
    More pictures, less words.

    Reply
  63. I am a 61yo self funded retiree.
    I am concerned about my income from dividends & fixed interest.
    Q 1) Worst case scenario—ongoing deflation—will the defensives eg WOW, still be paying a reasonable dividend—even 3% over time?
    Q 2) Same scenario— is the 2% mooted minimum int rate really a min or will it go to zero & stay there?
    PS–I am not into RE right now for 2 reasons—I think there is a strong chance the lower end could crash too when Kevvie pulls the plug on 1st home buyers,
    & I dont want to be in the position of having to evict some poor souls for not paying their rent.
    Terry T

    Terry Thomas
    March 16, 2009
    Reply
  64. My worries are :

    1, How do we get back to a true capitalist system where businesses are run for the benifit of owners (i.e shareholders) ALL employees and society in general rather than for the benifit of management.
    2. For example how could AIG enter into contracts with excec. to pay them bonuses EVEN when IAG made such huge losses?
    On a local Australian; how could a company which received some $20m in Govternment subsidies increase its directors and execs remuneration from $7m to $15m in year ending 30/6/2008? Yep it was PB- which sacked 1800 people.
    3. Obviously we cannot continue to live on credit. If credit dries up; consumption most drop= less jobs. How prepared are we for a world where not everyone can get work?
    4. How will Governments deal with the social unrest arising from loss of jobs/income at a time when household debt is not sustainable.
    5. Should we get back to a position of a 2006 status quo,that is, exponential growth in money suppy and consumption- we shall need another two planets.
    6. Pension and retirement funds are under funded the world over; what will happen when all the baby boomers retire?
    6. How shall we balance all these conflicting interests?
    7. What have we done to my grandkids future?

    Reply
  65. I am interested in understanding your views on where interest rates will go. It seems that interest rates could be set to sky rocket. After all, how can governments continue to print money without a major threat of inflation catching up with them. Your views?

    Regards

    Reply
  66. I want to read and contribute to being able to find ways to be more sustainable and how to put those aspects in to practice. How to increase independence from a broken system that may not serve it citizens well is going to be the reality for many by choice and necessity. Practical solutions of living with in means. Not becoming a victim, which is, as all said and done the Contrarian dictum. The types of contributors (which are very good) needs to be expanded to encompass stimulating practical solutions beyond economic factors to give hope and optimism leading to building a better future. This is especially essential for future generations of readers. We know the intrinsic reasons why the global economy is in this state. We know where it is possibly headed. We know what the effect will be on many. Now we need a greater sense of community towards sustainability by those who currently live in a more sustained way and think about it daily. The economic narrow view of gold being a saviour of all is a delusion in it’s own right. Broaden the horizons my good friends at the DR. It can only help more people in the long run and build a bigger bussiness.
    I’m with the comments of Anon, Rose,Hugh, John and Natalie. All the others are relevant too.
    I’m in NZ next week negotiating and gaining a better vantage point. So NZ is a very important focus point for the future regarding sustainability and economy. It is a country of repeated booms and busts that is likely to be one of the first economies to restructure and recover. What that eventual recovery will look like is any bodies guess. One would hope better, stronger and sustainable having learnt valuable lessons.
    WASTE NOT WANTS NOT.
    Ivor Evans.

    Comment by Anon on 16 March 2009:

    Some big worries I’d like to hear more about are:
    1. fresh water;
    2. fertile soil;
    3. food security; and
    4. that modern agriculture is fast running out of the cheap energy needed to keep up its 200-year struggle trying to prove the ideas of Thomas Malthus wrong.

    Comment by rose on 16 March 2009:

    Where should one put cash? it can’t go in real estate as it is still sinking, it can’t go in stock, the market is still falling and companies are failing, it can’t go under your mattress because it loses value daily. Should money be in canned food or dried cereal in case food becomes scarce or very expensive? Should it be in fixed interest loans as a car or some such necessity? Should it be in gold coins? They could go up or down in value and their is a premium on the buy and sell side. Should it be in gold in the stock market? Thats quicker to liquidate on the down side. Is a bank safe if their comes a world currency? Paper money could be devalued.
    These are some questions I have.

    Comment by Hugh Stewart on 16 March 2009:

    Hunter/gather by nature humanoids do not know when to quit. So when it’s good they go for more, more, more! Few other creatures express this propensity for limitless consumption – read greed. Evolved on the plains of the Serengeti our truest nature combined with our scary technologies leaves me less than optimistic. Good luck humanity you’ve missed the point.

    Comment by John on 16 March 2009:

    What’s happening in New Zealand?

    Comment by Natalie on 16 March 2009:

    Continuing from your DR today regarding oil and in particular the proven reserves. What do you think will happen to the economies of the world and more particularly our way of life when the world realises the reserves of oil are not as high as published. How will businesses continue to make money when most of their profit forecasts are based on cheap oil continuing into perpetuity.

    Ivor Evans
    March 16, 2009
    Reply
  67. devaluation of US dollar.
    Sure the US will be able to pay back the bonds by buying them (same idea as printing money), but how much will the REAL value of the US be then as a percentage of the say November 2008? In other words what percentage will be paid back in real value as opposed to dollar amount.
    I don’t envisage people having to truck wheelbarrows of US dollars to the supermarket here, but will it be a suibstantial percentage devalued?
    I share the concern of the Chinese re the Us ability to pay back, at least in similar value as opposed to the actual dollar amount.

    Reply
  68. Is it the Great Recession or Great Depression? Whats the difference, having regard to: unemployment, and sectors of the economy likely to see greatest number of job losses?

    Reply
  69. Dear Dan,

    Can you please tell us about the possible macro-economic ramifications of ‘the shift’ in credit markets?

    Whereby the Post-WWII til 2007 trend, of growing private-sector debt levels has stopped growing, and is currently looking like it will NOT grow anymore, and how this private-sector debt non-growth is being replaced by public-sector debt growth, which is looking like it will expand indefinitely, or at least until we have a currency crisis in the post-Bretton Woods, US Dollar Reserve Currency standard.

    Kind regards.
    kojacq.

    Reply
  70. 1. Why do you publish Mogambo Guru? The guy is just dripping with a pride that a. is only ever heard from perpetual gold bugs, and b. is the type of pride that usually cometh before a fall- he seems like such a jerk. (I own gold too as insurance!)
    2. If you are of the Austrian persuasion, why don’t you subscribe to, or even see the possibility of gold deflation in the current scenario? How is possible for the world which has lost some 50 trillion dollars in wealth, to hyperinflate with a few trillion? They couldn’t do it in 1930+ when the US government spent more in stimulatory packages (in %GDP terms,ref America’s Great Depression :Rothbard) than they have so far.
    3. I noticed that before Obama appointed Paul Volcker to his team, he (Volcker) was regularly mentioned as an unlikely ( to be appointed or used) savior in DR, but at the news of the appointment there was silence, and since, very scant mention. Did this unlikely appointment stop you in your tracks? Did you ignore it on purpose?

    NB: I am not anti-gold, DR or Austrian economics. I am pro-all three, but having seen gold ‘fail’ for a long time to foresee the market conditions, I can’t subscribe to the view that gold rises in deflation, stagflation and inflation, or necessarily in any of those conditions at any given moment.

    Reply
  71. 1. How long will I have a job?
    2. To what extent (if at all) does the financial crisis have its roots in resource constraints ( esp. oil) instead of the Ponzi financial shenanigans we are sick to death of hearing about? If it does to any reasonable extent, do our leaders know this? I am worried that this may be the case and we are doing nothing to prepare and plan.
    3. We are told our leaders are urgently working toward hastening the “recovery”. Just what are we hoping to “recover”? If it is the status quo ante replete with the afore-mentioned financial shenanigans, excessive debt, conspicuous energy consumption, unrealistic oil production expectations etc then I am also worried that our leadership is dangerously deluded.

    Reply
  72. Hi all, just to commend the bang-up job you do and to ask a question.
    The following is a clip from an article by Tony Blankley on Townhall.com

    The great whispered-about possible crisis that financiers and governments around the world shudder over is what to do about the more than quadrillion (thousand trillion)-dollar notional value of the world’s derivatives (what Warren Buffett called the financial WMD) — should that notional number become crystallized and, thus, real.

