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Just at the time the economy may need a boost, Australian Treasurer Wayne Swan promises...

Just at the time the economy may need a boost, Australian Treasurer Wayne Swan promises significant belt-tightening in order to meet a pledge of returning the budget to surplus this year. "It means monetary policy can play the primary role managing demand," he says, giving a very clear push to the RBA to quicken the pace of rate cuts. We'll keep an eye on the aussie (FXA) this week.
Comments (11)
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    This is great, lax monetary policy can support austerity, in Australia, or continued government spending, as in the US. Definitely an all purpose tool.
    21 Oct 2012, 08:37 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6699) | Send Message
     
    Yes, it is Tom. Far better to balance budgets and IF there is a slowdown, use the lower rates to stimulate. Why I like investing in Australia and Canada- they UNDERSTAND the power of good fiscal policy and trying to keep defecits low.

     

    FLOOR it towards the BS "cliff".
    22 Oct 2012, 01:54 AM Reply Like
  • Mercy Jimenez
    , contributor
    Comments (1892) | Send Message
     
    Well said surfgeezer; and for me personally I also add Norway and Singapore to Australia and Canada as foreign investment targets -- for some of the same reasons.
    22 Oct 2012, 11:16 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6699) | Send Message
     
    Agree. Have SRHBY in Singapore. Watching your posts especially on Norway- any high yield hints appreciated.
    22 Oct 2012, 10:58 PM Reply Like
  • Mercy Jimenez
    , contributor
    Comments (1892) | Send Message
     
    So few folks on SA trade on foreign exchanges other than Canada, that I rarely make those posts unless there is a related article. I'll send you a pm with some of my plays.
    Best,
    mj
    22 Oct 2012, 11:12 PM Reply Like
  • barakg
    , contributor
    Comments (53) | Send Message
     
    it's like pressing gas and brake at the same time. this beahvior is exactly what led private debt levels higher in us and europe, as less income resulting from government tightening is replaced by chepaer debt from banks. if easing is needed than it should be in both arms of the government, and if tightening is needed than vice versa.
    21 Oct 2012, 10:58 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6699) | Send Message
     
    Debt is a tool. Smart biz and people grow Income with it. Dumb people and biz make bad decisions no matter the Interest rate.
    22 Oct 2012, 01:57 AM Reply Like
  • barakg
    , contributor
    Comments (53) | Send Message
     
    looking at the real estate bubble in the us the only conclusion there is about debt is that there were no smart people using it. when credit is too cheap it will go into the wrong places en masse.
    now, about balanced budgets in a slowdown: every country that has some sort of social security, like unemployment insurance, taxes that depend on profit, etc. will experience a higher deficit in a bussiness cycle slowdown. this higher deficit is the RESULT of the crisis and not its cause, and it helps fighting the slowdown by being counter cyclical. however, if you turn to austerity in a slowdown you just exacerbate the problem even more. this is what we see in all of europe right now. one automatic tool that helps balance this (for the cost of inflation) is FX rates, but europe doesn't enjoy it.
    22 Oct 2012, 02:44 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6699) | Send Message
     
    People that based their investments in Real Estate on Income, and did not let flipping overtake them still own positive cash flow properties and feel no pressure from prices. As a point of fact I am currently in the process of using the low rates to grow income both in RE and stocks.

     

    I agree on cyclical debt, but Keynes also said to start paying it back. I do not believe the cliff will be much more than a speed bump on the ascent we are already on. Much of the calamity is predicted by people who have a very vested interest in seeing 1099 Income get treated better than W2.

     

    Getting a more balanced budget is critical to International competitiveness and the resulting jobs that will drive a better recovery.
    22 Oct 2012, 11:08 PM Reply Like
  • barakg
    , contributor
    Comments (53) | Send Message
     
    the income part is little comfort if you bought a house in 2005, lost 100k on its value and can't find renters who will be willing to pay the same as when you bought it. e.g., prices in tokyo still hasn't returned to their value in the early 90's. so yes, probably due to inflation you'll get your nominal value back, but the real value could take ages to recover. now, had you not invested in RE in the bubble years, now, as you mentioned, you could buy a few properties for the price you paid one then, and for a reasonable or cheap price from an historic perspective.
    23 Oct 2012, 03:09 AM Reply Like
  • Mad_Max_A_Million
    , contributor
    Comments (1175) | Send Message
     
    "ensuring government payments go to those who need them most"

     

    Fact: When you only give free stuff to those who need it, you end up with no one left that doesn't... "Means testing" is a double-edged sword!
    21 Oct 2012, 12:58 PM Reply Like
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