Join our investing community

The Aftermath of Financial Crises

Discussion in 'The Economy' started by Tropo, 5th Jan, 2009.

  1. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    That report doesn't paint a pretty picture, and I'd argue that things are pretty bad this time around, and may well be worse than many of the historical precidents used in the report (at least in the US's case).

    So I expect that declines and duration of employment, GDP and house price reductions to be larger than the averages suggested in the report.
     
  3. seaview

    seaview Well-Known Member

    Joined:
    8th Jun, 2006
    Posts:
    77
    Location:
    NEWCASTLE
    ho hum ..... more doom and gloom. :(
    Bring on Obama (aka Robin Hood) and his big cheque book: these Harvard style Steve Keen academics need not worry about less tax going to the government to keep the printing machines rolling....Obama plans to take from the wealthy and give to the poor. Kevin Rudd may swap his nice-guy suit for a pair of tights sometime soon too.
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    It does not include Austalia though, maybe they left us out on purpose because they see that we will go through this unscratched...:D
     
  5. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Australia is just like every other Western economy, just better positioned, we'll see our fair share of tough times though.
     
  6. shasta

    shasta Member

    Joined:
    23rd Aug, 2007
    Posts:
    23
    Location:
    Melbourne, Vic
    Interesting article Tropo, thanks.

    Following on from the discussion so far, it might be useful to consider the timing and extent of the monetary and fiscal policy responses from the governments in the examples cited. In many (probably most) the responses were slow and possibly inadequate. Eg Japan, it took years until the Japanese gov pulled its finger out and did the right thing.

    So we should factor in the swift RBA and gov response here, at least, when trying to draw any comprison with the article.

    But, BV, this doesnt mean we're in the clear completely!
     
  7. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Or was it the case where government and monetary response were just not enough to influence the market to the point where it could regain back to the top of its previous bubble. Japan has had interest rates are near 0% for nearly a decade now without many any inroads towards restimulating growth and abating asset price deflation.

    I think the major problem for Japan is/was that they were a manufacturing nation that through the 80s, 90s and 2000s that couldn't compete with the China's and other Asian Tiger ecomonies, and as a result a significant part of Japanese manufacturing has moved into other parts of Asia, much in the same way much of US manufacturing moved into Japan when Japan was up and coming.

    Swift action doesn't mean you can overt a downturn, at the end of the day in my mind it is simple maths. If 50 - 100 trillion has been wiped off world markets (both property and equity markets) with expectation of further decleins in at least the world property markets, then governments need to be able to fiscally inject 50 - 100 trillion to reinflate the market to the point prior to the bubble.

    The sad reality is that no amount of government stimulus packages will even come close to compensating the market for what it has losts. So I imagine most western economies won't fully recover from these losses for years and years - and will stagnate much like Japan.

    Obviously many central bank attempt to aid the economy through interest rate cuts, which definitely helps, but in my mind the only stimulus that can really fast track recovery (albeit not real recovery) is quantitative easing, where the central bank essnetially just prints money and injects it into the economy, much like want many fear the FED is doing now, in a bid to fight against asset price deflation.

    Removing all the smoke and mirrors that government and central banks use to attemp to "soften" the fall the reality is we are in the economic crisis for a reason and one way or another we have to fall. Australia only has subtle differences from most other western nations that place us in a better position. So in my mind recession is pretty likely here in Australia as well, it just won't be as deep or long as the rest of the world.
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    Personally I would be surprised if we do NOT have a recession ... but it won't be the first we've had, and it won't be the last. I'm not focussed on what might or might not happen - I'm more interested in identifying opportunities for investing and building wealth.

    Be careful about becoming too chicken-little-ish ... less running around talking about how bad things are, and more looking forward to looking at how to make the most of what we have.
     
  9. dudek

    dudek Well-Known Member

    Joined:
    10th Sep, 2008
    Posts:
    199
    Location:
    Sydney
    I fully agree with Sim. Opportunities are everywhere at any given time.
    BTW, there is a light at the end of the tunnel. New administration in White House may rebuild some confidence. Sure we may have to wait next decade for bull run in economy but this does not mean people will not make money and will not get rich in the meantime. In regards to Japan, when I landed few times in Tokyo I didn’t feel country is in “recession”. In contrary it made me feel that Australia is economically very behind despite running “resources boom” at the time. Think about “recession” as a state of mind. Its like your first love, you can get use to it after you get heart few times.

    One of my strategies (it works) is to borrow as much as you can manage and let the time do the rest. Milk and bread always goes up so is everything else. Just the matter of time.
     
  10. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Probably not, but we are in a much better position than many others and if our government plays it's cards right we could get through this difficult time
    without feeling much pain.

    Despite all the negativity I am optimistic because we are still running a surplus and because we still have money to spend on infrastructure projects.
    I wish the government moved their feet though....

    I also think that our banking system needs a new direction.
    Maybe our government should have used our surplus and the futures fund to bring competition to the lending sector.

    cheers
     
  11. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    I think that general sentiment will have changed come February and March when we start seeing some significant jumps in unemployment. I'm expecting January layoffs to be quite bad, and continue all the way through 2009.

    With that said, I do agree with Sim's sentiments that there are definitely oppurtunuties out there and I think in the last month or two some of them have already come and gone. No doubt more will emerge over the coming weeks and months.

    You obviously have a set of balls on you. I wish I had of backed some of my recent market positions more aggressively, but I just can't stomach the volitity at the moment. Though no doubt with the cost of borrowing likely to continue to drop in the future those who can stomach the risk and position themselves well will potentially reap great rewards...