Hi folks, it's been a couple of weeks since I sat down and made the time to post another thought provoking addition to my blog. Here's to seeing if it will or won't be thought provoking ha ha.
My main reason for not making the time is that I still own the farm I come from or at least part of it. The farm as a whole is share farmed. All the seasonal work is done by my uncle and one of his sons. However maintenance to the property itself is still my responsibility. So I have been home working on fixing fences for over a week. It was great to get back to see how the farm and home is coming along. And it was refreshing to see that not much has changed.
One reason I think that will always draw me back home is that I respect the country for what it is. Out there is where our food comes from. These thoughts keep me grounded, rather than being swept away in city life. The ease of finding what you need, and the short distances to going to where you work or shop. It's so very easy to get lazy here, even if you're working a nine to five. Going back to the country reminds me that I should never forget the work I had to do, or that is still being done. Now its not like I have forgotten, but by not being there for a while you can start to numb yourself to what it all really means.
And while being home working, something else happened. I realised just why I could never have done any of my investing while trying to run a farm. In only a few short weeks the Euro crap, and yes I say crap for that is what it is, has risen to the fore once again. Scare mongering is all it is at this point. But in that time it has seen markets fall all over the globe. Rest assured people, there are those in these last few weeks who would have been buying stocks and bonds and gold and silver by large amounts. Namely, some of those who have been causing the saturation of the media with the new worries of the Euro. It makes me sick, and almost makes me want to leave this markets business to those who would have it fall in a heap to just see themselves well off, while screwing everyone else over. Time will tell what really has been going on, either it will go back to how it was, or it will really fall. As yet who knows, but if it does it will be more to do with the extra attention it has all been given rather than the real effects of anything to do with the Euro. You can never make money in shares by striking out with a feeling. Many will have lost and only a few will have gained just like usual. Want to be smart, buy in these times where everyone else runs for the hills. Do this and you will be rich in no time. But is that the ethical way to do things.? This is what I am pondering at the moment.
Fundamentally nothing has changed at all. Fundamentals seldom do change. It's more the masses that hold the money and their sentiment that changes. As I see it nothing has changed at all. We're still doing just the same as we were a few weeks ago, so I have not changed one thing to the holdings I have. I believe sooner or later when everyone decides it was a smoke screen and come back into the market with force it might be time to look for the sales to be made to them. For those of you out there who invest I believe if you have investments in strong companies then hold everything as it is and maybe even extend your holdings, while everyone else is selling back into cash.
Cash might be king, but not just yet.!!
Thursday 24 May 2012
Saturday 5 May 2012
Discrimination or Prejudice!
After the first few post I've made, this is a change of pace. I was watching the show Today Tonight the other night, and on came a story about Discrimination towards larger persons. And it struck me once again just how much it annoys me that this word's meaning has been distorted so much. Add to that it is so overly used in the mass media these days, it has actually lost it's true meaning.
I have a pet hate I'm afraid with the misuse of words. Even worse maybe could be the subtle changing of word meanings to suit a particular movement towards creating more of a smoke screen than is needed. I'm sure everyone has noticed over the years the increase in the use of the word Discrimination. I'm sure that by far the majority of people in the world now recognise it as a word to use in order to describe the unfair views or treatment of different races or minority groups. I would point out here that I do not by any means condone any such treatment towards such groups. But I put it to you that we have been misusing the word Discrimination, when we simply mean Prejudice.
I was sad to look up Discrimination on the ever reliable
http://oxforddictionaries.com/definition/discrimination?q=Discrimination
to find that the first definition they had was; "the unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex: victims of racial discrimination, discrimination against homosexuals." I would love to at this point reveal the true meaning of the word. The second meaning listed is indeed it's true meaning: "recognition and understanding of the difference between one thing and another: discrimination between right and wrong: young children have difficulties in making fine discriminations: the ability to judge what is of high quality; good judgement or taste: those who could afford to buy showed little taste or discrimination: Psychology the ability to distinguish between different stimuli: discrimination learning."
Now time to show you why I say this. The word "Discrimination" is derived from the Latin verb, Discrimire, which means to separate, to distinguish, to make a distinction. More like making an informed choice rather than slandering, or abusing someone. HMM.?!