    By comparison, the U.S. gross domestic product is $14 trillion; the U.S. money supply is $15 trillion. The GDP of the entire world is $50 trillion; the real estate of the entire world is $75 trillion; the world’s stock and bond markets are worth about $100 trillion.

    The notional $1.14 quadrillion (as reported by the Bank for International Settlements, which is in Switzerland) only becomes real (and frightfully dangerous) if either counterparty to a derivative goes bankrupt and if the defaulter is a major institution. Then it would start a cascade of cross-defaults that might well infect and bring down the world financial system.

    Full article here http://townhall.com/Columnists/TonyBlankley/2009/03/11/obama_leverages_his_political_risk_in_first_50_days?page=2

    Now my question: What kind of derivatives is he talking about besides repackaged mortgages and associated insurance (I have seen your alphabet soup of them before, but I am still not any wiser about them) and secondly, how can there be an order of magnitude more derivatives than there is total wealth in the world’s stock and bond market? I realize it probably has to do with a concept similar to the credit multiplier effect seen in regular banking for fractional reserves vs. outstanding obligations, but since this is not any one bank collateralizing or hedging, but rather the whole system, how did it get leveraged out so far? I realize that what I am asking is probably more complex than what you would like to answer in the DR but could you point me to a resource that could answer my query in more or less standard English? If Buffet called it the financial equivalent of WMD, I would like to know where the fallout shelter is…, or should I just scream “GAAAAAAA!!!! I AM FREAKING DOOMED!!!!!!!!” like the Mogambu Guru does, and then buy a few pennies worth of gold? Have a great day. Brian

    Brian Norton
    March 16, 2009
    Reply
  73. In answer to Mizou Carillo’s questions:

    “Perhaps an article with FOCUS on Australia / RBA creation of money
    (eg) Why are the Medicare cheques drawn by the RBA / Is the RBA an agency of the government and are they audited and where are the P&L etc..
    Why was the RBA created ???”

    – Mr. Carillo, if you are interested in an alternative history of the RBA, the RBNZ, and the BOE, may I suggest having a read of this site:

    http://www.bankwatch.info

    The article is long and it is called ‘The Enemy with the Empire’ by an Eric D. Butler from the Australian League of Rights. I believe Mr. Butler wrote this article back in the early to mid 1930’s. Do a search for the word ‘australia’, to get to the relevent sections.

    I have no association whatsoever with the Aust. League of Rights. I just found the information reasonably accurate, based on my own research to clarify the accuracy of its claims. And thought it was worth sharing.

    Kind regards.
    kojacq.

    Reply
  74. I worry you will continue to be correct in your analysis and interpretations of current events.
    I am concerned that one of Newtons’ Law ; “for every action there is an opposite and equal reaction” will be held true for this depression.
    I worry that drastic people always do drastic things and make things drastically worse.
    I worry the inmates continue to run the asylum.

    Reply
  75. Edit: I meant to say (%government spending NOT %GDP)

    JK

    Reply
  76. Hi DR,

    How severe will the depression be in Australia?
    (Will there be a depression in Australia?).

    Will Goldman Sachs go under? That would be the ball game wouldn’t it?

    Will silver be more likely to rise further than gold, in your opinion?

    What will trigger the final crash? (I know that you aren’t God)-))

    Will the world finally turn to Austrian economists for a solution?

    Keep up the good work that you have been doing.

    Brian Wheatley
    March 16, 2009
    Reply
  77. I have heard about the female councillor being in bed (literally) with 3 land developers.
    In the seventies Gough Whitlam unleashed an army of town planners (remember free uni for all and the proliferation of Mickey Mouse courses?) on this nation and since then every council has produced a town plan and they change it when it suits them. Nowadays you cannot do anything outside a town plan. By means of zoning regulations the land made available for development was kept very restricted driving the prices up. I suspect further rezoning only happened once the rural land was in the right hands allowing the right people to make fortunes. And fortunes they made.Normally this would have put homes beyond the reach of most. But the federal govt came to the rescue by printing money and easy credit and other schemes.And house prices (mainly land)went up from 35000 to 35000. This sounds like the biggest case of fraud and corruption from the last 30 years. Bigger than drugs and police corruption.
    Can you say something about the relationship between land developers, councillors and politicians? About the gravy train from the Reserve bank to The Land Supply Cartel?

    Reply
  78. Edit From 35,000 to 350,000

    Reply
  79. Interested in knowing your take on hyperinflation, what you think the chances of it hitting the US are and how that might affect us here in Aus.

    Also, any reason why I shouldn’t just max all my cards out and wait for hyperinflation to magic my bills down to the equiv of a loaf of bread?

    Cheers, and yes please, another vote for the gold and silver…

    Reply
  80. 1) Cash crash? If so, when?
    2) If US$ goes bang first will ALL other currencies follow?
    3) Should we dig up the flower borders and start planting vegetables?
    4) Is NZ really the best place to survive or should we emigrate to Mars?

    Reply
  81. What is the real deal with the RBA and their relationship with the creation of money?

    It’s seems most of us pay more than half of our earnings in tax to the government, then the lions share of what we have let over goes towards paying interest payments on our debt.

    So, if the RBA sets interest rates at 11% (for example), my question is where does all that money end up? We’ll.. i suspect most people might think that the bank takes their cut (around 100 basis points or 1%) and then it’s pays the other 9% to it’s depositors who financed the loans. Well.. that it’s partial true, but if you are familiar with FRACTIONAL RESERVE BANKING you would know that the bank is allowed to create up to 20 times more than it’s capital reserves. So the money that is loaned by the banks is far more than what it has on it’s balance sheets from deposits.

    So, we must agree that the majority of the money loaned by the banks has been ‘created’ under the fractional reserve system and therefore there is no depositors to pay for MOST of the money loaned. Therefore, the majority of the 11% interest payed by the community goes directly into bank balance sheets. Bank profits are then taxable, so half of that would end up in the governments hands. On the other hand, the bank is required to take responsibility over the risk associated with the money it created and it’s then exposed to any defaults from borrowers. Those defaults can be forecast and placed on the banks balance sheets in advance.

    So, in reality for most of us is.. we pay half of our earnings in tax, the rest our money goes on paying interest on debt. Half of our interest payment (mortgages for most) ends up with the bank and the other half with the government. The RBA sets the interest rate to squeeze as much out of us as we can handle.. like a well oiled machine.

    For most of us who have to work all ours good sends to keep our heads above water.. how sad ;-(

    Call that freedom? Please elaborate..

    AnonymousAussie
    March 16, 2009
    Reply
  82. Hi DR,

    Great reading – thanks!
    Seriously, doesn’t Bernie Madoff have the perfect defense? His Ponsi scam is infintessimal compared to the US Fed’s Ponzi fraud that will ultimately take the whole world with it. Put Bernanke, Paulson, Geithner et al in the dock!

    Reply
  83. Dear DR,

    ok are you guys really asking us ? amazing ! ok then, I am 50 lost my job because of the global credit crunch, I have applied for 50 plus jobs in 5 months and only got part time, lost money in Super ( the biggest rort there is) and personally should I

    1. gleefully wait for a real housing crash

    2.how do I access my super ( without dying ) to use it in a better and more efficient way.

    3. what small business is sustainable in a peak oil age ?

    4. find a job or occupation that you can use in a WTSHTF scenario….

    gleefully waiting

    Al

    Reply
  84. Availability of fresh water resources.

    Reply
  85. Stay just the way it is, that’s what got me interested to begin with.

    (It makes me feel like a smarter average joe than the other average joes)

    Reply
  86. I really don’t know what questions to ask.

    If I find myself on Al’s predicament I will have to take up some work, indeed anywork on offer. Maybe my skills are in demand for the moment but around the corner who knows? There is work and opportunity around but an 80% pay cut isn’t a nice thought. For many on this forum it may become a reality and we need to be prepared for this.

    My guess is that what’s left of the superannuation deck of cards will collapse soon. The likely “political” outcome – allowing retrenched people to live of it (rather than use it to invest in business) is “flat TV” depressing.

