My predictions for the economy from COVID-19

Yes, me too, as for most of the last 30 years. My business has the 'honour' of having been selected for the ASIC business statistics list (I guess they need businesses of all types and sizes) and yesterday I was phoned by one of their researchers doing a supplementary survey into Covid. I almost felt guilty answering a couple of dozen questions with 'no change'.

 

Curious what does your business do?
Dont feel guilty

 

I hope Joye is right but I seriously doubt it.

I think immigration will take a hit as we go into recession and that will have further negative compounding effects on the economy.

 

I write and sell engineering software Beam design software using BS449, BS5268, BS5950, Eurocode 2 (EC2), Eurocode 3 (EC3) and Eurocode 5 (EC5). It's really a UK business (software is UK-specific; 100% of sales to UK), been going since 1989 which is pretty good for any small business let alone a software one.
My original (early 2000s) plan was to move here when I retired, then with the internet going from geeks only to everywhere, I saw that I could move here and carry on almost as before. I've actually seen things improve slightly in the last few months with the GBP:AUD exchange rate moving about 10% in my favour.

 

I think technically we are already in recession

 

The AUD has really been hammered it hit I think 54 2 weeks ago
Currency play also in my favour USD vs AUD

 

Technically we are in a bear market . Recession is 2 xonsecutive quarter of negative growth.
Either way, it's all academic anyway; economy is f****d and will stay that way for a while.

 

Seriously considering buying some VAS myself, dont have 500k to splurge unfortunately though

 

I don't think I will be able to scrape together $500k either. But I will tip in what I can then keep buying at regular intervals.

 

A mixed bag….. but many wrong, same here, I got it wrong


….. we did not expect government to print money

 

Since 1971, that's the government's only move.

We have to think of recessions as inflationary these days, not deflationary (like the Great Depression).

The stimulus always causes more damage than it solves, but the RBA is an inflation machine, and when all you have is a hammer, everything looks like a nail....

 

I think we are going to interest rates rise earlier than predicted…… but I could be wrong

I also never expected ongoing lockdowns which may impact on market sentiment

 

Regarding interest rates going up soon ... I wouldn't count on it.

 

why? Job numbers are dropping

 

Three reasons:

1) The Fed came out last week and said that they weren't thinking about it. If Australia ignores this and raises rates, it would put too much upward pressure on the AUD, and the RBA will want to keep a lid on this. If the reserve currency doesn't increase rates, we won't be able to either.

2) The longer interest rates are suppressed, the harder it will be to increase them. The debt load will be too big. And it will not be to protect you and me, but rather to ease the pressure on the federal budget.

3) They want inflation. This is what this is all about. Inflation is an alternative to an outright default for overly indebted nations. Governments have two options when they get into two much debt: 1) default (definitely not desirable); and 2) the debt gets inflated away via currency debasement. We are doing option number 2. So while central banks will tell us they are managing inflation, they are really fueling it.

Interest rates being this low is really the cause of all of our problems not the solution, but we are too dug in to reverse course now. One thing the last 40 years has taught us, is that if the central bank has the opportunity to make the wrong decision or draw the wrong conclusion, you can bet they will do it. The right thing is to raise rates, so my guess is that they will do the opposite.

 

They use our money to pay for a debt created by them. Clever... Then claim they have solved the problem and deserve another term in Gov.

 

Well, they are banking on the one insightful thing that Keynes ever said - that not one man in a million will even notice the inflation, let alone realise that the people we want to solve the problem are the ones who created the problem in the first place.

 

Double edged sword with a little “damned if you do, dammed if you don’t”

if the government didn’t do a mass printing, they don’t really have much other recourse for improving sentiment.

if the government prints like it has, it smoothens the landing and keeps spending going. But inflation isn’t kicking in because it’s all going into assets.

the only logical solution I can see is an asset tax. Example 1% of net assets per annum. A threshold that is tax free can be added based on family size. This will prevent most average people getting affected. To prevent abuse, the tax can be charged indiscriminately to all entities, and ONLY individuals can claim back a credit at tax return time. This will prevent people using shell/bucket companies as all entities will indiscriminately pay the full rate without a threshold, before claiming the threshold back as individuals.

Tho us, in the minority of people who invest, will be affected. It will still be fair because whilst we are paying 1% of net assets over the threshold, we will still be enjoying significant capital growth from all the printing! What’s 1% of assets taxed if you’re enjoying 20% annual growth rates!

it also puts significant pressure on yields, as these ultra low 2% yields will look significantly less attractive.

Countries like the Netherlands have similar taxes in place.

Instead , there’s talk that the government will recoup a big chunk of these costs from GST.. that makes no sense, and will put downwards pressure on inflation. As higher end costs for consumers means less incentive to buy, and less marginal propensity to consume.

anyway, everything Aus does will pale in comparison to the US. That’s the country that really needs to get a little more aggressive with its tax structures if it wants to inflate debt away.

The most logical way to increasing CPI inflation is always moving money from the asset holders (more tax on those people) and towards the consumers (less taxes on those people).

that’s the 101 of how inflation happens. There’s a lot of fluff to overcomplicate it, but it really is as simple as encouraging spending on a macro basis

 

interesting view on finance by Steve Bannon in the first 30 mins