For moments where things are seen as racial unfairness or ill treatment towards minority groups, the word we're looking for is more like the word Prejudice. This word carries with it the
correct derogatory tone for these situations and adequately conveys the message. The Oxford Dictionary does get it right this time with: Prejudice; "preconceived opinion that is not based on reason or actual experience: English prejudice against foreigners: deep-rooted class prejudices dislike, hostility, or unjust behaviour deriving from preconceived and unfounded opinions: accusations of racial prejudice." Why is this correct? The word Prejudice is derived from the Latin word Preajudicium, meaning prior judgement.
So where does that leave us? Pretty easy from here i would suggest. To discriminate is to make an informed decision, therefore a choice. No derogatory tone anywhere to be found to imply an against term like many would have you believe. However to be prejudice, that is a different tone of word altogether. I could simply say that I discriminated between eating an apple and drinking the DDT (chemical that was used to kill bugs on the apples). I made an informed decision not to drink the DDT because I knew it was poison. A smart choice too I might add. Thus bringing us back to Prejudice, and now we can see that this is the word we mean when we're upset about mistreatment, or derogatory comments and sentiment.
To Discriminate is not a crime at all, it is in fact using logic and common sense in most cases. But essentially it is simply making a choice. On the other hand Discriminating with Prejudice is not to be tolerated in any circumstances. This is flat out making a choice based on preconceived opinions about someone. In other words: do you know them have you had experiences with them yet? No! Then what the heck do you know to make such a decision?
So the next time you feel yourself getting sucked into using Discrimination as a derogatory term, remember it only means you're making a choice. There is no against in it's meaning unless you add the word Prejudice.
Rant Over...
Till next time.
God Bless
I have a pet hate I'm afraid with the misuse of words. Even worse maybe could be the subtle changing of word meanings to suit a particular movement towards creating more of a smoke screen than is needed. I'm sure everyone has noticed over the years the increase in the use of the word Discrimination. I'm sure that by far the majority of people in the world now recognise it as a word to use in order to describe the unfair views or treatment of different races or minority groups. I would point out here that I do not by any means condone any such treatment towards such groups. But I put it to you that we have been misusing the word Discrimination, when we simply mean Prejudice.
I was sad to look up Discrimination on the ever reliable
http://oxforddictionaries.com/definition/discrimination?q=Discrimination
to find that the first definition they had was; "the unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex: victims of racial discrimination, discrimination against homosexuals." I would love to at this point reveal the true meaning of the word. The second meaning listed is indeed it's true meaning: "recognition and understanding of the difference between one thing and another: discrimination between right and wrong: young children have difficulties in making fine discriminations: the ability to judge what is of high quality; good judgement or taste: those who could afford to buy showed little taste or discrimination: Psychology the ability to distinguish between different stimuli: discrimination learning."
Now time to show you why I say this. The word "Discrimination" is derived from the Latin verb, Discrimire, which means to separate, to distinguish, to make a distinction. More like making an informed choice rather than slandering, or abusing someone. HMM.?!
For moments where things are seen as racial unfairness or ill treatment towards minority groups, the word we're looking for is more like the word Prejudice. This word carries with it the
correct derogatory tone for these situations and adequately conveys the message. The Oxford Dictionary does get it right this time with: Prejudice; "preconceived opinion that is not based on reason or actual experience: English prejudice against foreigners: deep-rooted class prejudices dislike, hostility, or unjust behaviour deriving from preconceived and unfounded opinions: accusations of racial prejudice." Why is this correct? The word Prejudice is derived from the Latin word Preajudicium, meaning prior judgement.
So where does that leave us? Pretty easy from here i would suggest. To discriminate is to make an informed decision, therefore a choice. No derogatory tone anywhere to be found to imply an against term like many would have you believe. However to be prejudice, that is a different tone of word altogether. I could simply say that I discriminated between eating an apple and drinking the DDT (chemical that was used to kill bugs on the apples). I made an informed decision not to drink the DDT because I knew it was poison. A smart choice too I might add. Thus bringing us back to Prejudice, and now we can see that this is the word we mean when we're upset about mistreatment, or derogatory comments and sentiment.
To Discriminate is not a crime at all, it is in fact using logic and common sense in most cases. But essentially it is simply making a choice. On the other hand Discriminating with Prejudice is not to be tolerated in any circumstances. This is flat out making a choice based on preconceived opinions about someone. In other words: do you know them have you had experiences with them yet? No! Then what the heck do you know to make such a decision?
So the next time you feel yourself getting sucked into using Discrimination as a derogatory term, remember it only means you're making a choice. There is no against in it's meaning unless you add the word Prejudice.