    Coffee Addict
    March 16, 2009
    Reply
  87. I am worried that the politicians might actually be able to fix the system with stimuli and bailouts. OK, you have frequently pointed out this is not likely to happen, but a whole new paradigm is desperately needed, and I worry we might miss this opportunity for fundimental change.
    Wealth is not money, money is not wealth.
    Wealth is the stuff that you need and it all comes from the environment via human labor. Iron ore for your car, wood for your furniture, soil for your food.
    Money is the system by which wealth is shared, and is outragously unfair as the rich get obscenely rich, and the poor get catastrophically poor. When that imbalance comes to be abundantly clear to the poor and they become so poor they have nothing to lose, the society collapses. Can’t happen to us? Read some history.
    Economic reform needs to be fundimental so that we value our wealth, the environment and its resources, and human labor.
    Money needs a drastic reform to share that wealth more equitably to those who labor with their backs or their minds.
    I suppose I am one of the few who think this depression is a very good idea and to quote Bill Bonner “Let the bad times roll”.

    Paul Tredgett
    March 16, 2009
    Reply
  88. I’m worried that the gold ETF’s will devalue gold in the same way paper money is being devalued. Are the ETF’s on the level or are they creating gold equity out of thin air? i have put almost all our super into gold and silver (at the perth mint) but i am worried about the scammers scamming gold.

    Reply
  89. What is happening with smaller scale gold stocks? Their costs are fixed in AUD (Wages, most consumables) or reducing (Fuel) and the unit price of product is going up considerably when the USD/AUD relationship is taken into account.

    Reply
  90. Wow! What a response!

    Can you please explain:

    – money contraction due to fractional reserve banking? (can it contract? Does this mean money is ‘lost’?)

    – what do you think is the most damage the gov. can do to the economy (besides hyperinflation and trade embargoes)?

    – What is your take on the real-estate bubble in Australia, particularly the governments CURRENT role in it? For instance, do you really think they could get away with a 50K First Home Owners Grant?

    Great website by the way, Dan’s posts are pure excellence.

    Reply
  91. Dear kojacq,

    originally the Reserve Bank was established to ensure full employment for Australian citizenry.

    Since the 1980’s that notion was abolished and is now no more than a politican’s plaything for monetary policy while they diddle us with fiscal policy.

    Reply
  92. Dear DR,

    a few years ago when Roger Corbett was MD of WOW he sais water and water quality were the biggest issues facing Australia’s future.

    Are there any listed plays in Aus like Memtech of over a decade ago?

    Reply
  93. Dan,
    Just keep them coming. I love the mixed bag of comment which builds a picture of the overall situation, I think. What do I worry about? Well, at my age I just worry about waking up next morning.

    Reply
  94. If inflation trivializes debt how long before we see a “normal”inflation rate of around 10%

    eg a property bought for $20,000.00 35 years ago is now worth $1.2 million therefor a debt of $1.2trillion would be worth $200 Billion in 35 years time

    bring on inflation

    Reply
  95. I would like a very simple explanation of fractional reserve banking. Assume I am a bank. I take in a deposit of $10,000. I then lend out $100,000. On a ten to one ratio. Everything is perfect so far. One miserable woman, not man, defaults on her mortgage. As a bank I lose $100,000. I should never have loaned the money to her. But $100,000 has gone.
    Now where has it gone from? The original deposit of $10,000 or the $100,000 loaned by me on the strength of the $10,000? If it is gone only from the loan of $100,000 then the bank now cannot lend again on the $10,000 deposit. However, if it has gone from the multiple deposits of $10,000 in the bank, then the bank now has to call in $900,000 of lending. If this happens 100 times then the bank is broke. Explanations please. I do not know. Where does the loss come from on the banks ledger?

    Reply
  96. I’d like to know specifically what it was that made Mr Bernanke come to believe in September 2008 that the world was about to have a global financial meltdown. We hear about it in passing reference – But never any specific detail. And I’d guess whatever it was must have been a whopper because up until then the Fed and US Treasury and SEC had all been pretty much adopting an attitude of Ho Hum business as usual but suddenly turned on the proverbial American dime. What specifically woke them up?
    And if anyone wants to say it was their deep and insightful and carefully reasoned analysis at the time of what “could” happen if AIG failed (they HAD let Lehman fail the day before quite happily) I’ll simply say that in my opinion, that is giving them credit for an ability to be insightful and carry out carefully reasoned analysis that they had shown no prior evidence of and even fairly limited evidence of since.
    What SPECIFIC numeric bomb dropped in their laps in September 2008 that FORCED them to conclude that the global economic system was about to meltdown?

    Reply
  97. INFLATION is my overwhelming worry. Now retired on a fixed pension I have seen our investment income destroyed so have no scope for a means of combating inflation. Here in Australia pundits claim there is no inflation; the daily newspaper has increased from $1.10 to $1.50 in 6 months, food bill up around 1.6% in same period and no real fall in petrol prices although oil down over 60%. All that before the Rudd governments ‘stimulus package’ has kicked in.

    Much the same in the UK. Have written to our government and the opposition to ask why there is a conspiracy of silence on the subject; no reply at all.

    Paul Phillips
    March 16, 2009
    Reply
  98. Hi!

    I’d like to know HOW we can make money in this current economic depression?

    What are some strageies besides the gold and silver hedging?

    How can we educate our children to prevent such moral hazards and invest wisely?

    ;)

    Best regards
    Minghui.

    Reply
  99. Are the pics of Pauline Hanson really her…?

    David Oldfield
    March 16, 2009
    Reply
  100. Great blog, please make it a permanent feature of your excellent ‘e’ publication

    Reply
  101. Hi Guys what a great response And I thought nobody cared. Noboby in the banks or government does ther pockets are full I suspect!

    Question Is
    Are the Big four Aussie Banks lying about their balance sheets.
    Are they also lining up for a fall?
    Can we prove they are solid or otherwise.???
    Maybe Kevin Rudd already owns them.

    Reply
  102. I’d like to know the eventual outcome of all major global fiat currencies being in a race against each other to devalue. Albeit in an orderly fashion. Ultimately there must be winners and losers in this game! Who will be the winners? Who will be the losers? What are the ramifications?
    I’d like to believe bullion will be the winner as DR seems to regularly imply? But bullion is NOT money and NO government on earth of any significance is giving any indication of wanting bullion to be money – That would require them to surrender control of their fiat currency and as such, to surrender control of their economy.
    In a different world it “could” happen. But not in our world I opine?
    In our world America calls the shots and in my opinion, America would go to war rather than lose control of its economy. (AMERICA IS NOT Zimbabwe!!!) Although the alternative of “accepting” wars between other parties and just making the bullets for them to shoot could be far more preferable I’d guess.
    Irrespective, America is NOT averse to war. Joe Six pack is DEFINITELY NOT a bad person (mainly) – But is poorly educated, ill informed, intensely nationalistic, extremely pampered (by world standards), desperate to believe the US are always the good guys and pretty much as ignorant as toe nail clippings.
    While also knowing along with everyone else on earth that if a real stand up knock’em down stoush should seem useful, America WILL win.
    Why does the word Hegemony come to mind?

    Reply
  103. I’d like to know what the future holds for asset prices in general given the amount of QE going on around the world – Will the world governments succeed in making the majority feel confortably well off again in developed countries (albeit in devalued currencies) and that there is real hope for improvement in developing countries, or will they fail – As in Hello Asset Price Deflation.
    My guess – They’ll succeed – Hello Inflation. With two things being questionable:
    1) The timeframe before we feel good, and
    2) How sustainable it is – Hello NEXT BUBBLE/S!!!

    Reply
  104. What was it really like during the 1930’s?
    There seems to be much written about Germany but what was it like in other places?
    Were all sectors of society affected in similar ways?
    Was the biggest concern for most people just putting food on the table?
    What happened to food prices/average weekly wages in that period?
    What happened to the price and availability of energy (eg fuel, electricity)?
    How much could the various governments afford to do?
    How much can our current govt’s afford to do from now on?
    Who did rather well, or comparatively well, in the depression?
    What are the odds of us avoiding a hard landing in the next few years?
    Why can’t I work these things out for myself?
    Many thanks to DR.

