GFC Was 'Merely the Beginning of the End'

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Surprising News.com.au headline from some guy flogging his book.

IF you're approaching an iceberg, what should you do? The GFC was "merely the beginning of the end", and we are heading towards a titanic disaster: the next financial crash.

That's the view of Jordan Eliseo, chief economist with ABC Bullion, who argues the problems that led to the onset of the GFC haven't been dealt with and global economies are arguably in an even worse shape today.

Governments around the world are running record budget deficits hand in hand with extreme levels of public debt, interest rates have been slashed to zero or below, and trillions of dollars, euros, yen, francs and pounds have been "created out of thin air" and pumped intravenously into the world's economies.

His comments echo those of HSBC chief economist Stephen King, who recently issued a dire warning that the global economy was "like an ocean liner without lifeboats", with governments' traditional recession-fighting ammunition all but exhausted following an "insipid" post-GFC recovery.

"While Australia has plenty of potential, our economy has become massively distorted. More than 75 per cent of everyday Australians' wealth is trapped in their super fund or their house," Mr Eliseo said. "That's not stimulating the economy, and it's not what you need for people to become more prosperous."

The rising cost of housing, both commercial and residential, is holding back private sector job creation, which will be the key to any kind of meaningful long-term recovery. The problem is, any large correction will send shock waves through the financial sector.

Like the banks, the property market has become too big to fail.

"We've been brought up to believe we must own a house and that's the Australian dream. I think there's a good chance it will become the Australian nightmare in the next 10 years," he said.

"A major crash would obviously wreak havoc not only on asset values and the net worth of everyday Australians but cause major stress to the financial system itself. But if prices keep skyrocketing at five or six times the rate wages are growing, that's going to have a huge impact on the economy as well."

The more money that is tied up in property either through rental, home deposits or mortgage repayments the less will flow into the real economy. And the RBA, while well-intentioned, is only causing more problems by slashing interest rates.
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Continued here
 
Thanks! That kind of gives me comfort knowing I made the right decision to first focus on paying my house off before I started stacking PM's. Being debt free certainly feels good!
 
The more property prices detach from reality the bigger the shitstorm when reality asserts itself.

Once interest rates start reverting back up to long term averages, prices will be forced back down.
If that happens at the same time as a recession and higher unemployment, prices will go down even further.

That in itself is not a problem except for the massive amounts the banks have lent on housing.
The banks will be in deep shit.

And since the banks now make up more than 25% of the entire ASX value, super funds will also be in deep shit if the banking sector tanks

Everything is linked and could domino: property -> banks -> ASX -> super funds


The biggest fear for all of us, but the most likely outcome if the banks do get into deep shit, is that the govt will come along and save them with taxpayer money (or debt)
 
trew said:
The biggest fear for all of us, but the most likely outcome if the banks do get into deep shit, is that the govt will come along and save them with taxpayer money (or debt)
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You mean the bail-in laws/changes that are ready and waiting for such a situation.
 
willrocks said:
trew said:
The biggest fear for all of us, but the most likely outcome if the banks do get into deep shit, is that the govt will come along and save them with taxpayer money (or debt)
Click to expand...

You mean the bail-in laws/changes that are ready and waiting for such a situation.
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Bingo.
 
If media announces something, it won't happen.
Couple years ago half of Greeces State debt was forgiven.
Nothing stops other governments from forgiving all that is needed to hold their Greek buddy up.
By the time they actually do so, most people will already have accepted it as a normal thing.
And would it be special in any way? That's what governments do all day long: erasing debt, erasing the obligation to pay back. Whether that is achieved over 2 decades or 2 days, doesn't really matter, as long as people are given the time to get used to it. Greeces debt forgiveness is already long "in the market". That's what happens when things are published. Look at 2008's crisis, that "GFC", nothing was published, yet it did happen. Why would it be different for the opposite?
 
willrocks said:
trew said:
The biggest fear for all of us, but the most likely outcome if the banks do get into deep shit, is that the govt will come along and save them with taxpayer money (or debt)
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You mean the bail-in laws/changes that are ready and waiting for such a situation.
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Yes, but until that day comes, the powers that be will do everything possible and everything previously thought impossible to maintain the illusion of prosperity by debt based fiat currency. They have no choice and have no plan B, so debt by fiat it will be.

The BRICS and non-US aligned countries are preparing their plan B. USD aligned countries seem to be all-in on this hand of global debt explosion, staring down the other nations as if they have a hand worth playing. Unfortunately, the moment they recognise the reality that they are broke, the bluff comes to an end and they have to use their one advantage, their military, or lose it.

Is it not obvious that they will use their singular advantage before the end? Even now, all stupid rhetoric about Putin-bots aside, they are manuvouring their assets all around the world.

So before the end, it will be war because they are insane gamblers, all-in on a hand they can not afford to lose.

How that plays out in the localised financial and monetary systems I think we are beginning to see; a continual melt-up of asset values until personal bank accounts are no longer the concern and war is fully under way.

IMO.

But the (now declared) opposition know the end game and know time is their ally, so they play at being the peacemakers.
 
By stacking now, you don't have to worry about when the beginning of the end begins, you're ready.
 
sammysilver said:
By stacking now, you don't have to worry about when the beginning of the end begins, you're ready.
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When the beginning of the end begins, does that mean it's near the end of the beginning? Begun the beginning has.
 
SilverPete said:
sammysilver said:
By stacking now, you don't have to worry about when the beginning of the end begins, you're ready.
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When the beginning of the end begins, does that mean it's near the end of the beginning? Begun the beginning has.
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You'll get it right in the end.
 
Are there any dates or deadlines coming up for the U.S this year?

Or is it all happening in 2016/2017???

Any risks of a U.S default soon is what i am saying.
 
As long as they can keep convincing people their $$ is actually worth something - To infinity and beyond - Buzz Lightyear. lol
 
sammysilver said:
By stacking now, you don't have to worry about when the beginning of the end begins, you're ready.
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That's true when it comes to your personal finances (though you can't be all in metal. Chances are most of us have income in fiat, investment in super in the share market, some sort of land and all sorts of other things. Plus, we have to live in the world afterwards, a real crash will mean problems in the supply of a range of services, collapse of infrastructure, reduced investment in medical/industrial/scientific research and up have to live in a world with a pile of poor bastard who have lost everything. We'll be better off than most but I don't think that means we're going to be just peachy.

You're right that we're ready as we can be though.
 
"While Australia has plenty of potential, our economy has become massively distorted. More than 75 per cent of everyday Australians' wealth is trapped in their super fund or their house," Mr Eliseo said. "That's not stimulating the economy, and it's not what you need for people to become more prosperous."
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I don't see why he grouped super in with housing as most of it is going into business investments.
 
bordsilver said:
"While Australia has plenty of potential, our economy has become massively distorted. More than 75 per cent of everyday Australians' wealth is trapped in their super fund or their house," Mr Eliseo said. "That's not stimulating the economy, and it's not what you need for people to become more prosperous."
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I don't see why he grouped super in with housing as most of it is going into business investments.
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As far as the typical super fund manager is concerned, "business investment" = buy shares in Commonwealth, Westfarmers and BHP.

There's a massive amount of capital there, but very little of it ends up going into new, innovative ventures. The result is the brain drain of people in the STEM sectors and entrepreneurs leaving to set up shop elsewhere.

For example, how many super funds put even a small percentage (like 1%) of their capital into early stage venture capital funding?
 
As a trustee for my SMSF, I would be remiss if I were to invest monies as venture capital. Risk management is the order of the day with super funds. IMO.
 
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