By: lasty49
10/11/2009
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ang,
The next push is for this "one world" cr@p pushed from the left as their socialist experiment failed in the 1980's.
Their cagey disguise behind climate change and the environment got traction however cracks are now appearing as science is becoming contradictory to their alarming theories.
Capitalism is on shakey grounds too.Had it not been for the Chinese opening up towards capitalism I think the world today would be somewhat in a "Menta wishlist".
Interesting stage in life as the economic powers of the present are losing their grip on the future.
Im currently going with the flow until such time I see anything different. |
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By: billy.holliday@rocketmail.com
10/11/2009
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And Ang and Steve Keen, since when is long term investment in the share market (i.e. in productive businesses) a "speculative asset" ? Are you saying, Comrade, that "cash" is the only real investment because it doesn't go down or up in value (as long as your bank doesn't go broke)? Gold is speculative.......providi ng risk equity capital to a productive enterprise is investment.
Lets stop using ideologically driven jargon and talk concepts using English words. |
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By: billy.holliday@rocketmail.com
10/11/2009
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Hi GoF
Been busy, but got some time yesterday....
I have now watched the Steve Keen video and I thought it was very good. (I am going to have to attend some of his lectures I think). However, I have the same problem with him: after doing a great job modelling an economic system with a Minskian complex approach rather than a linear equilibrium neoclassical approach, he goes on to try to "predict". This typically involves holding everything constant and changing one variable and while it may be better than a linear model it still has "sensitive dependence on initial conditions", so changing another variable ever so slightly will give you a complexly different answer.
This is the reason that he was wrong on housing: because hi model is good, but not 100% accurate and as usual depends very much on your initial assumptions.
In Stevies case, he criticised other economists who put a rabbit into the hat and then expected applause when they later pulled the rabbit out, but did exactly the same thing. His big assumption (check the video) is that debt is increased in a more confident economic phase with no commensurate increase in productivity (the rabbit in the hat), and then miraculously gets the result that it leads to debt induced deflationary economic collapse as everyone deleverages (the rabbit comes out again). For a subscriber to real world economics rather than delusional ideal world economics, assuming that investment (even speculation) in assets (even property) has no flow on productivity effect is delusional. Even if you subscribe to the simplistic view that investment in property only drives up prices, then that of itself encourages more housing to be built, thereby creating economic productivity. That's the reason he got it all wrong. D'Oh.
I also agree with Ang that net debt should be used, and with Lasty that you cant ignore assets (like Super). Steves approach is right, but its far to rudimentary to be using it to predict things and make walking bets. |
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By: ang101000
10/11/2009
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Hi Jay,
It is a bit overblown, I know. The whole movie is part of a much bigger movement and it is a bit out of context (like looking at one piece of a puzzle), it is to do with Ron Paul's push to supervise the FED.
Anyway, I thought it is interesting to see how different groups are coming up with new developments on the evolution of the financial system. I did not post the original link to the movement (that could be overwhelming).
Thanks for watching. |
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By: jaymarcel
10/11/2009
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I enjoyed the link ang (downloaded the whole thing from the website in the end). But isn't it kind of obvious that with a growing population you do have to print more money othewise you would get inflation anyway, similar to the theory behind the value of gold due to its limited supply.
If you remove the conspiracy part the show was good thanks. |
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By: ang101000
9/11/2009
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Fire,
'Whether it is based on gold, rum, olive oil, salt, seashells or pure faith makes no difference IMHO :)'
There is a point we agree on! Of course we need a better system than a central bank supervised fractional monetary policy. |
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By: firefly_au
9/11/2009
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Hi Ang :)
I had a look at the youtube article and it does more or less describe the mechanics of the fractional reserve system of banking and money supply. But once again it tends to over dramatise the conection between currency and debt under this system as though this is new...
But the reality is all currency under all systems have the same relationship to debt because in fact all currency represents debt or a promise to deliver goods or services to the value indicated or it would not work as a currency!
Whether it is based on gold, rum, olive oil, salt, seashells or pure faith makes no difference IMHO :)
In the past systems based on Fait (faith) have handled the challenges that the real world has thrown at them better than most other systems due to the superior flexibility. In fact this is why it is in such widespread use around the world today. Despite the shortcomings of Fait systems and fractional reserve banking it is likely to remain unless someone can come up with a better system.
BYE :) |
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By: ang101000
9/11/2009
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This is a problem because businesses generally use borrowed money to invest in new buildings or equipment that will expand their production, which in turn creates more goods, often more jobs and more national wealth.
