As inflation increases creditors indeed demand more interest on the money that they lend. Obvious if you think about it. Don't forget that the Reserve Bank does not SET interest rates. That's a bit of a myth. It defends interest rates by buying and selling short-term bonds. They can only keep rates low for so long before the pressure builds for them to rise. Just like in the US, where the bond market is now saying no, more and more when the US goes asking for money. You can see it in Europe where bond yields are getting higher and higher for various countries. Hyperinflation occurs in countries which are essentially cut off from the international bond market as they have no other means to survive. If I was you, I'd forget hyperinflation, it's more likely there will be very high interest rates at some point in the not too distant future and this will kill off what remains of the housing market at that point. Cheap credit will become expensive credit that not many will be able to afford.
It would be put into foreclosure proceedings. The banks DON'T want property, they want money. A house price crash is a disaster for them as should be obvious by now from just looking around the world. EDIT: obviously there is the situation in the US where they don't push through foreclosure too much because it would reduce prices further and many just decide they aren't going to pay and live free in the house for months and sometimes years.
When inflation going rampant interest rate will sky-rocket. The effect of this is no body will want to buy property any where at such a ridiculous interest rate. So there'll be alot of houses foreclosed and go empty and unsold. It is possible banks will start becoming landlord, afterall it is better to have the house occupied and have tenants who pay rent rather than leaving the house empty.
Can't see it. Banks deal with money. They don't deal with house inspections, arranging repairs and all the other landlord duties. I think it will be fairly orderly over here, I don't foresee people staying in the houses for a year or more without paying here. Ireland is a better case study for here I think, although I think we won't be quite as bad.
Not convinced myself mate on the orderly impact of Australian markets. A lot of investors who are up to their eyeballs in debt are still in la la land on what's happening. The market Australia wide was already looking unsteady with a lot of stagnation and drops (especially in capitals) and now this QLD flood event could very well be the black swan catalyst that sends the whole damn thing into freefall. Think about how many people who live on floodplains that just had houses destroyed with absolutely no insurance. Insurance companies will not touch flood prone/fire prone property at any price. Then consider the damage to industry - mining - farming - CBD - tourism. We'll see a massive loss of jobs in a cleanup slated to last up to 2 YEARS and people walking away from debts they have no ability to repay. Obviously, the federal government will force austerity across the nation to help pay for the damage and we'll see massive across the board blowouts in budgets and/or cost saving measures to help meet the balance. I personally believe that whilst the Australian markets were poised for a significant slowdown this year due to simple international events and increasing costs of overseas credit, this massive budgetary cost that's now been dumped into many laps will be the event that sends it into freefall. You watch the political fallout ahead on this and how the financial markets react. The Aussie dollar is already pulling back and investors are running shit scared. We are MASSIVELY overdrawn on private credit and the federal budget was already in the red. With interest rates on the RISE and not a pullback, a massive cleanup bill can only mean one thing on affordability for many. It's still early days, but I think Australia is now officially in some very deep shit in 2011.
Although the oppisite could also happen. Many homes arent insured but many more are (not all of Qld is uninsurable to flooding). This will boost construction, as well as retail sales in everything from electronic goods to carpets to car sales. Rents may increase due to lack of housing stock, and house prices may increase in non-effected area's. People have already donated millions of dollars to help with support and clean up. this will ease the pressure on the govt even if only a little. But the economy will be interesting to watch in the coming months.
Dunno. To put in perspective, the amount of land affected by this flood is over 4x that of hurricane Katrina in the US and look what happened there. It's good to have a positive perspective, but I think this is a situation where expect the worst, hope for the best probably applies the most.
http://en.wikipedia.org/wiki/Reconstruction_of_New_Orleans Business in New Orleans Bars were the first businesses to reopen in many areas (indeed, two remained open in the French Quarter even during the worst of the storm and the official mandatory evacuation). Most other businesses, such as gas stations, supermarkets, appliance stores, and restaurants, followed somewhat later as they required more work before they could reopen. Some of the few businesses to do significantly better business after Katrina than before are new car dealers. Flooding totaled an estimated 200,000 vehicles in Metro New Orleans, and dealers able to get in shipments of new cars quickly found customers. After local reporters found a used car dealer selling partially cleaned up flooded cars with restored engines but still soggy trunks, the state legislature quickly passed legislation mandating that cars declared totaled must be dismantled, crushed, or otherwise disposed of and could not be resold. Some three months after the storm, most open restaurants were serving food and drink in disposable plates and cups because of the shortage of dishwashers. Despite many restaurants offering wages double pre-Katrina levels for dishwashers, there were few takers as untrained laborers were able to make more money in demolition- and reconstruction-related industries. Ten months later, things had improved, though there are still labor shortages in many service industries.
Orderly as in we won't end up with hyperinflation or destruction of the currency. Yes, I expect severe recession and ultimately depression, yes, I expect property people will be burnt to a crisp, ordinary people will suffer, but I don't think and I certainly don't hope that our political structure will unwind or that we will go short on food, major riots, things like that. Maybe a big bank or maybe even two will fail but hopefully no loss of deposits will ensue and it would be orderly bankruptcies. That's what I mean. I never implied that everything was going to be OK. Many will suffer financially and it may sound cruel but people like me and you will be able to jump in and grab at fire sale prices. But the facts are there's nothing we can do to stop it. When there's blood on the streets, you might as well buy, there'll never be a better opportunity.
