My predictions for the economy from COVID-19

Discussion in 'Property Market Economics' started by Paul@PAS, 28th Mar, 2020.

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  1. Big A

    Big A Well-Known Member

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    Let me pose a question. All these billions they are handing out right now. A few years down the track once every ordinary person who got it that supposedly needed it has spent it and its now circulating in the system, where does it eventually end up?

    I mean we have the money supply that churns round and round everyday from the process of earning wages and spending, while that varies depending on the spending habits of the participants as a whole. But overall that stays within a certain range of money that goes round and round in the system. So where does this extra money that is being dumped in the pool end up?

    I can only think that eventually it all floats to the top and sits in assets owned by investors. So the more money that is thrown into the system the more of it that will end up at the top in assets causing investment assets to continue to inflate. Yes some of that money will always stay in the daily earn and spend system and that world will get bigger hence having more of that money pile going round in it. But the rest must always go somewhere eventually.

    This brings me to my next point. If what I just said makes any sense at all. o_O Sort of does to me. Then to stop all this money from going straight to the top and into the hands of investors resulting in even higher asset prices they need to claw some of it back. Problem I see is that most of the money will eventually float to those who invest and the more investments you have the bigger piece of this money you will have. But when it comes time for governments to claw it back it doesn't necessarily come back to them from the places where it predominately went. It seems that they try and suck it out of the system and a lot of it comes out from the lower and middle class as a percentage of what they have. When a good chunk of it is sitting with the top end.

    Does this make any sense to anyone else or am I the only one seeing this.
     
  2. turk

    turk Well-Known Member

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    Do you mean the rich get richer and the poor get poorer.
     
  3. essendonfan

    essendonfan Well-Known Member

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    I think we will run the bar tab up to $1 trillion
     
  4. Big A

    Big A Well-Known Member

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    In short yes. But simple maths dictates thats how it works. The more you have the more you can make. I don't think there is anything wrong with that. Problem is what happens when those who have, have so much more than they need. And if there are to many who have more than they need where does that money go? Everyone wants a nice home for there excess cash that will bring them a nice return. If we are all fighting for that same home and return then we bid up the prices of those assets and the income from those assets gets less and less as we pay more and more.
    Now the way I see it is that's not a problem for those with big time money. Lets say asset prices are so high whether its property or shares and the income they produce dwindles down to 1% yield, as a result of such high prices. If you have a cool billion dollars invested then you should be ok on a 1% yield. But what happens to average joe who say If they are lucky has a $1mill super balance in retirement and yields are down to 1%. Poor Joe cant live of his $1mill super income.

    That's why they need to control asset inflation and suck some of that excess money out of the system. Problem I see is I am not sure they are sucking it from the right place.
     
  5. Blueskies

    Blueskies Well-Known Member

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    Why is there the expectation the government will attempt to pay it back at all?

    US and Japan national debt had been only been increasing since the 70s, the eurozone has been going the same way ever since the GFC, Chinese growth story has been built on trillions of government debt. There isn't a great precedent for governments aggressively tackling debt, and whenever they have attempted it has crushed growth and led to huge political blow-back.

    I predict... that debt will not be repaid in any of our lifetimes.
     
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  6. JDP1

    JDP1 Well-Known Member

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    Maybe more.the govt isn't quite done yet. .
    Neverthess, its a massive bar tab although about average compared to the bar tab most PC members run up every weekend. :)
     
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  7. Blueskies

    Blueskies Well-Known Member

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  8. euro73

    euro73 Well-Known Member Business Member

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    It's the guy who runs WAM...not a politician
     
  9. euro73

    euro73 Well-Known Member Business Member

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    Politics my friend...politics. They have spent so much time talking about debt and deficit disasters under Rudd, bad mouthing his responses, talking up how much better they'd have done it , they cant really pretend that quadrupling the debt while they are in power isn't a thing.... It wont matter that it was necessary. What Rudd did was too .... It just wont matter. They will be attacked mercilessly as the biggest spenders in history , who were too slow to respond ( to this and the fires) , costing taxpayers hundreds of billions more than necessary due to their reluctance to act faster and so on and so forth..... Australian political culture will demand that it be so. It will be wedge politics all day every day .

    I agree... and I agree it doesn't need to be repaid. I have long argued they should take on far MORE debt and build nation building infrastructure with it . Never the less, both sides will use the "we must pay it down" argument politically at every opportunity.
     
    Last edited: 2nd Apr, 2020
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  10. George Smiley

    George Smiley Well-Known Member

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    We really saw that post GFC with Abbott's 'budget emergency' while playing the 'all debt is bad' card to the electorate (and disrespecting our intelligence in the process). Having said that, I'm not sure it's a political given in a post covvid world when one looks at the state of fiscal conservatism in the US where tax cuts and appetite for debt are well known. The conservatives are much happier pointing to the promised land down the road where increased revenue is supposed to kicks in and make up for the shorter-term revenue shortfall of these policies.

    There's also the real possibility that governments will become more interventionist and expansionary in a post covvid world. Regardless of one's view on this, there might be more acceptance and less criticism of this from the right side of politics as some aspects of globalisation are wound back and social cohesion becomes a greater issue.
     
    Last edited by a moderator: 2nd Apr, 2020
  11. Primary341

    Primary341 Well-Known Member

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  12. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Are we discounting the possibility of massive global infra spend funded by mother of all fiscal stimulus with enough crumbs thrown at every stakeholder to avoid any revolt in printing Ponzi,
    in turn resulting in a massive commodity boom in the coming decade, benefitting OZ hugely?

    Gold first and then rest of the base metals and even oil n gas

    just a thought..
     
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  13. Melbourne_guy

    Melbourne_guy Well-Known Member

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    Anything is possible. No-one has any real control over the direction of their economy right now and the USA has just added record numbers to their unemployment queue.
     
  14. essendonfan

    essendonfan Well-Known Member

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    Having a look a Transurban traffic numbers, March car traffic was down 60%

    If this is a real pivot for people to work remotely and not as many rush into CBD areas each day. What will be the long term impact of government spending?

    Perhaps that new road into or across town is not such a priority. A nice high-speed national railway instead?
     
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  15. Closet

    Closet Well-Known Member

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    If anyone watched Steve mcknights webcast last night....the govt spend in 3weeks has dwarfed the entire spend throughout gfc and it has just started. It won't get paid off for many generations taxes will have to rise to pay it off and he sees a depression unavoidable...if it goes for longer than 6 months then we are in major trouble...if not we may squeak our way through it with minor damage...fingers crossed...
     
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  16. Primary341

    Primary341 Well-Known Member

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    We know that governments love going ahead with mega infrastructure projects even if they don't meet cost benefit analysis - dodgy traffic modelling anyone?

    It's often the smaller, less 'sexy' projects that provide the greatest improvements to productivity and provide the large ROI.
     
  17. Tony3008

    Tony3008 Well-Known Member

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    It's struck me as to how recent arguments over the Melbourne Airport rail link - whether to do (a) or (b) with the difference in cost being $2-3bn look so trivial when compared with spending billions a day on trying to secure the economy. Just a pity we're spending all that money to keep people at home instead of productively working.
     
  18. shorty

    shorty Well-Known Member

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    I'm productively working from home. :D
     
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  19. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    My attempt to synthesize some of my recent reading together and make sense of things. Summary: Joye thinks peak infection rate is quite close here in Oz. Switzer, Joye and Louis Christopher all see growth opportunities after short term pain. LINK
     
    Last edited: 3rd Apr, 2020
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  20. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    me too :)