On the other hand, 88 per cent of the outstanding household debt has been spent on housing.
While some of that debt would have been used to build new dwellings, or renovate existing ones, which creates jobs and places for people to live, the majority of that debt would have gone to bidding up the price of land on which existing properties stand. |
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By: ang101000
9/11/2009
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Hi Al,
I don't think Keen has referred to your particular debt/assets levels, they seem to be fine.
Although I am not Steve, I do think that he uses aggregate figures. My 2 cents worth is this;
A report from the Reserve Bank confirms that Australians are in a lot of debt, and that most of it belongs to the major banks.
The RBA article on how the bank calculates its credit aggregate figures, also reminds readers of how much debt Australians have outstanding - $1.9 trillion in the June quarter, which is more than one and a half times Australia's annual economic output.
Many economists already consider that Australia has a problem with too much debt.
However, the Reserve Bank's credit figures demonstrate two further problems with the make-up of that debt.
The first is a competition problem, with the figures in the RBA's report emphasising the dominance of the big four banks and the rapid decline of non-bank lenders during the financial crisis.
According to the official figures, the major banks accounted for 70 per cent of all outstanding credit in the Australian economy, with other banks holding 17 per cent, registered financial corporations 6 per cent, building societies and credit unions 3 per cent and the remaining 4 per cent classed as 'other'.
In 1989, households accounted for only 36 per cent of total private debt in the Australian economy, meaning that businesses were by far the biggest borrowers.
However, by June 2009 the position had reversed, with households holding 61 per cent of the country's debt and businesses only 39 per cent.
While the business figure did not include the increasing amounts of debt issued directly by companies, not via financial institutions, even including this independent borrowing, the amount of business loans outstanding was easily overshadowed by household debt.
continued |
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By: ang101000
9/11/2009
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Hi Fire,
The only reason I have posted those PDFs is - they had the charts showing what the return would be if money invested in super over 25 years.
Lasty is correct in his assumptions in regards to returns. The files are not really of any other interest.
Of course, the switching example given in the AMP file is a biased one, but the charts are correct!
If you are really bored check my earlier (today) posting with a link about monetary system. That is a more challenging and confronting message.
Menta has found it 'interesting', see his comment on The real threat... |
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By: firefly_au
9/11/2009
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Hi again Ang:)
I also find it interesting that they argue sitting tight and wearing the losses is better than doing everything wrong! Naturally so IMHO!
But I wonder if an intelligent active investor who usually made good decisions most of the time was considered and what the results would be like then?
IMO they could be pushing their own barrel here he he :)
BYE :) |
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By: firefly_au
9/11/2009
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Hi Ang :)
That "investblue pdf" is interesting and I find it a bit sad. The switching fund customer in their example would have sat in cash all the way through the resent rally and would have missed any gains as a result!
It is also interesting that they waited to switch to cash until capitulation in the bear market which IMO is the worst time to go short! Sadly stupid IMHO!
BYE :) |
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By: almurrie1@y7mail.com
9/11/2009
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Ang
from what I can see this figure is total average debt, with no indication of the value of the assets the debt is based on. In my case I owe 7 x my income, ie $7 for every 1$ I earn. BUT this is meaningless because my assets are worth double the debts. The only way you can realistically buy houses is to borrow, and tax gearing makes it sensible to do so.
Of course it is a gamble to balance the costs with the end result, as this involves an increase in asset value to work, but I am willing to take that risk.
It is the unsecured credit card debt that is the worry and could cause the banks to crumble, but they are covering this by charging up to 20%, which covers a lot of defaults.
And Menta would pipe and and say all very well until you lose your job, or the asset value collapses, then Keen would be proved right to worry about this figure. Your horse could also fall over at the Melbourne Cup but that didn't stop people wagering hundreds of millions. The same philosophy applies, you gotta be in it to win it. And sometimes you lose. But I'm betting that i will win.
Al |
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By: ang101000
9/11/2009
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Lasty,
Steve's figures appear to be gross debt figures. I'd prefer to see net ones.
If I owe you $30 and you owe me $30, Steve would apparently have our total "debt" at $60. Wouldn't it be better to describe it as zero?
As it happens the household sector as a whole is a net saver at the moment (a net repayer of debt). |
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By: lasty49
9/11/2009
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ang,
"I do agree, any form of national savings is good for the economy."
Yes especially when it exceeds the private debt by $250 billion.
So does that make Australians in debt or in surplus? |
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By: lasty49
9/11/2009
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ang,
The point here is that Keen has dismissed this figure entirely.
