14 September 2007

The Myth Of The Perpetual Boom

In "The Age" today there was an article detailing how loan defaults have risen 30% in Australia over the last financial year. Read It.

That's not really what I wanted to concentrate on. There are literally hundreds of articles bringing to attention the signs of a world economy going over the falls. No need to regurgitate too much of that here.

The bit that caught my attention was this statement:
...And economists say consumers who haven't experienced a recession are upping their borrowing to levels more than double their income because they are confident the good economic times will continue.
This is something we bush economists of an Austrian bent have been commenting on for some time now. There are many folk that have either never experienced a recession, or who have forgotten that they can occur.

Only recently I was speaking to quite a successful small businessman who refused to concede even the remotest possibility of a recession... not just in the immediate future, but ever! LOL! Anyway, I changed the subject pretty smartly to conserve a friendship.

I notice even experienced economists who speak on Bubblevision seem to imply that recessions are just not on the cards anymore.

WTF?

I think the contrarian indicator is invokes waaaaaayyyyyy too early these days, (It's fashionable to go against the tide ). I often think it's a good idea to fade these "early" contrarians, but in these days where everybody knows about the contrarian indicator, and hence its inappropriate use, surely there must come a time to fade the faders who are fading the faders. lol.

In other words, in the quote above, is there a "genuine" contrarian signal? There sure are lots of bears about at the minute, but the great unwashed masses are still unrelentingly bullish.

3 comments:

The ASX Gorilla said...

Just before I left Aust I was offerend an audacious amount of money for a mortgage to buy a PPOR from one of the big four banks. That was when I realised things have gotten really out of hand!

ASX.G

Anonymous said...

Recession seems to be a word of choice. Depression scares people but might be more apt.

Wayne said...

G.

I haven't had a credit card for years and years (just a debit visa) Scarcely a month goes by where I wouldn't get at least 1 credit card offer.

When people flop open their wallets at the supermarkets, I am continuously stunned at the number of credit cards people have. I know several folks doing the credit card boogie, rolling and building debt from one card to the next.

Scary. I certainly wouldn't have the stomach for that sort of life.

Anonymous,

Yes. "Negative Growth" is even more palatable. But after it's over, it may well be remembered as a depression. We will certainly see.

Cheers guys