Rant Over...
Till next time.
God Bless
Friday 4 May 2012
Money from nothing and they get it for free.
Sorry but I had to use this. For those who don't get it, I got the idea from the Dire Straights song "Money for nothing and your chicks for free"
The Misunderstanding of Debt's Fundamentals! Money that is here today and gone tomorrow!
Firstly to address Jonny's comment on yesterdays post. Without betting anything, I would suggest that the majority of home loan owners do not own shares in their bank due to not having any savings. The home loan owners in this country are largely in this category, hence the hefty amount of consumer debt. More people have loans than have savings. Making the banking profits, for the minority who may have shares.
I'd like to refer to the link that Jonny shared with us yesterday from the Daily Rekoning. I too read their material and find it insightful and therefore quite interesting. However I have to say they too seem to miss the mark when they discuss debt. Debt has come under the spotlight a lot more in the last decade, what with the GFC and all. And sometimes I wish my Dad was here to see all that is happening now. Years ago before debt was a really big subject, for the majority, my Dad and I had many conversations to do with it. And in my opinion he called it along with a few of his friends before many had a clue. How? It's all to do with the fundamentals of debt. It makes me laugh to read some of the ideas out there as to where the money comes from. But in another way it makes me feel like crying, it's that selfish.
You think you know debt? I'm now an investor, although I have for a long time been watching the markets, and I have made some silly mistakes simply because I listened to the banks. Or maybe I just simply took the view that it must be right what they say, after all they run the show. Who of you got lured into bank managed funds because of their growth portfolios and previous results. If I had have had the time to look more closely I would have seen that it was not sustainable at all. The GFC! What was it exactly?
It would seem that even after the GFC most people, including economists (also it would seem including the Daily Rekoning), still believe that they know debt. Debt apparently is made up of savers money being loaned out to borrowers for the most part. Really? Think about that for a moment. Did you say that your money in the bank could be used to loan out to someone else. I haven't said that. So savers money in the bank is loaned out to those who wish to borrow it. For being the middle man so to speak the bank charges a rate on the borrowings and then pays a portion of that back into the savers account in return for using their money. Simple right? (BUZZER) Wrong! While it may or may not work in some small way like that (mostly to make it seem like that's the way it works), there is a much bigger game at hand.
If that was the way it worked: one; why would the RBA rates have a thing to do with borrowings? two; how the heck are the majority of loans supplied for by the savers money? three; where did all that money go from the worlds economies when the GFC hit? You want the truth? If yesterdays post wasn't enough to make your blood start to pump, then get ready for this. I remember just how my Dad was when he would discuss this with me, before I guess I could really have gotten a full grasp on it.
Here goes. When we take out a loan from our bank, we are not (and if at all it's minute) borrowing money that is essentially someone else's savings. Read that again.... What we are doing is creating another opportunity for the bank to borrow some more money from the RBA (hence the Reserve Bank of Australia). The RBA has just created this money out of nothing, in order to supply your bank with the needed funds. Now it charges interest on that amount which the bank must pay (currently 3.75%). In turn the bank must as Jonny said make a profit, as they do very well here. So they charge a margin interest rate on top of the rate they must pay. The margin your banks hold onto is their profit. The rates they pay to the RBA my friend is brand new money. Money my Dad simply said to me should be everyones money.
This simple fact is clarified very simply indeed. And the proof for me was when the GFC hit hard. Over that short period of time something happened. Yes, money that was here yesterday was gone today. Where did it go? Easy! It was money that wasn't really here yet, but would have come into existence once it was paid back to it's source. The Reserve Banks of the world. The money that disappeared was perceived money treated as though it was already here. Remove growth, the very thing that feeds our economies, and that perceived money just cannot be. Money by massive majority is not borrowed money backed by saver's money, but borrowed into existence.
Yes our system works this way, it's called fiat currency, and it must have growth to survive. And yes our banks must turn a profit like all other businesses. But as we know they are currently turning very healthy profits, aren't they? Increasing margin, is that really neccessary when they're obviously paying back their loans to the RBA, while clearing the amounts they are?
As for the housing boom, bust or bubble. I might just have to leave that one for another night.
Till next time.
God Bless.!!
The Misunderstanding of Debt's Fundamentals! Money that is here today and gone tomorrow!