I agree with you mate. The underlying structure is still pretty sound. Whilst the QLD situation will kick the tax payer in the balls and keep us in debt on a public level a lot longer, it'll still be managable on the whole I think and we're in no danger of going down the shitter like the US will in terms of it's own governmental collapse or currency implosion. But I definitely do see a big push towards commodities locally over financials looking ahead. I definitely do see a strong overshoot in the wings concerning the imbalance between debt and savings and how it'll impact trade and commerce going ahead. So much of the bubble here was driven on credit and no real underlying industry that the total illusion of speculative wealth has no where to go once the underlying support structure fails (and I strongly believe it will!). I was very prepared to assume that a controlled deflation was the plan, but with this sort of start to the year here I'm starting to wonder if this might force some sort of panic in the markets as people rush for the exits. All we can do is sit and bide our time to see what happens. Personally, I'm not as optimistic as some that Australia will have a good year on many levels. I think we're in a lot of trouble personally. But then again, I remember the Recession we had to Have all too well and know what it's like to live in a real economic downturn. I've no doubt in the slightest that when it really does hit, many new folks in the market will have no idea what hit them. [youtube]http://www.youtube.com/watch?v=AaiHknko6dM[/youtube] [youtube]http://www.youtube.com/watch?v=VJiOZIdJOeA[/youtube] [youtube]http://www.youtube.com/watch?v=MixVLZeVz7c[/youtube] Paul Keating saw it coming and tried to control it back in the 90s and was slammed politically for it. Now, it doesn't matter. Even back in 2008 as you can see in this interview, he saw the writing on the wall. All the US has done is forestall the inevitable, but they actually didn't fix ANYTHING. All we're seeing now is the continuation of the inevitable and Australia will resume it's role playing their part in the fallout. Right NOW, if I was loaded up on debt - I'd be positively shitting myself. But I'm a little more wary than some I expect
Even the evening news told that the sharemarket had pulled ahead. http://www.abc.net.au/news/stories/2011/01/13/3112381.htm The dollar has just gone back above parity, though it's bouncing around a bit.
Thanks for the vids Auspm I went bankrupt during the recession of the 90's and blamed Keating for it.... now i have a little more respect for the guy
Oh don't get me wrong, he WAS a bastard through and through! But I absolutely respect his economic credentials. He really was a rarity in modern day politics on that front. Mostly we just get popularists who simply do what they are told to do and don't think for shit. Like it or not, he had to lead and if he didn't slow down the economy, we would have gotten today's situation much earlier in Australia. Australia is a tiny backwater in the middle of nowhere. Essentially a thin reed in the torrent of international markets. What happened after the 80s boom run was honestly inevitable and Keating's willingness not to sugar coat the fact and protect us from ourselves ensured that whilst the downturn WAS painful for many, it was absolutely necessary as well. Now all we have is Keynesians and they are the worst lot to have in power economically. They print their way to popularity and play the social aspect of their position, kicking the can down the road on the economic position for someone else to deal with. Whilst the party is rolling and times are good, they are lauded as heroes. But when the party is finally over and the bigger bill than normal comes due, the sheeple want blood. This is the territory we're headed into now and any leader stepping up is likely to simply be forced to take a bullet rather than have any real impact on what's to come. I guess that's why so many behind the scenes were content to put Ronald McDonald's love child forward to 'lead' at the present rather than anyone of any real worth. Many of the current placeholders in positions of power think they're there by right, but more likely they're there simply to take the fall in these increasingly difficult economic and political conditions. You cannot have a perpetual boom cycle of any economy as many liars in politics would have you imagine. It's popularist thinking with the masses, but it's impossible to maintain long term. When Keating said 'This is the Recession we had to have' he really was not lying. But when you're in a position by decree of the sheeple, openly stating anything like that invariably leads to being removed from office. I knew a lot of people who lost homes on 1/3 the average mortgage of today during that Recession due to the nature of the work I was in at the time. Today's situation is positively scary compared to then and I don't see a drop of fear among any of them. In fact, you're lambasted as a downer or worse for even suggesting caution. People have very short memories I find, but it still won't alter the inevitable flow of cyclic economics.
Even if a politician were to emerge tomorrow who would on national TV tell the aussie public how it is and financially what would need to be done in order to prevent things from getting uglier, and if he were to explain to the aussie public that their properties would be devalued initially by 25% and than by 5% pa after that so that equilibrium, stability and financial integrity is to be reached. The aussie public would kick him out saying " how dare he "
It's always easier to talk about Australia's problems and financial issues when your not in government. However, when Keating was at the tiller, it was different.
Do you ever expect Gooolia or Abbott, ever being able to speak with as much logic as that man. Don't get me wrong... born and bred lib, who as woken up to the BS.... but i can say *none* of our current talent pool will ever speak like that man just did. We are f'd
