Will these unprecedented stimuli support a much quicker economic recovery?

I sometimes wonder if all the stimulus has wound everything up like a rubber band?

The moment there is a vaccine or cure....ping!

 

You think we'd be staying home with no deaths and hospitalisations? What grabs you about Italy? The 101,739 cases or 11,591 deaths?

You see this heading?

Trump says keeping US Covid-19 deaths to 100,000 would be a ‘very good job’

It's not about the DOW, its about deaths, which are a proxy for the economic damage.

 

When I look at this globally I don't see a fast recovery any time soon. I would want decent answers to the following...

1. When can I have confidence that visitors from ANY country are not carriers of the virus.
1a. We have a growing number of foreign students arriving from Nepal, India, Bangladesh etc. When it comes to developing nations or nations which struggle with large amounts of poverty, how do you have confidence that these countries are in control of public health?
2. China has recovered quickly to get back online but now suffers from the rest of the world being shut down. No one is ordering products from them. So far it looks like a vicious cycle of slowdowns. So how does this quickly all speed up again across the globe at the same time?
3. The huge increase in unemployment that we have seen here is mirrored across many nations. We know that there will be lots of people and businesses that fall through the bureaucratic gaps and end up going to the wall. How long will it take for the global economy and employment to come back to 2019 numbers?

These are my thoughts as I consider how much to offer on a potential PPOR this week... in addition to the details about the house itself.

 

I'm looking at this from a totally different angle.

The marketing machine has been spending on welfare & business support initiatives - moved pretty quickly once they knew it was more than knee deep and required a plumber.

What is so fundamentally different this time round (possibly way too early in the cycle) there has been no mention of job creation schemes sad have been previously rolled out during previous recessions. I can't see the need at present but is this set aside for round 5 or 6? (maybe I'm thinking too left).

 

Not at all. My question was more a follow up to this statement you made:

 

It's a good thing then that we value human life more than money. Don't we?

 

Interesting you wrote this and a great point.

In the UK during the 2008-2010 recession there was no QE or large stimulus injections, rather, they allowed the credit crunch to stop people’s ridiculous spending and appetite for debt and it humbled the UK Banks (who were bailed out by the British Tax Payers).

They focused on initiatives, two memorable ones:

1. Reduction in VAT (the UK’s GST) which was 25%, this was reduced to 15% to encourage spending. This did nothing.

2. Then it dawned on them to digest economic statistics and pinpoint the cogs of the economic machine and they rolled out First Time House Buyer Schemes to get the construction industry going. You only needed 5% deposit for a house, the Government guaranteed the remaining 5% and banks were told to lend. Hey presto, the wheels were in motion!

What I’m seeing here is the Governments seem convinced that this is a momentary downturn hence their efforts are channelled towards ensuing businesses are geared up to go from 0-100 as soon as they say - “Vaccine” or “All clear”.

 

No worries.

I believe nothing from the world's most populace country about their figures. My fear is there is a recurrence of this and it is nastier than outset. Fortunately the US administration decided, after all, it was not wise to re-open biz activity before Easter as was their initial stance Be well everyone

 

Didn't they also make a lot of changes for property investors(Buy to Let), big increases in stamp duty for anyone buying a second home, foreign investors etc and lots of changes regarding limited deductions on interest against rental income.
I think even Joe Hockey or Scott Morrison may have gone over there to see what they were doing about housing affordability, but didn't really like what they saw.

 

Yes they did because investors were finding loopholes to mop up cheap properties utilising the grants and schemes. These changes came later in the piece (a year or so into the recession). The initiatives were a kickstart scheme for young people...it wasn’t until a couple of years later that people found there was a catch...

You had to start paying back the Government’s ‘gifted’ 5% guarantee, which was added to the mortgage at a higher interest rate.

Secondly, if you sold and made a Capital Gain 25-50% of the gain goes to the UK Government.

 

I'm not convinced. We saw this happen in 2008 when America and Europe imploded, and orders fell off. Ironically, China actually boomed in 2009-11 (that's partly why Syd/Melb properties then boomed). I've said in another thread, now's probably the time to long RMB and CSI300.

At the end of the day, the strength of your currency and hence your country's collective wealth, is broadly related to the productivity of your country. If they're up running, their currency is going to be worth a lot more than a bunch of paper being printed and handed to people sitting at home, while the productivity has fallen off like a cliff. All that happens in the latter scenario is you have more paper (because there's more money being handed out) chasing fewer goods (because no one's working).

 

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Opportunities will present. Better to have a 24 month time frame. Property is lumpier and non-liquid compared to stocks.

 

https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-scheme-everything-you-need-to-know

High-level synopsis of the scheme there.

Plenty of young couples who thought they were getting ahead and getting on the ladder who are now 5 steps back than where they’d have been if they’d saved for another year.

 

I'm not sure how you draw that inference.

We're in a property economics thread. As a result, I am talking about the impact on the economy as a result of the virus and the fiscal policies. In the same way when I'm in the shares section, I don't talk about property or talk about Allah or aliens.

But hey, nice try with the cheap shot

 

I think the mentality and confidence will be totally wrong, Business's will still be in self preservation/survival mode.

I think of the money more as support, than stimulus.

 

Yes the combined stimulus's from Aussie government, RBA, banks & regulators will have a massive positive impact on the property market. Its impossible to measure the case of 'no intervention', its something we can't see, but IMO it would have been something like this:

No intervention:
In the complete absence of stimulus, we would have seen the greatest housing crash in Sydney/Melbourne/Australia. Like bigger than anything most of us would have ever seen in our lifetime. A complete freefall. Unemployment would reach 20-30% as large swathes of economy is basically shut down. 30%+ of owner occupier mortgage holders would stop making repayments, give the keys back and declare bankruptcy. A greater proportion of investors would do the same. Banks would go under and our financial system would relatively quickly collapse.

Thankfully, government intervention is a massive part of a basically every economy in the world.

Every government is intervening with some form of economic stimulus in some shape or form. Australia, thankfully, are doing this extremely well so far.

That doesnt mean its going to be pretty...but it does mean outright long term economic disaster will be averted (whatever it takes).

 

I

I think the biggest losers from all this will be the countries that overall have poor health services.
China has a two month start over many countries, coming out of the corona virus, and in Australia we will probably see severe restrictions right through till September or October.
The fact that the virus was probably spreading through the U.S in late February unchecked speaks for itself, and millions of low class U.S citizens have very poor healthcare and will probably completely overwhelm their health system , not helped by poor decision making at the very top.

 

I for one am certainly hoping that the measures the government are putting into place allow the nation to get back on its feet. Time frame.... anybody's guess....

 

I have a more optimistic take, I think once we start to build momentum out of the other side asset prices will re-inflate pretty quickly, what's the alternative? Cash which is being devalued through Global money printing? Term deposits or Bonds with 0.5% yields?

You can already see the share market trying to turn positive, it will be volatile for a while yet but there is clearly some appetite for bargain hunting. Super low rates and ultra loose monetary policy will do what it always has - inflate asset prices.

 

Panic and forced selling due to margin calls after what was an insane overvaluation. Apple has retraced all the way to what it was in November.

Consensus estimate still have Apple growing revenues this calendar year and both Facebook and Google growing revenue at mid teens rates this year. Most investors still think these names are bullet proof but they're ether selling advertising (FB and Google) or expensive discretionary items (Apple). They get crushed in recessions and we're likely to see big revenue drops for all 3.