Firstly to address Jonny's comment on yesterdays post. Without betting anything, I would suggest that the majority of home loan owners do not own shares in their bank due to not having any savings. The home loan owners in this country are largely in this category, hence the hefty amount of consumer debt. More people have loans than have savings. Making the banking profits, for the minority who may have shares.
I'd like to refer to the link that Jonny shared with us yesterday from the Daily Rekoning. I too read their material and find it insightful and therefore quite interesting. However I have to say they too seem to miss the mark when they discuss debt. Debt has come under the spotlight a lot more in the last decade, what with the GFC and all. And sometimes I wish my Dad was here to see all that is happening now. Years ago before debt was a really big subject, for the majority, my Dad and I had many conversations to do with it. And in my opinion he called it along with a few of his friends before many had a clue. How? It's all to do with the fundamentals of debt. It makes me laugh to read some of the ideas out there as to where the money comes from. But in another way it makes me feel like crying, it's that selfish.
You think you know debt? I'm now an investor, although I have for a long time been watching the markets, and I have made some silly mistakes simply because I listened to the banks. Or maybe I just simply took the view that it must be right what they say, after all they run the show. Who of you got lured into bank managed funds because of their growth portfolios and previous results. If I had have had the time to look more closely I would have seen that it was not sustainable at all. The GFC! What was it exactly?
It would seem that even after the GFC most people, including economists (also it would seem including the Daily Rekoning), still believe that they know debt. Debt apparently is made up of savers money being loaned out to borrowers for the most part. Really? Think about that for a moment. Did you say that your money in the bank could be used to loan out to someone else. I haven't said that. So savers money in the bank is loaned out to those who wish to borrow it. For being the middle man so to speak the bank charges a rate on the borrowings and then pays a portion of that back into the savers account in return for using their money. Simple right? (BUZZER) Wrong! While it may or may not work in some small way like that (mostly to make it seem like that's the way it works), there is a much bigger game at hand.
If that was the way it worked: one; why would the RBA rates have a thing to do with borrowings? two; how the heck are the majority of loans supplied for by the savers money? three; where did all that money go from the worlds economies when the GFC hit? You want the truth? If yesterdays post wasn't enough to make your blood start to pump, then get ready for this. I remember just how my Dad was when he would discuss this with me, before I guess I could really have gotten a full grasp on it.
Here goes. When we take out a loan from our bank, we are not (and if at all it's minute) borrowing money that is essentially someone else's savings. Read that again.... What we are doing is creating another opportunity for the bank to borrow some more money from the RBA (hence the Reserve Bank of Australia). The RBA has just created this money out of nothing, in order to supply your bank with the needed funds. Now it charges interest on that amount which the bank must pay (currently 3.75%). In turn the bank must as Jonny said make a profit, as they do very well here. So they charge a margin interest rate on top of the rate they must pay. The margin your banks hold onto is their profit. The rates they pay to the RBA my friend is brand new money. Money my Dad simply said to me should be everyones money.
This simple fact is clarified very simply indeed. And the proof for me was when the GFC hit hard. Over that short period of time something happened. Yes, money that was here yesterday was gone today. Where did it go? Easy! It was money that wasn't really here yet, but would have come into existence once it was paid back to it's source. The Reserve Banks of the world. The money that disappeared was perceived money treated as though it was already here. Remove growth, the very thing that feeds our economies, and that perceived money just cannot be. Money by massive majority is not borrowed money backed by saver's money, but borrowed into existence.
Yes our system works this way, it's called fiat currency, and it must have growth to survive. And yes our banks must turn a profit like all other businesses. But as we know they are currently turning very healthy profits, aren't they? Increasing margin, is that really neccessary when they're obviously paying back their loans to the RBA, while clearing the amounts they are?
As for the housing boom, bust or bubble. I might just have to leave that one for another night.
Till next time.
God Bless.!!
Thursday 3 May 2012
"General Hate for the Big Four Banks!"
My Best mate Jonny has had the first word on my blog in response to my last post. One quote I found interesting in his response was "I find the general hate for the big 4 banks around somewhat mistifying." Hence the title of this next post.
Indeed using the internet or watching a TV, we will see that banks worldwide are failing and "are being bailed out (given free money!) by" governments who use our tax as they see fit. Be mindful that our taxes once paid are no longer ours. It would be interesting to see how and why this situation has exactly come to pass in these economies. The result has been insolvent banks in either case. But having access to the internet and a TV also brings other information to our attention. The very fact
that our banks are quite clearly a long way from being insolvent. They posted yet another round of fat profits for the last quarter. A long way from being insolvent I think.
