Fuel will be at $5 per liter soon, it's already half that in Europe, and yes, many will be out of a job because of it. You make the assumption that the price will cause trouble, what about supply? People are still just thinking about price when they should be concerned about actually having the fuel to buy. Rationing will occur sooner rather than later, THEN the real trouble starts. Fuel could be $10 per liter, but if there's none to buy then the price is moot.
I was quoting the 1970's and if you think the minor issues here at 'GFC' in any way reflect the reality then hold on to your knees next time. The government is not the power. The finance people are. 18 percent will not see massive defaults. As has been pointed out 'Oz is different'. Australians will abandon consumption to keep the mortgage paid. We have a legal obligation when we mortgage which the bank will pursue to your death. It's what happened last time. Of course there'll be hundreds or thousands who will default and come to an arrangement with the bank to be debt slaves for the rest of their lives. I know a woman with 3 kids and a 400k mortgage. The bank has restructured so that she is paying almost all the interest and her share of the home is dropping year by year. She won't move 'for the kids' and most Oz dwellers are like that. I'm preparing for the worst and if it doesn't happen I'll be very, very happy.
Trouble with interest rates is that they seem to be the only tool in the box the RBA has to manage monetary policy. Remember that the RBA has a charter to: Not just "keep houses affordable". I'm interested in seeing what lead to the massive interest rates of the late 80s.
The 80's was the same thing as today, just mass speculation and over-leverage which always comes to the point where retraction is required. This is something that has repeated itself for cenruty's in people's quest to become wealthy.
Not without a HUGE increase in the money supply - hyperinflation. The RBA is not printing money to keep the AUD at high value. So you can rule out the printing presses going mad and you are arguing a rationing the income can support such an interest rate. Lets look at your example. Median household income is $6k/mth A $370k loan @ 7% is roughly $2.6k/mth A $370k loan @ 18% is roughly $5.6k/mth That leaves a whopping $400/mth to feed 2 adults and 2.3 kids or whatever the number is. This is whilst fuel is at $5/L...... average monthly kms is roughly 1,600. Using 10L/100km on average you get $800/mth fuel bill. That leaved -$400/mth to cover food and anything else. Use $10/L as you suggest and it's $1,600/mth fuel bill and you are borrowing $1,200/mth just to drive to work. This is why such claims of super high IRs are not going to happen unless the RBA goes into hyperinflation in a huge way in order to monetize debt. On rationing fuel, there is still excess supply capacity albeit only 3MB/day or something like that. The question is how much oil is purchased with speculative dollars? Remove that speculative demand and then see what consumption demand looks like. We do the same thing with silver. I don't own physical silver because i am going to consume it or produce anything with it. I'm only holding it because the price is going up and i'll make money to hedge against inflation. If we removed the 'speculative' value of silver, how much would it really be worth on a consumption level only? Shitloads less than $36!
Again, you completely missed my point. You're worried about banker this, fiat that, interest rates, blah blah blah. Even if petrol was $1,000,00.00 per liter, if there's none to buy, you won't be spending a cent. Get it yet? The bankers and financiers manipulation of the world markets has caused a lot of shit, and sure, we're not happy, but this will pale into insignificance once people work out we're out of oil. Mind you, people will only work it out the day they are told "only 20 litres per vehicle". Most people are oblivious to the oil situation and all they know is it's getting more expensive. Crying and whining over high prices will give way to physical confrontation over wartime style rationing. Businesses that rely on large amounts of oil will crash, the markets will shit themselves. This is coming, and soon. All this film-flamery about manipulation of paper markets is all fun and games, wait until the REAL commodity that EVERY BUSINESS ON EARTH uses is gone, or is seen to be rapidly depleting, then we'll see fireworks. In 15-20 years, if you think well be producing even half the 80 million barrels of oil per day we currently do, then you need to get onto the Internet and give yourself an education, it's all there. Judging by the last 15 years, and the aggressive push back against any source of energy other than fossil or nuclear, we are screwed. We basically won't have time to make the transition. The first sign will be restriction at the bowser for the civilian motorist.
If government wasn't managing the interest rate, it would be higher. If silver wasn't being manipulated, its price would be higher. Take advantage of both while they last. As to the AUD - it's still more likely to correct up than down. It's been range bound for a time now, so if it does move it could well move a good distance quickly.
I commented on someone suggesting IRs would hit 18%. I am saying that is impossible right now or even in the next 12 months etc. If you agree with the poster, that's up to you. I can comment on oil but you are all over the place in your posts. When is this timing of your rationing of oil? You said 'This is coming, and soon'. Then a few lines later you start talking 15-20yrs time. That doesn't sound like 'soon' to me. When is this 'soon'?
I think your right, if the market was setting the rate then atleast in places like the U.S the rate would be much higher, its unfortunate it works the way it does.
Yes very interesting indeed! The last RBA meeting advised no new IR rises are forecast, then bam! the global black swan (Japanese earthquake/tsunami/volcano/nuclear meltdown) hits and the AUD falls to below US$0.99, resource stocks are being smashed and it's looking to get worse. Anyone else thinking the AUD is due for a correction? What remains to be seen is if the AUD decline will out-pace any decline in precious metals. Thoughts?
There is now a 50% chance that the next IR move will be down. Before Japan they were saying the only moves were up or sideways.
Actually currency refers to fiat currency - such as the USD and AUD. The value can be changed overnight by central bank manipulation (changing interest rates and money printing). Gold and silver have intrinsic value and cannot be created from thin air - like currency can. Gold and silver is therefore money, as opposed to currency.
Currency doesn't have to refer to fiat at all. It could refer to something backed by precious metals or anything else with intrinsic value just as easily.
Int rates down would be a scary proposition. House market will reignite, wage growth is already around 7% p.a. not to mention inflation already heating up. Dropping rates will just cook things up.
If you want to know if rates are going to drop, ask your bank what fixed rates are for 1 year. If they are lower..rates will go up and vice versa Banks are out there to charge you the highest rate...no way they would give you a lower rate if they didn't have to. They spend millions doing their own research. During the last 3 years, every time my business banker manager has contacted me re interest rates, I would of been WORSE off EVEY-TIME, had I listened to that jerk to lock in rates! disclaimer: the above method is not 100% full proof
Repatriation of capital to Japan is seeing the Yen hitting highs against the USD, while the AUD is down to US$0.97. With international speculators turning to a risk-off posture, Aussie investments will be under pressure and if the RBA drops interest rates, that will reduce even further the speculator's interest in Australia. We could easily see a flight to safety positively impact silver while negatively impacting the AUD, accelerating AUD denominated gains.
I'm surprised that the AUD is only down to ~USD$0.98c. Everyone keeps saying that the AUD is a proxy for commodities and speculation, but if share markets are falling off cliffs all over the world, why isn't the AUD dropping faster? The thing in Japan has been going on for a week and we've dropped three cents. I have a feeling people are reluctant to get into USD (QE2), GBP (recession) or EUR (sovereign debt).
That may be closer to the mark, than a lot of people realise. But rest assured, our time will come to be impacted. And I would suggest that it will be a deliberate currency play by our government, to make our export commodities more commercially attractive.