    Tony Hansen
    March 16, 2009
    Reply
  105. how will the coming hyperinflation of the u.s dollar affect the aussie and kiwi dollar and the gold/silver price denominated in these currencies how will that scenario play out over the next few years do you think there may be significant currency risk should i wait to buy more when the currency is closer to parity or just get some more now

    brendan hirst
    March 16, 2009
    Reply
  106. I think your despatches are very interesting, the fact that they are varied and talk about a variety of things that I dont entirely comprehend only makes them more interesting.
    Sometimes I think you do labour the US situation a bit and it would be good to get more perspective on the Aus and European economies.
    Why do you think it is that we dont hear much about the underlying inflation rate (and impending inflation) from the mainstream media?

    Reply
  107. I am seriously concerned that when this is all over, everything in the world will be owned by the IMF and a mega rich and very ruthless people, and we will all be serfs.
    I am concerned that the AMERO is reality not fiction, and that this crash, far from being unforseen, has been deliberately created.
    Why? To create 1 world currency and a totalitarian world government. I hope I’m wrong.

    Mark Smith
    March 16, 2009
    Reply
  108. Hmmm … I’ve convinced myself. Buffet is correct – Don’t bet against America. Not anytime soon anyway. They’ll sidestep that little national debt thing somehow or other.
    If you have some assets then sell up, sell out and see if you can apply for a Green Card – Hey, Florida sounds nice and a house there sounds pretty cheap? (I’ll give Detriot the swerve though thanks.)
    Joe Sixpack might be as ignorant as toe nail clippings but there’s lots of ignorant people in lots of countries and if Joe desperately wants to get shot for the good old US of A, who am I to stand in his way?
    GAWD BLESS AMERICA!

    Reply
  109. I fear for my children’s future.

    Doing the right things, higher education, moral integrity, focused motivation, etc., no longer insure a bright future for them. The lessons being learned from this financial fiasco are not the lessons I want my children to learn. Rewarding failure, bailing out buddies, governments power grabbing will insure their future to be discouraging to say the least.

    CommonCents
    March 16, 2009
    Reply
  110. Re: Comment by kojacq on 16 March 2009:
    Mr. Carillo, if you are interested in an alternative history of the RBA, the RBNZ, and the BOE, may I suggest having a read of this site:

    http://www.bankwatch.info

    Thank you kojacq. Already started to read.. Great Site.. Highly Recommended

    Thanks Again

    Mizou

    Mizou Carillo
    March 16, 2009
    Reply
  111. Global impact of foreign funding of US debt. Can we explore separating US$ functions of global reserve currency and domestic business?

    Seems sensible for Chinese to invest in own currency medium and thus insulate themselves from US inflation devaluing their US bond investing. Likewise all other investors?

    Issue is we have a global trading model but global finance is an uneasy kluge of domestic fiscal models.

    Banks make a killing in this scenario. What we need is a non-domestic currency unit reserved for global trading. All currencies to be valued against this universal currency which should be the medium used by contracts and settlements.

    Objective to restore ‘money as a store of wealth’ instead of banker’s piracy mechanism. Will G20 do anything besides hand wringing and poseing for cameras?
    Don.

    Reply
  112. My take on the future is as follows:

    – at some point there will be an economic recovery.
    – this will increase the demand for oil.
    – demand will push up against constrained supply due to depletion from existing fields and cuts in oil industry investment due to GFC and lower oil prices.
    – this will result in another oil price spike which in turn will trigger another round of economic contraction. This cycle will continue until we develop an economy that uses significantly less energy.

    My question is: when will the powers to be wake up to this? How long will they keep up the charade that continuous economic growth is a. a good thing, and b. possible?

    Reply
  113. For Kathy worried about Gold ETF’s, try Jason Hommel’s silverstockreport.com There is alot in there about Perth Mint and ETF’s.

    Reply
  114. What I am really worried about is the monetary system as it stands now. You rightly point out that the USofA and other countries are just printing money to cover their debts and to ascertain their so called stimulus packages. Is it possible that we will really get to a point where we will see currencies just collapse, because of inflationary tendencies like the ones during the Weimar Republic? I fear that will be the end result. Will we see a new (old) order for currencies that will be based on gold?
    I am really interested to read some comments on this.

    Peter Mueller
    March 16, 2009
    Reply
  115. I’d like to know when you guys are going to reply to my emails concerning my subscription and the passwords you sent me that don’t work.

    I’ve only been emailing you since last week.

    Alllo Allo
    March 16, 2009
    Reply
  116. The global demographics of this recession may be the Achilles heal for any hope for a return to the economic normals of the past 20 years.
    Your absolutely right that we need a new economy and the quicker we
    Reinvent the automobile and replace our energy infrastructure with something that doesn’t kill our planet then obviously this will be a positive for our future.

    Reply
  117. What me worry? HA! Like “Alfred E. Newman,”…not at all. Are we all so dumb to have thought that capitalism would live on forever and forever…and forever…??? How utterly boring that would be. Accept our destiny folks. The next wave is a hybrid…”Socio/Capital/Moral” society here in the U.S. This is a hard, new…”Age of Aquarius” upon us. We will know it in August/September of 2009…after the rise of the stock market…a total crash will come. The Middle Class is awaiting just this. Hording their cash, frugal spending…but most of all…BUYING AMERICAN as often as is possible. America will be fine…if there would be anything I would worry about…it would be all the other countries. Why, you ask? Because the middle class Americans now realize their “true power.” It is called…”Purchasing Power!”

    Sue Lawson
    March 17, 2009
    Reply
  118. Housing prices are only one aspect of the economic situation that is most visible. I prefer that you continue with the more fundamental aspects that are the cause of the macroeconomic problems.

    A concerned Canadian.

    Reply
  119. I would be interested to hear your opinion on the 1987 crash and the effects it had on gold prices. Being too young to remember the details, historical charts show that gold price didnt really react that much in october and actually fell in 1988. At the same time I believe there was significant increases in the monetary supply by governments at the time. Is it always the case that gold is the safe heaven we hear so much about?

    Reply
  120. banks are scamming us as when u go for a loan they send out apprasers that appraise your house so low that u don”qualify.then in the paper says the moneys available but it is really not .they dont tell about the appraisal scam. so if banks dont care about me they can have my house back and i will have the standard of living with the amt. of money i save on mtge and fees. ken

    Reply
  121. I’m worried that we will never be able to trust anyone again.

    Reply
  122. Lots of good suggestions in other comments. Kudo’s!
    1) I’m a US citizen but read DR-AU. Would like to know more about domestic AU and NZ and how US actions impact them. Suspect DR has large US reader base hence primary focus on US activity. That’s ok. US is still largest economy in world. We sneeze you get pneumonia. Truly sorry about that.
    2) At 62 worried about best use of cash reserves for retirement income (have been mostly cash last 4-5 years, whew!).
    3) If all reasonable people expect hyperinflation (world gov’t stimulus spending) how likely are we to get what we expect? And if we do where to hide? Gold?
    4) Why do gold producers want my fiat money?

    Thanks for the good work.

    Reply
  123. AUD/USD rate – what’s next and why?

    Reply
  124. There is a surprising amount of one-dimensional thinking by the readers here. (I don’t excuse myself from that comment)

    I would have thought that readers would, by now, be more adept at understanding the ‘global’ economy and not just accept the same old cyclical “boom follows bust” talk.

    The idea that some readers here still expect a recovery in the near-term to me implies that they are only selectively reading the articles that they want to read.

    I bet there were people in Japan in the early 80’s thinking “oh, I might get back into the market so I can catch the start of the boom” only to find that they had more than a decade of recession to go.
    Are we that naive that we think that a complete restructuring of the world economy will create another boom in the near-term?

    How would this boom be fueled? The last boom (bubble!) was fueled by cheap and easy credit, which still has not busted completely. Another boom could only be fueled by two things:
    1) MORE cheap and easy credit (which is ludicrous considering the state of the banking/financial system)
    2) A Gov. fueled stimulus/bailout bubble. How long would this one last? Oh, about as long as it takes to destroy a currency with ‘Quantitative Easing’ (money printing). My guess is about two years maximum for that one, producing an even bigger bubble in gold.

    But…I could be wrong. We could be on the verge of a real-estate boom, a mining boom (fueled by a massively expanding China, who will have sustained internal growth, like a fantastic perpetual motion machine, and of course will save us all somehow), the Gov. bailouts/stimulus could really work (what are you spending yours on?), sub-prime home loans will become the future norm, and we’ll all live on mars when our planet gets too hot.