Now with that in mind why is there such hate out there for the banks. Put simply as long as the banks keep the same margin in place between the reserve bank's set rate and their own rates that they charge, their profits will remain on balance with now. So in effect passing on the full rate cut changes only the savings to the consumer. And on the opposite side of that is, they don't pass on the full rate cut and keep more back for temselves, thus increasing the margin. I'm sure right now it is so much clearer why the hate is growing. Still mystifying? :)
In a final note our rates have a long way to go down before they reach the low levels of nearly zero like America. And more importantly the reducing of rates before they badly need to be lowered would help to prop up our system. With the banks passing on all the cuts as they happen, it will not impact much if at all on their profits (keeping them profitable), and it would spur on the markets that need a boost, by freeing up funds of the consumer. This in turn helps consumers pay off their debts sooner, avoiding bad debts and allowing for new debt to enter the system.
Banks aren't so badly hated for making profits, because as we all know this system requires it and so we need them to continue. The hate begins to rise when these banks begin to hold extra margin back for them selves further lining their pockets with ever higher profits. Leaving their customers with less chance to pay the debt. This will become bad debt if the process is allowed to continue. Hmm maybe we're onto something on how the Americas got into trouble?
Till next time!
Indeed using the internet or watching a TV, we will see that banks worldwide are failing and "are being bailed out (given free money!) by" governments who use our tax as they see fit. Be mindful that our taxes once paid are no longer ours. It would be interesting to see how and why this situation has exactly come to pass in these economies. The result has been insolvent banks in either case. But having access to the internet and a TV also brings other information to our attention. The very fact
that our banks are quite clearly a long way from being insolvent. They posted yet another round of fat profits for the last quarter. A long way from being insolvent I think.
Now with that in mind why is there such hate out there for the banks. Put simply as long as the banks keep the same margin in place between the reserve bank's set rate and their own rates that they charge, their profits will remain on balance with now. So in effect passing on the full rate cut changes only the savings to the consumer. And on the opposite side of that is, they don't pass on the full rate cut and keep more back for temselves, thus increasing the margin. I'm sure right now it is so much clearer why the hate is growing. Still mystifying? :)
In a final note our rates have a long way to go down before they reach the low levels of nearly zero like America. And more importantly the reducing of rates before they badly need to be lowered would help to prop up our system. With the banks passing on all the cuts as they happen, it will not impact much if at all on their profits (keeping them profitable), and it would spur on the markets that need a boost, by freeing up funds of the consumer. This in turn helps consumers pay off their debts sooner, avoiding bad debts and allowing for new debt to enter the system.
Banks aren't so badly hated for making profits, because as we all know this system requires it and so we need them to continue. The hate begins to rise when these banks begin to hold extra margin back for them selves further lining their pockets with ever higher profits. Leaving their customers with less chance to pay the debt. This will become bad debt if the process is allowed to continue. Hmm maybe we're onto something on how the Americas got into trouble?
Till next time!
Wednesday 2 May 2012
The power of Influence.!!
Yes the power of Influence with a capital I. As promised here comes the continuation to yesterdays first ever installment.
The Reserve Bank of Australia, the big fish. that's where I left off. For any of you who have been following the Reserve Banks rates actions will know things have not been the way they used to be. The big four banks are not passing on the rate cuts, while they very happily reduce the interest payments that they pay those who have savings. The follow the leader link seems to be disappearing between the Reserve Bank and the major banks. And what does this do? Expands their already massive profits of course. They even have the nerve to raise their loan interest rates regardless of the Reserve Bank not moving rates, up or down.
This makes me think about the conversations I used to have with my Dad to do with Finances and how it all works. The fact that the world's economies essentially run using rates of debt, in order to create growth. This is only possible with new money that essentially no one owns, or it could be argued that everyone owns it. The interest paid on the debts creates the growth. With this in mind, put simply, if the RBA raises interest rates they are attempting to slow growth and if they lower them they are trying to stimulate growth. Translates into: raising the interest rates, they are trying to slow down the amount of loans being taken out because the growth is too fast (inflation), lowering rates, they are trying to suck more people into borrowing more to get the growth going again.
So what's going on now? Well as I'm sure we would all know, mainly because the RBA rates decisions are big news, that interest rates play a massive part on how things go down here. From the cost of paying off a home, to the running of a business, to the raising in the general cost of living. We here in Australia have some of the highest rates of interest in the world at the moment. And our dollar is trading high compared to where it used to sit with many other currencies. This adds to the cost increases we see here.
