–Some reader mail?
A lot is being said about the current generation being lumbered with billions of dollars of debt resulting from the Gov. spending spree.
Personally, I do not care at all.
The current and future generations have been bequeathed Trillions of dollars of assets and infrastructure.
The proposed Gov debt is a mere drop in the bucket.
I would be very happy if someone would bequeath me a house even if there was a mortgage attached to it.
–Very generous of you Garry.
–A reader has a different interpretation of what progressive taxation (a mild form of robbery) is.
“This is called caring for your fellow human beings – this is called helping a friend, relative or even a stranger when they need help – God forbid you or your relatives are ever in need – law of the jungle is dead – no more jungles – you cut them all down! I can’t believe anyone still thinks this way. Get a life on another planet please!!”
–The things you describe have nothing to do with taxation. They are what you can (and maybe should) do in your private life. And by the way, we didn’t cut down the jungle. Or start the fire. It was always burning.
You may try to justify hyperinflation all you like but we are not re-entering the 1970’s – I lived through that time and we needed a 30% deposit for a house, the prices for which did not deflate. I cannot see how hyperinflation can eventuate – if anything there will be a shortage of money.
Here’s what I see – more money created to pay for more debt – more debt defaults creating less funds available to banks – creating less money for taxation – creating major government defaults creating more SHORTAGE of money.
If we look at the example of Japan – where’s the hyperinflation there and they have far higher savings – yet that has not created hyperinflation – deflation is still continuing after an 80% fall (deflation) in assets.
–A fair argument. But it’s impossible to have a shortage of money when the government controls the printing press. It can print all it likes. What it can’t do is make people spend it or want to borrow it or even take it seriously.
You said progressive taxation is, “base (sic) on the class-warfare idea that the rich get rich illicitly and conspire to keep the riches of society for themselves.”
The rich get rich due to good fortune. The redistribution is from the fortunate to the less fortunate.
–Some people are born rich. Some people get that way through hard work. Why do you or anyone else get to decide when the fortunate deserve to be knocked down a peg? If you want to help the less fortunate, why not use your own time and money instead of stealing from someone else to do it?
–And finally, a letter on property.
In reference to your email yesterday and the graph below on AUS v US property market. I am not a subscriber to a large (i.e. greater than 10-20% fall in house prices) fall in property values and would add the following:
– AUD mortgages are recourse, therefore a lot more to lose than US property buyers whose mortgages are non-recourse
– No capital gains tax for AUD owner-occupied properties, and concessional capital gains tax for investment properties in AUD
– Whether rightly or wrongly, our govt policies are skewed towards a solid/buoyant property/building sector. I can’t see this changing for political reasons.
– Culturally, owning your own house/property is a rite of passage for most Australians. This provides a natural level of demand, which is underpinned by our baby boomer parents who are able (through certain financial institutions and products) to provide additional security to otherwise marginal homebuyers. I’m not saying this is the right thing to do, but it is fact.
I understand your completely rational views why property values should crumble, but for the factors outlined above I don’t believe this will eventuate (unless we get soaring inflation/interest rates, but even then, historically, AUD property values have risen in times of rapidly rising interest rates).
Enjoying your musings…
Dan Denning (and readers)
for The Daily Reckoning Australia