Update - September 2015 - general comments with a focus on Australia
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John
Sep 12, 2015, 2:18:53 AM9/12/15
to MonitoringTheMadness
Hi all,
A spare moment has popped up to write a long-overdue update.
Except for some insignificant cases, the fundamental problems underlying the global financial system continue to fester and grow. The world's largest Central Banks continue to feed a steady flow of heroin ("cheap money") to the addict. Central Banks and governments continue to claim with a high degree of certainty that these and other measures are designed to "fix" the economy and recovery is surely "just around the corner". However, we are now more than 6 years along since the "GFC" and an almost continual stream of such "measures" have failed to produce the promised "recovery". There appears, at least by my reading, a growing proportion of awareness/recognition that that Governments and the Central Banks have no freaking clue what they're doing (and that's an understatement in order to not offend my more sensitive readers). This is critical to recognise. If I'm right in this assessment, it means that we're getting close to a major turning point.
Their measures are, in actual fact, more like desperate groping in the dark. And, after they administer a shot of heroin and the effect wears off, they desperately declare that the reason it did not cure the addict is because the dose was not high enough. So they up the dose.... again... and again... and again... each time producing a smaller and smaller short-term positive high... each time increasing the size of the "comedown" that will arrive when the heroin no longer has any sizeable effect and the music stops.
This process is long and drawn out. Psychology is at work here as well. Make no mistake, the dynamics at work are closely related to group psychology and group perception. This unprecedented period of "easy money" and the truly gigantic misallocations of capital and resources that are the inevitable result of such misguided actions will start to unravel only when a critical proportion of the "group" psychology and perception changes - when a critical mass of people lose confidence when they finally realise that the "fixes" aren't working... when they realise they are not well positioned and financially vulnerable and "rush for the exits".
Looking at the psychology from the opposite perspective - the process is "designed" to wear your patience down.... to cause you to question your judgement... to start to wonder that perhaps this time "really is different".... perhaps it's a "new normal"?.... perhaps the Australian property market has ascended to some new extraordinary permanent 'high plateau' from which it will never descend and you have missed out?.... maybe
These kinds of questions will always, by definition, plague the minds of people who care to actually invest energy in examining the fundamental situation.... they will become increasingly troublesome the larger and more drawn out the cycle is - because, towards the end, the law of gravity seems to be suspended. Embrace the doubt but don't think for a minute that gravity actually has been suspended. It hasn't - it just seems that way. The numbers don't lie. Patience (lots of it) and a level head are probably the most valuable assets you possess in the present situation.
There was much more I wanted to say, but I'm not a fan of repeating what others have already said, particularly when they say it utilising a much better grasp of prose than I do. So, without further ado, let me direct you to yet another excellent posting by Matt Ellis. I've recommended his writings before. His recent piece is another great read.
Read it here: Australia, you've officially jumped the shark
When time permits I hope to post some more specific ideas and thoughts. There's a chance I may even get to do that in the next 24 hours. Fingers crossed.
Cheers
John
A spare moment has popped up to write a long-overdue update.
Except for some insignificant cases, the fundamental problems underlying the global financial system continue to fester and grow. The world's largest Central Banks continue to feed a steady flow of heroin ("cheap money") to the addict. Central Banks and governments continue to claim with a high degree of certainty that these and other measures are designed to "fix" the economy and recovery is surely "just around the corner". However, we are now more than 6 years along since the "GFC" and an almost continual stream of such "measures" have failed to produce the promised "recovery". There appears, at least by my reading, a growing proportion of awareness/recognition that that Governments and the Central Banks have no freaking clue what they're doing (and that's an understatement in order to not offend my more sensitive readers). This is critical to recognise. If I'm right in this assessment, it means that we're getting close to a major turning point.
Their measures are, in actual fact, more like desperate groping in the dark. And, after they administer a shot of heroin and the effect wears off, they desperately declare that the reason it did not cure the addict is because the dose was not high enough. So they up the dose.... again... and again... and again... each time producing a smaller and smaller short-term positive high... each time increasing the size of the "comedown" that will arrive when the heroin no longer has any sizeable effect and the music stops.
This process is long and drawn out. Psychology is at work here as well. Make no mistake, the dynamics at work are closely related to group psychology and group perception. This unprecedented period of "easy money" and the truly gigantic misallocations of capital and resources that are the inevitable result of such misguided actions will start to unravel only when a critical proportion of the "group" psychology and perception changes - when a critical mass of people lose confidence when they finally realise that the "fixes" aren't working... when they realise they are not well positioned and financially vulnerable and "rush for the exits".
Looking at the psychology from the opposite perspective - the process is "designed" to wear your patience down.... to cause you to question your judgement... to start to wonder that perhaps this time "really is different".... perhaps it's a "new normal"?.... perhaps the Australian property market has ascended to some new extraordinary permanent 'high plateau' from which it will never descend and you have missed out?.... maybe
These kinds of questions will always, by definition, plague the minds of people who care to actually invest energy in examining the fundamental situation.... they will become increasingly troublesome the larger and more drawn out the cycle is - because, towards the end, the law of gravity seems to be suspended. Embrace the doubt but don't think for a minute that gravity actually has been suspended. It hasn't - it just seems that way. The numbers don't lie. Patience (lots of it) and a level head are probably the most valuable assets you possess in the present situation.
There was much more I wanted to say, but I'm not a fan of repeating what others have already said, particularly when they say it utilising a much better grasp of prose than I do. So, without further ado, let me direct you to yet another excellent posting by Matt Ellis. I've recommended his writings before. His recent piece is another great read.
Read it here: Australia, you've officially jumped the shark
When time permits I hope to post some more specific ideas and thoughts. There's a chance I may even get to do that in the next 24 hours. Fingers crossed.
Cheers
John
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