    Reply
  125. Right you are Pete. The only people who should be in the market are those who absolutely-positively-without-a-doubt know how to time it. Earnings are falling, the credit market is still unwinding, the manufacturing sector has no idea where the consumer market is going, and the mining industry is betting the US dollar collapse will push up commodity prices. But, like you, I want to know who is going to buy what, when and for how much. The US absolutely will not be producing anything but massive tax increases, massive debts, and a population that thinks the deeper their country goes into debt the more prosperous they will become.
    I read a lot of analogies indicating that Americans were on a drunken debt binge. Well, with Obama, America is now smoking dope and suffering the munchies that they think they can satisfy with more debt.

    Anthony Teamson
    March 17, 2009
    Reply
  126. What am i worried about? I’m worried about the moment when international investors (China, Japan, Europe) disabuse themselves of the pervasive notion that America is “where it’s at”. Everyone has this romantic, wild-west, anyone can get rich there notion of the US which, unbelievably, still hasn’t gone away. As proof I would offer the relative out-performance of the US stock markets… why? When the scales fall away from their eyes we’re in deep doo doo here. Not worried about “if” so much as “when”. As a whole the US is the most deserved and the least prepared for (excepting, of course, those who bought gold coins and firearms in record amounts) this global depression.

    Reply
  127. POLITICIANS
    I worry about the cretins purportedly “running” our fantastic country, while, in reality, perpetually focused on constant posturing to prolong (and in some cases; save) their political existence. There is no more supreme self-absorbed, pretentious prat than that guy they call our Prime Minister. Everything he does is so obvioulsy driven by his own personal gain. I’m positive he has his career path and exit strategy mapped out to use the Oz PM’ship as a stepping stone to some cushy international ‘highly important’ job (IMF, UN ?).

    HOUSING (in Australia)
    It’s clear that there is an ongoing rout in the US housing market, but the circumstances that led to this don’t necessarily seem to be reflected in oz. You have predicted a period of deflation followed by a period of severe inflation due to the over supply of paper money. One of your recent guest essayists also strongly recommended we hold “hard assets” like housing, commodities etc. All this would seem to suggest that holding property would be prudent. However, another recent DR outlined how severely over-priced property is in Australia with respect to affordability. I’m having a little trouble sorting out the mixed messages. Would it be possible to do a treatise on the Oz housing market but in the context of the relevant international dynamics that you usually address, please?

    PERSONAL DEBT
    How important is it to get out of debt now?

    TAXATION
    My friends always scoff when I rant about the complete abolition of taxation. Everyone should pay their fair-share; how would the roads, bridges, hospitals be built they say. Hypothetically, could a nation still operate without taxing the people?

    I harbour a deep mis-trust for Governments and the (biased) media, and therefore most of the “conventional” wisdom out there, which is why I am a huge fan of the DR. Keep up the great work fella’s.

    Reply
  128. Dan, I’m worried about how easy it appears for people in finance to bilk the general populous (not just in America but here in Australia too).
    I’m not sure what amazed me the most about the AIG bonuses – the bonuses themselves or that Main Street America doesn’t want to listen to those parts of the media who are trying to describe to them just how ugly this whole situation is … not to mention all of the Goldman Sachs fingerprints over everything.
    Maybe there are some funny Simpsons re-runs or a particularly good game of basketball on the box keeping people distracted. I haven’t watched mainstream media for a while now … maybe Paris Hilton has done something outrageous again and people are engrosed in that.

    Reply
  129. p.s. the David Oldfield comment was the greatest!

    Reply
  130. I would appreciate management accounting, reporting and disclosure being critically covered. With our investment decisions being on these inputs the coverage ranks equally with macro economics. I had changed my investments into consumer staples, health and energy (incl energy services) about a year ago but have been let down by poor accounting regulation & disclosure on more than a few investments. Currency & derivative management and geographical source/application of funds is a mess.
    These are not matters where analysts have done any better (except those that have had insider banking debt covenant info come their way and have gone shorting the stock to get it past the equity trigger point). The FASB standards are a big step up from Australia’s in every way other than in the off balance vehicle debacle.

    The myopia about the negatives in Sarbanes Oxley has allowed the Australian rum rebellion era styled crooks around Sydney Cove to get away with the AASB rules on marking to market / good will (that the bank/real estate paid lobbyist accountants and lawyers got up) to allow Australian companies to mark to whatever they like and however they like. The government won’t address it due to the implosion that would result but we as investors and our superannuation has got screwed over by the cronies and our reckoning is already set in a long tail decline in the economies core assets.
    You can juxtapose good management versus bad on reporting and disclosure matters when you compare a Mt Gibson versus a Transfield.

    Reply
  131. 1 – hyperinflation
    2 – widespread war due to lack of essential commodities such as
    fresh water and oil
    3 – erosion of protections provided by U.S. Constitution (we have
    already lost about one half)
    4 – confiscation of precious metals
    5 – terrorist release of weaponized smallpox – THE most deadly
    thing that could happen to the human race – would make a nuclear
    exchange look like Guy Fawlkes Day – U.S. and Russia both
    posess weaponized smallpox. There is NO CURE, and mortality
    rate is 50% plus and it is EXTREMELY contagious.
    6. Collapse of U.S. dollar – see #1

    Reply
  132. Pete, why wouldn’t people be waiting for the boom/bust cycle to continue..hasn’t that be the routine for a few hundred years? Of course there will be a recovery at some point but I have not read very much where anyone is expecting that in the short term. (2010 sounds nice) As I have mentioned before we will get out of this mess at some point only to work ourselves into another one just like we did after the S&L loan crisis and the bursting of the tech bubble for example. I do not like economic turmoil, bubbles bursting and asset prices falling etc but the only way to protect yourself as an investor is to appreciate they will happen and not think we have seen the end of them.

    Reply
  133. Hi,
    I am worried that our Labor government is going to hand our money over foreign workers who lodged their tax returns in the 2008 financial year. Foreign workers such as working holiday visa holders, temporary visa holders (student visa holders) can be residents of Australia for the taxation purpose. Those people will get the tax bonus of $900, if simple eligibility test is satisfied. I don’t think the tax bonus will boost our economy just handing over tax payers’ money to foreign workers who have already left this country. I think that money should be used to fund infrastructure projects to create more jobs. I am wondering what your view on this silly policy.
    Thanks for your articles.

    Reply
  134. When will Bigpond deliver my DR?

    Reply
  135. What I worry about is that people want to know what is happening next. It seems so passive. What I would like is DR to constructively suggest we do in actively our role as Consumers, Investors and politically as Citizens (each addressed separately).

    I do also worry about what AIG is saying here, inside the item of “AIG: Is the Risk Systemic?”:

    http://www.aig.com/Related-Resources_385_136430.html

    (I was alerted to this in Ralph Nader’s latest blog posting “Six Avoidance Indicators”:)

    http://www.nader.org/index.php?/archives/2106-Six-Avoidance-Indicators.html

    Reply
  136. US housing? Who cares? So, many people bought overpriced houses they couldn’t afford. The outcome was inevitable. Let it happen.
    Don’t miss the two letters in CourierMail – Letters section this morning. Very pertinent.
    What I like to read in DR is hard economic facts and figures, with some comments and explanation please.

    Trevor Best
    March 17, 2009
    Reply
  137. Hi Greg. Well, 2010 isn’t really that far away. I personally just cannot see a ‘recovery’ happening before the liquidation has even got to halfway. In Australia the liquidation appears to be just beginning.

    That said, the impact of Government intervention (or meddling as I like to think of it) throws a bit of an ‘unknown’ factor into the mix. What effect this will have on the liquidation in the short-term is anyones guess I think. It may cause a rally that will make 2010 appear to be a return to 2007 norms, followed by some real economic carnage. Or maybe it will do almost nothing.

    The other very major unknown factor is war. We just never know if one will start. There may be military boardrooms full of people planning that exact thing as I type. What effect would certain wars have on us in Australia? What about the US? Would that hurt a potential economic recovery, or be just the thing that an economy needed? It was for the US in 1940 (technically 1939), but they had already had their liquidation many years before.

    Just my thoughts anyway. If you asked me for a speculative recovery date, i’d certainly do no better.