So what has happened recently to cause the RBA to slash the official cash rate by 0.50%? The single largest rate cut since like 2009 or something. Well the big story is nothing much has changed. This is a rate cut that has been needed since the start of the year. They held off and off till now because markets have been recovering. But something very big has not changed all that much in relation to the growth of some markets. Consumer borrowing, and even more importantly consumer spending. Consumer borrowing isn't too much the issue here I don't believe as I read recently we as Australians own a total of $1.256Trillion worth of debt. OUCH.!! Therefore I would suggest that the amount of borrowed money here, and the interest being paid, isn't causing the slowing of the tide. Just think of all those free dollars the banks are earning (stealing?) from all of our fellow Australians, who have no choice but to have a loan to live somewhere. Or even more so those who can't afford a place to live because of the high cost of just the interest alone with no hope of ever getting from underneath a loan. GRRR.!! The bank profits just keep getting bigger.
Consumer spending.! Here's the point I wanted to reach for tonight. One very major reason I can see that has affected the RBA decision is the influence I wager you may never have thought you had any hand in. Due to the increasing cost of servicing loans and just living Australians have been largely reducing their spending, in order to attempt to pay off their debts sooner. Consumer spending has flow on effects to the businesses like retail for one such example. The retail sector is massive and with lower spending while still employing people to work there, the margin of profit is a lot less. Big business might be able to absorb this to a point, but small businesses are struggling. Their owners make less and so therefore spend less. Can you see how it flows on to everyone eventually? This is possibly the main reason why the Treasurer was so strong towards the big banks to pass it on to loan holders. While he won't say straight out, I'm sure he is aware that we need rate cuts now or risk job cuts and closures of small businesses. Not a good mix.
Our lower spending people! It's having an impact that I'm going to guess many don't understand. There are so many things we can do without even if it's for a short time. Lesser spending from here will put serious pressure on the big banks, and the big fish ha ha. Let's see if the RBA will reduce further sooner rather than later. And while cutting back even more on our spending, if we move to the banks that pass on the full or closer to full rate cuts, we place the pressure on the others to lower their rates too! We as a collective do have some serious power of Influence if the last little while has shown. Even if most of us Australians hadn't thought about till now.
Till next time.
The Reserve Bank of Australia, the big fish. that's where I left off. For any of you who have been following the Reserve Banks rates actions will know things have not been the way they used to be. The big four banks are not passing on the rate cuts, while they very happily reduce the interest payments that they pay those who have savings. The follow the leader link seems to be disappearing between the Reserve Bank and the major banks. And what does this do? Expands their already massive profits of course. They even have the nerve to raise their loan interest rates regardless of the Reserve Bank not moving rates, up or down.
This makes me think about the conversations I used to have with my Dad to do with Finances and how it all works. The fact that the world's economies essentially run using rates of debt, in order to create growth. This is only possible with new money that essentially no one owns, or it could be argued that everyone owns it. The interest paid on the debts creates the growth. With this in mind, put simply, if the RBA raises interest rates they are attempting to slow growth and if they lower them they are trying to stimulate growth. Translates into: raising the interest rates, they are trying to slow down the amount of loans being taken out because the growth is too fast (inflation), lowering rates, they are trying to suck more people into borrowing more to get the growth going again.
So what's going on now? Well as I'm sure we would all know, mainly because the RBA rates decisions are big news, that interest rates play a massive part on how things go down here. From the cost of paying off a home, to the running of a business, to the raising in the general cost of living. We here in Australia have some of the highest rates of interest in the world at the moment. And our dollar is trading high compared to where it used to sit with many other currencies. This adds to the cost increases we see here.
So what has happened recently to cause the RBA to slash the official cash rate by 0.50%? The single largest rate cut since like 2009 or something. Well the big story is nothing much has changed. This is a rate cut that has been needed since the start of the year. They held off and off till now because markets have been recovering. But something very big has not changed all that much in relation to the growth of some markets. Consumer borrowing, and even more importantly consumer spending. Consumer borrowing isn't too much the issue here I don't believe as I read recently we as Australians own a total of $1.256Trillion worth of debt. OUCH.!! Therefore I would suggest that the amount of borrowed money here, and the interest being paid, isn't causing the slowing of the tide. Just think of all those free dollars the banks are earning (stealing?) from all of our fellow Australians, who have no choice but to have a loan to live somewhere. Or even more so those who can't afford a place to live because of the high cost of just the interest alone with no hope of ever getting from underneath a loan. GRRR.!! The bank profits just keep getting bigger.
