Don't mention the debt.

Sounds like Michael West gets it.

Australia's debt dependent economy is headed for a painful adjustment, Michael West writes


Ever expanding debt borrowed from overseas must hit a wall. That D-day is looming and the domestic credit shortage that will result coupled with higher unemployment can have but one effect on real estate prices.

 

02

Considering that our interest rates will always be higher than those of other western nations there will always be people who want to lend us money.

And why not?

We must be one of the very few safe places on earth where you can invest your money, get a decent return and still get your money back.

 

It's great to see that an honest perspective can filter through all the vested interests and taboos of mass media from time to time.

Now if only more people could get their heads around this idea that using debt for speculation of price growth in assets is not investing, then just maybe we can have the financial revolution we need to put processes in place to reduce the likelihood that this will happen in the future.

The sooner Australia accepts the brutally honest facts, the sooner we can get on with solving the problem, instead of medicating it.

Where did you pull this pearler of a statement from?!?

Firstly our interest rates will not "always" be higher than other western nations... they are just "presently" higher due to a resource boom that was stimulating growth to a point where the RBA, rightly or wrongly, felt that it was forcing inflation to unacceptable levels.

Secondly, people won't always want to lend us money. Would you lend a drug addict money at risk free rates? The only reason they lend us money is because we consume more than we make, and guess what, they make most of the junk we consume, and they don't buy nearly as much of our dirt!

There is a reason why China and Japan are running around buying up companies at bargain prices right now - because they spent the last few decades producing more than they consumed, meaning they produced a surplus, aka savings, and now in a time of crisis, all us debt-ridden and desperate "westerners" are begging for someone to buy our companies out because we don't have the money to even pay interest on our debts and no one wants to lend to someone who is up to their eyeballs in debt. Unfortunately for them because they have been running surpluses they have being buying our western assets like debt obligations, of course debt obligation are great assets when the borrower can pay the interest, of course they are worthless when the borrower is bankrupt.

It is a real shame when a company like RIO with as much long term potential as it has will end up in the hands of the Chinese... Australia (as a whole) is flirting with bankruptcy just like many other western countries, the only difference is that our government doesn't own the debt, we as private citizens own the debt through our outrageous property prices.

LOL - what an insight! So by that logic the recent falls in the AUD$ are a reflection of Australia being a safe haven!

*sarcasm off*

Those that invest in Australia will get their money back in AUD$, but what it will be worth in comparison their domestic currency (Yen, Yuan, Real...?) is a completely different story.