Lets hope the stupid Aussie banks and RBA now see our economy is a part of the world and any talk of raising rates and more taxes ( carbon tax) is suicide for Australia.
The carbon tax is going to happen - it's inevitable.
I had a bet with my granddad yesterday about the carbon tax, he said the carbon tax won't happen, I bet him that not only will the carbon tax happen the price on carbon will be at $100 before 2020.
Living with your head in the sand won't change anything reality.
As for the RBA - we have a flexible exchange rate and a pretty open investment policy so international shocks will tend to work themselves out naturally with time. No need for the RBA to worry too much about them.
If anything I'm expecting something similar to the GFC last time around, commodity prices will fall, AUD will go with in, that will promote Australia as a buying opportunity to international investors as well as support local manufacturing, and some equilibrium will be reach. I have been buying international index funds over the last couple of months with the AUD on the off chance that the AUD tanks like the last GFC.
I'm interested to see what commodity prices do - it's been hard to buy them when they are so high in recent months, but if they fall even half way to their lows of the GFC you have got to be happy to get a second bite at the cherry before they go through the roof in the coming decades.
What the RBA really need to do is start factoring localised inflation within the economy and have a far greater look at credit growth within an economy. Our interest rates should have been way higher over the last 20 years to prevent the housing bubble, whose influence on inflation was unrecognised because asset prices are not considered in the CPI but one look at M3 or broad money supply growth over the last 20 years would have told you something unsustainable was in the works.
The lax IR policy means that the bubble is now formed, deleveraging at some point is inevitable, my fear is that the deleveraging is going to take place at the worst possible time, while the rest of the developed world is also going through recession (ie the next two to five years).
Oh well...
With banks making Billions in profits the rates need to be lowered if anything not increased as they keep saying we they need to.
The banks are already screwed, Basel III makes banking a far less profitable business going forward.
If you are invested in banks (especially Australian banks) I think the next 10 years will be very ugly, firstly they will have to deal with the deleveraging of Australian households then they will have to accept the new reality of Basel III capital requirements which will reduce profitably going forward.
My doomsday proclamation is: the era of the leveraged investor/banker is over - the era of the producer/manufacturer has begun. Buy farms and build factories, inflation is on its way and the internet is killing the middle men.
New high for gold on the open....IN GAP UP!!
I saw the gold price this morning - I must say I was very happy. I've been in gold and silver since 2008.
That said, I still have loads of cash on the sideline looking for a home, and I think over the coming weeks and month I might able to find a home for it.
Cheap stocks around the corner me thinks.