Consumer spending.! Here's the point I wanted to reach for tonight. One very major reason I can see that has affected the RBA decision is the influence I wager you may never have thought you had any hand in. Due to the increasing cost of servicing loans and just living Australians have been largely reducing their spending, in order to attempt to pay off their debts sooner. Consumer spending has flow on effects to the businesses like retail for one such example. The retail sector is massive and with lower spending while still employing people to work there, the margin of profit is a lot less. Big business might be able to absorb this to a point, but small businesses are struggling. Their owners make less and so therefore spend less. Can you see how it flows on to everyone eventually? This is possibly the main reason why the Treasurer was so strong towards the big banks to pass it on to loan holders. While he won't say straight out, I'm sure he is aware that we need rate cuts now or risk job cuts and closures of small businesses. Not a good mix.
Our lower spending people! It's having an impact that I'm going to guess many don't understand. There are so many things we can do without even if it's for a short time. Lesser spending from here will put serious pressure on the big banks, and the big fish ha ha. Let's see if the RBA will reduce further sooner rather than later. And while cutting back even more on our spending, if we move to the banks that pass on the full or closer to full rate cuts, we place the pressure on the others to lower their rates too! We as a collective do have some serious power of Influence if the last little while has shown. Even if most of us Australians hadn't thought about till now.
Till next time.
Tuesday 1 May 2012
The Beginning.....
"The Beginning." Sounds reassuring doesn't it. Sort of like it doesn't matter what the past held. Today is a new day.
I thought that maybe my first post should be about me and who I am and where I come from. My name in English is Anthony, although there are those who jokingly call me Antonio. Yes I'm sure you can see the link there, right. However there are those who have called me Gribble for years as well. Can't see the link there? Get's complicated from there going as far as being called Bob. But for the purposes of what to call me on here let's just go with Tone.
I grew up in a place down in far western Victoria called Serviceton. You couldn't get any further west in Victoria either as we're right on the boarder with South Australia. My Dad owned a farm there and we made an alright living. Sadly Dad got cancer only shortly after I turned 18, (2003) while I was still doing year twelve. He died very early on in 2004. I was then left to take on the farm, with my Mum and my two siblings who were still going to school. Soon after in July of 2004 on my brother's birthday no less, my Mum died too. If it wasn't for our extended family there to help us we would not have made it as well as we did.
I continued on the farm for seven to eight years providing for the three of us. Both my brother and my sister have left school and are setting themselves up in life and so it was time for me to do the same. I loved farming but I also knew there was more for me to find out about the world. So I have moved to Adelaide and bought a house. And I met the most beautiful woman you ever did see (the main reason I moved here), and finally living my dream of investing and loving it.
There is a lot in my past that I wish had never happened. Though there are things I'm glad did happen. Our past is what led us to be who we are today. We know what we know now because of yesterday. We can't change the past but we can make choices that affect our future. Today is the Beginning of the rest of your life. That is what I said to myself when I finally decided to take the plunge and move here, and to take on the task of investing. Life is too short to waste, so get with the program and make it happen.
It has slowly but surely come to my attention over the years, beginning with my Dad's interest in world affairs, all the way to now, that things are not what they seem. We're told one thing by those in power, when another is actually going on. Put simply we go chasing the dollar to make ends meet to pay off the mortgage and to try to live at the same time, while the banks and those behind the banks dictate how much we pay back in order to have what we have. The truth dear reader is they do their best to keep you from understanding that you have a great deal of power in how they will have to act.
Just yesterday the RBA lowered the official cash rate by 0.50% to now be 3.75%. They held off from doing this for a while, but it seems they were wrong to hold off as now the economy is starting to show strain. Why did they drop it after all this time, and why now?
Treasurer Wayne Swan has come out warning the big banks to pass on the full cut. Also saying to the Australian public that if the banks don't then it's time to start looking for better deals. And he's exactly right. You have the power to send a message to the banks that could sway them into doing what the should in the first place. You do have the power, but in a collective force.
But it has had me thinking about this on a larger scale than just the banks. How about the formidable Reserve Bank of Australia. This is the big fish, the one that I believe most people think is too big to influence. Hmm..... I'll leave you to think that one through. And I will continue this tomorrow.
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