SO the Reserve Bank doesn't raise Interest Rates. What's that mean?
Well been a while since the last Interest Rate Movement. In fact this has the official line from the RBA for some time. The October 2017 Reserve Bank of Australia's announcement on Interest Rates, well the first sentence anyway, reads...
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
And that's been the exact same first sentence since September 2016.
Prior to that "At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.50 per cent, effective 3 August 2016. "
In short it means we're by no means under any threat of our economy over heating. While there'll no doubt be economists with differing views, some with motivational speaker type zeal about possible opportunities there's still an elephant in the room.
At present the nation's Household Debt is equal to Gross Domestic Product.
There's probably a few economists who'll have differing views on what that means, some might even think that its a thing but not a big bad thing and we should all just smile & soldier on.
That'll most likely happen anyway, but it does have ramifications and potential risks if a sizable threat comes our way.
Not pointing at North Korea but if there's another type of GFC we are in serious peril as an economy. Its bad enough that most of our engine fuel comes off shore through Asian waterways...one serious conflict in the region and some experts think we may have approximately 49 days fuel, for anything powered by petroleum. The military potentially less.
That's a worry because of the impact it might have on mortgage stress or mortgage default.
With such low levels of equity in householders assets they're at a big risk and it really is time Australia took its future into its own hands and took financial training on as a matter of National Security like food, water, energy & fuel. Well like Food, Water, Energy & Fuel should be.
Its not all easy to learn, but the fundamentals aren't hugely complicated & they generally don't change because, well, the fundamentals don't change...that's why they're "fundamental"
For example...
There is a good time to use debt.
There is a bad time to use debt.
There is no such thing as a bad time to pay debt off.
Some people turned to valuers to give them a high valuation for the home so without paying off any extra their debt on paper their equity had increased...which meant they then went and borrowed a little more which in many cases went into discretionary spending. I still don't understand how that even works.
The house didn't move to a better area, it gained no physical change...all on paper and if the economy turns much further south, the valuations will plummet whilst their increased debt doesn't lessen.
Meanwhile the smart folk don't spend money they haven't got, on things they don't need, to impress people they don't even like. Far too others many do.
We've lost the idea that hard work can and is enjoyable.
That money is earned with hard effort & is lost with very little effort at all.
That going without things actually causes later gains.
That compounding interest is your friend and the earlier you save the less you'll have to borrow.
As a Nation we need to pressure our legislators to future proof the country by pushing financial literacy. Schools often teach mathematics, but rarely teaching sound principles of financial planning.
The worst case scenarios highlighted on the TV several years ago were scary. We saw two girls aged between 18 & 23 with the massive credit cards debts. One girl was employed but neither had any assets & were still living with their parents. Spending over $20,000 a year on clothes and make up annually threw me for a big 6.
It seemed when money got low, they both did the same thing. No not austerity. Not sell off things and go without but apply for another credit card.
A wise teacher once pointed out that if kids don't get things right by 9 years of age they very likely have them right by the time they're 19. It doesn't matter how accurate the numbers are in that instance but the fundamental is there. We need to teach our youth how to manage money, how to make it work hard for us once we've worked hard for it. And also teach "He that makes money his slave also makes it his master"
Our moral fabric in society is torn and legislators might do well to at least start conversations on what problems this causes and what solutions are before us. Chances are they may very well have to go back in time to discover the better formulas for success and sustained success at that.
We've become the masters of short cuts to everything and we as a species seem to be very impatient. Amassing great wealth appears to really be amassing great debt with a bit of short term joy getting their before the debt collectors kick the door in.
In a dangerous times the tear in our society's moral fabric has developed into a set & accepted part of our culture.
Everyone wants their rights but wants them completely disconnected from responsibility. Apply that criteria to any issue and it'll fit.
Human rights are not absolute. Freedom of speech is not absolute. Even discrimination is not absolute. They are have boundaries, boundaries people conveniently erase if it doesn't suit their aims and goals.
We have an unravelling before us. Denial won't correct it dismissing it won't make it alright.
We have to pay the ferryman.
The greatest kings of all history were not absolute rulers. They had immense constraints & limitations. We're in an era now where some people want excess on tap and they want it now.
It might be possible if you squint and ignore the perils and the cost...but its not sustainable.
It will implode. We're in the midst of a huge explosion of implosions.
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