    Reply
  138. Hi Pete. Actually I was not very clear when I mentioned a recovery. For me a recovery is simply when things stop getting worse an we slowly start to work our way out of this hole. I am not suggesting in anyway that we will be at 6500 again on the ASX in 2010..that would be nice but I doubt it is going to happen.

    You are right about war being the wildcard, being in Japan I am a little concerned about the situation in North Korea as that could easily get out of hand.

    I am a little heartened though by the current support the ASX 200 is finding above 3000 and am starting to dream we might be finally bouncing around the bottom. (mind you I had that same dream at 4800!)

    Call me silly, but I actually think Australia will be one of the last G20 economies to come out of this downturn..simply because it will take a while for demand and prices for commodities to both hit that 2007 sweet spot again. Until then we will have to live with less money from exports and that might be a bitter bill for the Australian economy to take.

    Reply
  139. I would like to know your thoughts on what may happen to interest rates as many of the world’s governments rush to the bond market to finance their stimulus packages?

    gingermeggs
    March 17, 2009
    Reply
  140. I am worried cos Aussie housing prices haven’t crashed. They are still stuck at 6 or 7 times earnings and historically they are at 3-ish. The government – political and bureaucracy – is trying to bridge the recession with handouts and interest rate cuts which are artifically propping things up.

    If I had a fat mortgage, I would be white with fear. I cannot fault those who saved their Government bonus, it is the only prudent course to take. Get that mortgage DOWN!

    Will we be stuck with an entire economic cycle of high prices? We dont, ahem, have a land shortage…

    David Collyer
    March 17, 2009
    Reply
  141. Has anyone here in Oz thought about what the property market would be like if people per houses went from 1.6 (last year) to 1.7 (now) back to 2.4 (historicle avg) people per house.

    Reply
  142. Comment by Dick from Sydney on 16 March 2009: “You have to keep an eye on housing. It’s the next bubble to burst in Australia, and the sooner, the better.” While the first sixteen words might be genuine and appropriate, why do the last five make me giggle?!~ (Dick is a very apt tag, BTW!)

    Reply
  143. 1. The Australian resource sector is a bit of a worry. The banks are reluctant to lend companies with world class deposits. Several of these are well on the way to producing real metal. e.g. KZL; LYC; MOL. Getting them going will generate jobs and the product(s) they will produce once their refinery / processing plant get fully operational may well come on stream once the recession / depression ends.

    2. Printing and dumping billions of dollars into failed enterprises cannot be good. Inflation, corporate welfare, etc. Better to put it into the likes of (1) above, &/or crank up the R & D investment incentives, & / or let entrepreneurs have a free rein by reducing red tape and giving tax breaks.

    Goat Pointer
    March 18, 2009
    Reply
  144. Hey! Something BIG is going on! Have you noticed all the focus on AIG bonuses? Did you ever ask yourself…”Why?” Perhaps to distract you from the real world??? No doubt. Granpa always taught me…”When you see the man in front of you waving his left hand all around…don’t watch it…look at his right hand he is hiding in back of him.” Grampa recently died a billionaire at age 98! He must have know something.

    Sue Lawson
    March 19, 2009
    Reply
  145. Hello, I love your newsletter! I would like to know if you think that all the coming inflation will make interest rates go up, and how high do youreckon they will go? Will it be like when interest rates went up to 20%?

    Reply
  146. What worries me?

    1. It is clear the US will have high inflation due to their debt level, bailouts and quantative easing. Will Australia necessarily have high inflation also??

    2. House prices in the US look like they will continue to fall. Australian house prices look set to move downward, even though a seismic shift seems unlikely. What does DR foresee for Aussie real estate over the next 5 years?

    3. The Aussie share market no longer seems to immediately mimic the activities of the US overnight. Will the ASX follow the same ‘dead cat bounce’ and then further slide as DR see the US going through?

    Reply
  147. over the past 30 years every investment I have made using the approved vehicles/methods eg major share traders like Ord Minnet etc have cheated me to the point where I have little cash left to sustain myself unless I entertain suicide in the not to distant future. Although I understand the global meltdown and the necessity of the ‘boomers’ getting the biggest BOOM at the end of their lives I’m bewildered that there are no trustworthy means of investing at all since every system or investment is either manipulated or corrupted. So what can one do with the little cash left except hold on to it and pray? even if I try to make small gains in order to retain my in-dependence and stay off the public purse it seems govts want me to be even more dependent on their corruption by offering me what they call ‘free’ money which the minute I get it I will have to spend simply to survive. The minute they discover that I have any assets/savings they withdraw my pension and deny me ANY assistance whatsoever until i can PROVE that I am poor enough to qualify for help. This means I have to be living out of a shopping trolley as any acquired ownership of anything that equals a totally ‘inflated’ value of $690k puts me into the RICH class. Now if I want to give up my home of 30 plus years and live in a hospice type environment great but I can’t sell my home for that sort of money anyway as the banks won’t lend that sort of money but of course the banks have offered to take full control over my property and pay me a small annuity for the joy of getting my property for almost nothing given my old age the odds are on their side. Anyway enough whining how about some advice about how us oldies can recover and make small investment through a systems/service that WORKS in our favor rather than some else’s?
    thanks

    ralph meyen
    March 20, 2009
    Reply
  148. Holy smokes Batman…is DR finally getting the message!? Looks that way Robin…maybe now they are beginning to understand, that it’s the Americans, hanging onto their money in a clenched fist and releasing that grubby little fist is the ONLY cure! Do you mean a depression is inevitable Batman? Ha! Robin…stop people,look around…anyone see what’s goin on…We are…”in”…a depression Robin…but the talking politico heads can’t see past their fear and egos. What will we do Batman? I donknow Robin…let’s just pop a few brewski’s and head on down the beach.

    Sue Lawson
    March 21, 2009
    Reply
  149. US pays its own debt?????
    What effect long term will this have on AUS?

    great website

    Reply
  150. Hi

    I would like a guide on where I should put my money if I had this much cash:

    $5K?

    $10K?

    $50K?

    $100K?

    The $5K answer is for me. The rest are for the richer readers. Right now I have 3 ounces of gold and 4 kg of silver from the 2008 lows, and my ‘paper profit’ of 35% has halved due to the USDAUD forex rate. This is making me sad. Make me happy. Do I get out or stay in?

    First Home Buyer
    March 26, 2009
    Reply
  151. Dear DR,
    is there grpahical representation of australian property prices , with RSi and moving averages?

    Bill Foord
    March 30, 2009
    Reply
  152. FHB: Consider… what if Forex changes again? Also, look at the long-term trend for Gold/Silver. Make your own decision based on your predictions.

    Reply
  153. FHB: My gold purchased in 07 has gone up 30% so far, but as I am not about to sell it, I am actually happier if the gold price drops in the short-term so I can buy more.

    The Forex issue is only going to be a real problem for a short-term investor, or for someone looking to time the market perfectly.

    Reply
  154. ralph meyen: I feel sorry for your situation. Have you considered a “reverse mortgage”? If you don’t want to leave any money to anyone, then it might be an option for you.
    Sorry if this is unwanted advice, it just might be a decent option ‘before’ the market crashes and the banks get properly scared. Plus you would get to stay in your house.

    Reply
  155. I took the time to read the hyper link in DR ‘Australia Ponders its Chinese Future’, it was the highly regarded The Economist Intelligence Unit Report 3 and on the second last para on page 15 it states “Unlike most countries, the US has few liabilities in foreign currencies, so sharp depreciation has only a modest impact on the country’s ability to service its debt. Foreign holders of US liabilities, however, and the countries against whose
    currencies the dollar depreciates, are hit.”

    If I’m not mistaken the money lent to Aus by mainly China is in the form of US$ and if the US$ and all within its black hole economy collapses won’t China decide to redeem AU$ or its assets ie the country?

    It is clear that Australia is under achieving in its industrial capacity and its ability to defend its self – this is core to Australia’s sovereignty. It is noticed by those countries with less energy material per capita ratio that Australian Govt has lost the capacity to train its population, treat them for illnesses, get them to work on time or give them anywhere affordable to live, a county hell bent on immigration beyond the capacity of its coping infrastructure and social cohesion, a net importer of food in a country that could be used to deleverage the population of China, a proposition put which would help the world regain its economic footing – tax havens are being routed could the land haven of Australia be next?