Does he understand that anyone can currently lump sum a super payout and reduce debt when hitting retirement?
His 160pct debt of GDP then becomes what?
He is yet to explain this and so far he has said that assets in super dont count. |
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By: ang101000
9/11/2009
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Lasty,
here are the figures and charts as you would like it;
http://ifile.it/fqn2my5
I do agree, any form of national savings is good for the economy. |
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By: ang101000
9/11/2009
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Lasty,
You are correct; my 'selective' use of last years figure is a distortion of the true returns.
So here is a link to a 'more' balanced and official analysis of a balanced superannuation investment (from an industry insider):
http://www.investblue.com.au/imgresource/amisc/ite m_7.pdf |
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By: lasty49
9/11/2009
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ang,
Interesting you picked last financial year.
Since the start of compulsory superannuation 1992 lets say the market was 1700. Its now 4600.
So I could say the market has gone up 150pct since then.
Its futile because of the dollar costs averaging, the timing,the length of investor etc.
I look at it as compulsory savings.
These questions have not been addressed about personal debt.
I know there are a few heading towards retirement who cant yet access their super but are looking to become mortgage/debt free by converting super to repay debt when they do so. |
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By: lasty49
9/11/2009
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Superannuation maybe invested in shares, property cash, bonds, both locally and foreign etc.
The underlying factor is over $1 trllion dollars is invested and the majority of workers, via employers, contribute 9pct of their income into their super fund per annum.
Dollar cost averaging comes to mind but lets not go there yet.
Im not here to say everything will be rosey but these equations will need to be taken into account.
It appears unlike his other judgements of his recent bet these outside influences werent eg FHOG,Lower interest rates, housing shortage.
So rather than dismissing them, afterall they are an asset, what effect does this have on his model. |
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By: ang101000
9/11/2009
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As at 31 December 2008, the value of the S&P/ASX 200 has fallen by 40% over the preceding year. This market downturn has wiped $680 billion off the value of Australian shares and is consistent with the experience of other stock markets around the world.
Volatile periods and market downturns are part of the nature of investment markets. Since 1900 investors have experienced 32 significant downturns and 25 significant upswings.
As at January 2009, the market had already experienced 14 months of poor performance since the market highs of November 2007, and most economists expect prices to stay depressed for some time, reflecting the cycle of the larger market downturns.
Because it has been around 20 years since a significant market correction and 'bear' market, many people have come to take for granted the high returns of recent years. Consequently, some people may think that the stock market always goes up, and when there is a market correction, it is relatively minor and short-lived.
The share market and superannuation
A typical balanced option invests approximately 65% to 75% of their funds in growth assets, such as shares (a combination of international and Australian shares) and property and often some allocation to alternative assets.
The balance is invested in defensive assets that are mainly fixed interest and cash.
Research shows how the average balanced portfolio is invested in:
Shares 58%
Cash 3%
Fixed Interest 18%
Property 10%
Alternative Assets 11%
Over the course of the year to 30 June 2008, global share markets decreased in value, returning - 21% while Australian share markets fared better at -14%. In the same period cash returned around 7%.
As a result of these market conditions many 'balanced' portfolios produced negative returns that averaged about -7% for the year. |
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By: ang101000
9/11/2009
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Great Lasty,
average Joe now has most of his wealth invested in 'speculative' financial assets; shares and real property. Hmm, we all know these assets can only increase in value over time. Good, we can all relax now that there is an other govt sponsored Ponzi scheme. |
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By: mentawaisurf
9/11/2009
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| Unfortunately this $1 trillion asset pool of Australian savings that you purport to be our salvation is largely invested in the share market. Our super fund managers have been piling back into the share market recently on the back of a return to extreme bullish sentiment, economists proclaiming that recovery and inflation is imminent and especially now that our RBA have lifted their forecasts for Australia's GDP to return to trend growth by next year. If they are wrong, and markets crash harder than last year as the deflation intensifies, then there simply won't be enough super for people to retire on. |
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By: lasty49
9/11/2009
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Menta,
What about Superannuation?
I saw Keens 30 min seminar and there was no mention.
His charts go back well before compulsory Super came in.
You cannot ignore $1 Trillion asset pool of Australians savings.
Please can you shed some light on it. |
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By: lasty49
9/11/2009
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Menta,
What about Superannuation?
I saw Keens 30 min seminar and there was no mention.
His charts go back well before compulsory Super came in.
You cannot ignore $1 Trillion asset pool of Australians savings.
Please can you shed some light on it. |
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