Smarter than your average bear

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A few bearish Aussie articles have been doing the rounds of late…

This one made it to FTalphaville.

For an antidote, see this post:

Countries that have a rising currency and outperforming asset prices do so because they are viewed as an increasingly good place to invest. An increasing foreign liability position is due to the wisdom of a crowd. Prices are democratic in a way that catastrophe articles are not

My sympathies lie with the responder.


  1. Australia did not reduce its previous low level of debt through budget surpluses it did so by selling off Telstra. In doing so it made the same mistakes Thatcher did.

    Focusing no gross debt is absurd particularly when one doesn’t talk about why gross debt is rising whereas net debt is about to fall.

    This clown doesn’t seem to understand just how much the Regulators have learnt from the early 90s and the problems that occurred in the financial sector then.

    Why was St George for example told in no uncertain terms they could not have any no loans without a deposit back just before the GFC.

    Another Kelly farce!

  2. We had the CAD debate in the early 1990s and don’t need to have it again. Why can’t people see that we had a recent experience with rapid foreign outflows – the GFC – and managed just fine because the RBA was on the ball and we have a floating currency. I don’t have much faith in regulators to foresee problems in the banking system, but I do have faith in the RBA to maintain steady nominal income growth. With steady nominal growth, banking crisis should not significantly affect the real economy. The RBA could do more at the moment, but it hasn’t stuffed up majorly like other central banks.

  3. I applaude Radical Expections on his / her post.

    It is nice to see MMT framework when discussing the currenct account (ie; it is the foreigners desire to net save AUD which drives the capital account surplus, and the accounting reality of a currenct account deficit).

    Yes there are macro economic risks in Australia – the greatest risk is government deficits are too low.

    After the run up of private debt last decade (private debt / GDP c 140%), the domestic private sector now desires to save net financial assets. The sectorial balances tell us this can only come from two sources – the external accounts or the federal budget. But the external accounts are also seeking to net save AUD. So its fime for the Federal Government to supply AUD via increased budget deficits.

    Unfortunately, bad economic advice and politics is driving the budget in the opposite direction. The outcome will be an unintended budget deficit resulting in needless austerity measures resulting rising unemployment.

    Australia’s economic prosperity is ours to lose.

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