    In such face of under performance a country that prides it self on global socialism will it not become part of the solution for a more equitable planet to make fairer Australia’s disproportionate energy materials abundances?

    Charles Norville
    April 2, 2009
    Reply
  156. Consider the following…

    Replace the phrase “The banks arn’t lending”

    with “The borrowers arn’t borrowing” (they are paying down debt)

    After a few minutes thought you will realise the extreme deifference between the rhetoric we are hearing in the media and the reality of what is actually happening.

    I would be interested in the DR comments on the above statement. The ramifications are huge.

    Reply
  157. I’m concerned about Rudd’s record levels of immigration, and it’s effect on the average Australian.

    Rudd’s and Swan’s initial justification was:
    ‘put downward pressure on wages inflation due to the mining boom’..

    Exactly 2 months later the world was in a downward spiral! So what now? It seems every person imported is a job we just don’t have!! Unemployment is the most critial factor for Australia’s survival.

    Immigration is obviously great for the corporates (lower wages and more labor), but the average Australian only stands to loose via increasing social pressures and lower wages.

    I’m tired of politicians justifying everything for the ‘ecomony’. A stronger economy most often does not translate into a better way of life for your average man, woman and child. Bring back the 80’s when $2 worth of chips was enough to feed 4, and there were more than enough waves to go round ;-)

    AnonymousAussie
    April 5, 2009
    Reply
  158. Hi DR

    I didn’t get my last rant acknowledged (feeling dejected) so I thought I’d ask for some direct feedback in relation to what old Ruddy has recently announced.

    I heard recently that there are shortfalls between the age pension and unemployment benefits; basically the government has neglected unemployment provisions backing full employment over the boom years.

    Now that we have a mini sub-prime created with first home buyers, with unemployment set to rise over the original 7% forecast, and the FHB’s being the most vulnerable, the Government has once again come to the rescue. They will attempt to provide more mediation for those that have over-borrowed, over-extended and acted like total sheep to the slaughter. Just what is Kevvy’s solution? Its instigating a 12 month reprieve for mortgagees and car loans for those who face unemployment (http://www.abc.net.au/news/stories/2009/04/05/2535315.htm).
    I guess this is yet another way to ensure we don’t have a housing crash, and banks don’t further contract credit markets.

    The problem is many mortgagee’s, not so many in the recent FHB binge, but more so mortgagees over the last 3-4 years, have borrowed from non bank lenders. Will they play ball with Kevvy is a big question?

    What I would like to know is what are the likely ramifications on Kevvy’s new policy. Is it likely to keep the increasing downward pressure on middle ground houses from falling further? What is the likelihood of success?

    I basically see this as an attempt to prop up the unemployment benefits without having to raise taxes. Are the banks truly as benevolent as we are lead to believe or is it just another noose to be lopped over the lumpen mortgage belt with no jobs?

    Keep up the good work.

    Cheers

    Ken

    Ken Harrison
    April 5, 2009
    Reply
  159. Hi Guys

    Good work and keep it up. Enjoy the articles, Gumbo dude isn’t my style, but overall brilliant.
    I moved from Sydney to Perth about 4 nearly 5 years ago now. I wanted a lifestyle change (ahhh amazing what approaching 40 does to you), and thought I’d invest in a franchise instead of a house because 1. I wanted to really experience running a business for myself i.e. put academic theory into practise 2. I wanted to invest in something that could create and income stream 3. I decided to buy into a franchise because my research (which I now know was largely biased) indicated that it was a less risky venture than starting your own business fully knowing that returns would also be smaller i.e. risk v’s reward 4. I believed the housing market had reached a tipping point in Sydney and did not want to poor money into real estate as preferred equities over Australia’s love affair with houses. All this even though I have never owned a house.
    Now however, I am approaching a tipping point where I am more inclined to consider a value proposal on a house rather than dismiss it altogether; and no franchising was not for me – paying fees to someone based on many unfulfilled promised and duly created expectations does not a partnership make.

    Anyhow. So here I am in Perth. I have moved from the Northern Suburbs where everything is typically wonderful in a largely Anglo world with an openly xenophobic outlook. BTW – The white Anglo Australia policy is still alive and well in Perth but it seems to be strong in the North of Perth, possibly due to the influx of largely racist UK expats, and some South Africans.

    Where did I move to, or should I say, where did my partner move us to? My partner moved us to a very blue collar suburb named Belmont. It exists in the East of Perth and have a largely mixed cultural demographic with a higher rate of Australian natives than the average Perthite cares to tolerate. Why does this have a baring on Real Estate you ask? Bare with me I am sure you can edit some of the ramble.

    I see Belmont being somewhat of a Redfern or Newtown in Sydney in that its proximity to the city opens it up to a horrid term known as gentrification.

    Belmont is within 10km of Perth CBD, the North, where the big mortgage belt of newly nationalised xenophobes lives is over 20km to the city. In peak hour it takes me 20 minutes to get to the city by car from Belmont and from Joondalup in the North it will take near on an hour. Average house price in Joondalup I think, from most recent data available, is $550K to $580K for a 4×2 whilst the average in Belmont is around $450K to $520K.

    Rentals in the North of Perth are difficult to come by, rentals in the East are not as difficult.

    I am a fairly inquisitive person and don’t like having one source of information. I like many sources of information. The sources usually range from media that targets mainstream mum and dad, media that targets mainstream business, and then the non mainstream like the DR, money morning, and various postings around the world. I use the different information sources to formulate my own opinions and then integrate the knowledge into my investment decisions.

    I hear a lot about the rental shortages in Australia. I hear a lot about the house building shortages. I read a lot about demand exceeding supply. I read your numbers that the average time earnings of a house exceeds a PE multiple of 25 (I think that was it last time I looked). But what I don’t get, after moving here, is all that I read does not match all that I see. So what is it that I see?

    In the suburbs of Carlisle, Belmont, East Victoria Park, and surrounding areas, there are full built properties that have been sitting vacant for months. Many of them have for sales signs out front, but a good percentage (I would say 3 to 4 out of every 10) are just sitting there gathering dust, and with it, vandalism. So you ask how many houses have I seen? Good question. Only yesterday I decided to walk from Kensington to Belmont. I walked through all the back streets, over a distance of 10 to 15km. Yes I was on a mission to see more of what I had already suspected. Low and behold in just one block I came across 5 lots with between 3 and 5 two storey 3×2 townhouses that were totally empty. They did not have any for sale signs on them and looked like they had been there for some months as many of the windows had been broken. In that 10 to 15km cross section I must have come across approximately 70 houses for sale. Of those houses I can quite comfortably say that 30% of them were on lots that had more than two townhouses, did not have for sales signs, and were vacant for more than 3 months (suspicion).

    I know that people like to rent in a suburb that they like. I know that Belmont and surrounding suburbs aren’t exactly on the top over every WASP’s rental or purchase lists. But if people are so squeezed for choice why aren’t these properties being bought, or at least why aren’t these properties being rented? Has the FHBG created such a floor that the marginal developers are holding out as long as they can until the market turns around so they don’t have to take a loss? Is there really a housing shortage? Is there really and honestly a rental squeeze? Are whites in Perth so inherently racist that they would pay far more in rent and mortgage repayments and risk financial ruin than to live in a multi-cultural neighbourhood? Is the situation described an insight into the ridiculous investment choices that have gone on in Perth over the past 5 years from part time mum and dad entrepreneurs. All I know is that I am reading one thing and seeing another … I was absolutely flabbergasted.

    Mandurah in the South of Perth is experiencing exactly the same thing. People 3 years ago were lining up to by lots of land down there, only to sell them a few days later for a profit (this is first hand knowledge). Now many of the estates are looking like dust bowls and there are more and more for sales signs emerging. We have some English friends that live in the Lakeland’s estate in the South. They bought an average type of house for the area on a 400sq block for around $450K. Yes they had a fairly sizeable down payment on the house proper, but after they put in a pool and made some significant renovations, there was also a significantly increased mortgage. They are now in a situation with one bread-winner, that has taken a risky move to the mines for more $$ (working for Lynas Corporation), along with four mouths to feed (Wife and three children under 7). This is an all too familiar storey – they are Mr and Mrs Jo Average (all be it from the UK).

    I felt that this was relevant to the previous DR’s and felt it needed to be said. The arguments for and against have nearly all been theory to date. Much of it using the U.S. as a yard stick with opponents saying that we are not the in the same situation as the U.S., yet this is happening in our backyard …. yes its Perth but how many cities in Australia are similar to Perth?

    Make with the information what you will. I have merely reported it the way I have seen it.

    BTW – I am a white, not religious practising, double income and no kids Australian national …. but with a dog!

    Ken Harrison
    April 5, 2009
    Reply
  160. hi Dr and readers,

    I have a situation that I hope some DR readers can have a punt at, I am in the situation of renting in Sydney, but want to buy a house, ( can’t get first home grant because of prior marriage which went sour, hence lost house to ex…..never mind, can’t take it back now anyway)
    my new partner and I have $40,000 saved and don’t feel taking the plunge yet into property is worth the effort yet, the super is going south real quick, but how can I access it before 65 ? ( I am 50 ) its relatively small, but it pains me to see these idiots in the funds lose and it and I still got to pay them trailing commissions !.

    so my concern is rents seem to going up and Sydney being the dog eat dog place it is, no one gives a hoot what happens to the average joe ( my saving grace is reading the DR every day)

    so any ideas gratefully excepted !, I would even move to Perth, and the jobs vacant section in the papers are shrinking dramatically ! over the last 3 months I have seen the ads go from 8 to 9 pages in the main dailies to Saturday 4th April 2 pages ! that means a lot of business are not hiring, and lots of people are losing their jobs ! so much for a recession ! hah ! what crap on the part of the pollies ! call it like it is !

    its a time to plan ahead and try to remain calm ! what do I do with the small amount we have ?

    other than buy a hole in the ground !

    CA

    Chris Alan
    April 6, 2009
    Reply
  161. Chris A: If this site is anything to go by, buy Gold. They keep saying it week in week out.

    If you are considering buying real-estate, consider everything about it first.

    Read all the comments at:
    http://www.dailyreckoning.com.au/australian-house-prices-are-severely-and-seriously-unaffordable/2009/01/27/
    and make your own decision.

    The only person that should give you investment advice is…you. No-one else cares about your money as much as you. Do your research. Make your commitments based on the what you think will serve your future the best…based on what you think will happen in the future. Reading the DR is a good start.

    Don’t stress too much about low cash return rates in the short-term. Is it worth plunging your money into a depreciating asset just because the cash rate is low at the moment? Consider that the people with REAL capital (not borrowed) will have the power when the banks stop lending.

    Plus there is nothing nicer than the feeling of a (liquid) safety net rather than being underwater in debt.

    I’m bullish on gold and oil personally.

    Reply
  162. Oh and of course – investing in yourself is also a good option. That means making yourself more qualified, more employable, etc.

    Reply
  163. 1. Chris Alan on 6 April 2009:
    Hi this is crazy but in your position I would buy a camper van and live in that.
    This is if it is only you and your partner
    Also join a gym (fitness first so you can use any of their gyms in any suburb you like to stay in) so you can shower before or after work and youse a dry cleaner for your clothes. Travel on the weekends
    Take your home with you.
    Why take over someone else’s loan

    Reply
  164. I reckon the best thing you can do is start a part time internet business in your spare time after work.

    christina
    April 7, 2009
    Reply
  165. Rick, Pete, Christina,

    we have thought of a camper van, it has certain appeal, and you can buy a second hand one quite cheap, if need be pay it off quickly and at the same time pay no rent, you pay for fuel and the normal road levies, of course you pay them anyway, so yes that’s a viable idea. ( it seems the mobile home market is tanking too ! lots and lots of shiny new campers the dealers can’t sell)

    as for gold and silver, sure thought of that, the trouble with Gold and silver is as I see it, A) where do you put it where it won’t be stolen, B) its value as a medium of exchange is great, but you can’t eat it, so a balance would be needed of perhaps long term food and gold?

    yes i agree that I am the only one who knows what to do with the money, nevertheless its frustrating to be in a position of having a small amount but not enough, I agree and think housing is on the way down here in Australia, I see the bubble being “popped ” and when it does, I think it will be like the US, I have a RE license,
    so I have been my own research and have seen RE in NZ go from good to bad.No joy there.

    and I am considering more education as well…

    Pete Gold is good, what about the guns ? though….!!!!!

    Chris Alan
    April 7, 2009
    Reply
  166. Chris A:

    Gold you can store safely, at a cost. Safe deposit boxes, etc. Personally I would consider burying it somewhere secret. But that’s me, and I don’t recommend that risk to you.

    You will need to keep some cash to live on (and for emergencies). If you buy some shares, you ‘could’ make some decent returns whilst also ensuring that some of your wealth is liquid. It is a bit tricky picking a winner nowdays though. I’d recommend NCM and WPL as basics personally. They’re pretty tidy, and the biggest operators in their field in Australia.

    Real Estate might not be so good to ‘invest in’, but if there are loads of foreclosures, maybe you could get in on that? Become an Auctioneer or a regular private agent. I’m sure they will get loads of work, even if the commissions start dropping (at least it’s something). If you have plenty of spare time maybe you can undercut the fees of some regular agents.

    It doesn’t cost much to advertise real-estate online, and that is what a lot of agents do nowdays (the last 5 or so years has been very easy money for them).

    Maybe you could also get into the bank’s side of foreclosures – surely there will be a lot of activity there. The banks will need people who understand real estate, so if you have a licence then you’re probably a few steps closer than many. Not sure how you would go about getting that work though. You could try approaching banks/bank managers directly.

    Reply
  167. in the not so far fetched event that there was a complete global financial catastrophe akin, or even worse than the 1929 market crash, what does that mean for the deposit guarantee scheme that Kevin Rudd has implemented. If there is no money, and the government has no money, and the Australian Federal Reserve is NOT actually a government department, but rather, is owned by the Commonwealth (Britain) … who will ensure that all guaranteed deposits held in Australian banks and credit unions, will be paid in full?

    Reply
  168. One simple question,

    Is there an independent, objective government body or private institute that reports on mortgage defaults in Australia?

    Reply
  169. When a nasdaq listed company enters and announces a partnership agreement, why are the details including monies not disclosed?
    Secondly, as a shareholder, why can’t we know the details, since the company almost filed bankruptcy with its high burn rate?
    Do shareholders have any rights of disclosure, or is it for management to know and privy info?

    jimmy turano
    May 23, 2009
    Reply
  170. Our own physical body possesses a wisdom which we who inhabit the body lack.

    Reply
  171. Is it just my impression, or has the subscriber commentary on this site become seriously dumb lately?

    Reply
  172. Try not to become a man of success but rather to become a man of value.

    Reply
  173. I would like to begin by thanking you for challenging the conventional wisdom of financial and government decision makers today. A couple of things i was hoping to provide comment on and see if you could cover them yourselves (some of which you have probably covered before in some way or another):
    1. The insulation scheme in Australia: While many people have lost their jobs because of the sudden axing of the program (which could have been handled better) – i do not understand the current public outcry over the loss of these jobs – particularly when they wouldn’t have existed in the first place without the scheme! It is a potential example of rachet spending (it will probably be made permanent if certain people get their way) as the public (and indeed today the Australian) feel it is ok to make jobs by “tapping (a government) insulation scheme when the construction industry slumped with the global financial crisis.”
    2. Economics is increasingly being socialised: I want to know if you agree on this point. I recently wrote to Martin Wolf from the FT upon a suggestion that Greece needed to be bailed out by German consumers and I suggested that German’s should not be forced to pay for the mistakes and financial mis-management of Greece because they have managed their economy reasonably well. His response to this was to label me as ignorant and suggest that a bailout is needed to prevent the radically negative social consequences of unemployment and pointed to Hilter as an example of what happens when you don’t intervene to prevent economic ruin (i will not go into the obvious flaws in this argument that i pointed out to him).

    Regardless, Economics is about the market, as well as social conventions – but to what extent should market outcomes be sacrificed and distored to improve social outcomes through employment? Are there not social outcomes being sacrificed for future generations through huge bailouts now?

    Reply

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