(Reposted from IO Thread) Agreed E. It is a really precarious...

(Reposted from IO Thread)

Agreed E. It is a really precarious position we are in. Very messy actually.​

Monetary Policy is just about exhausted and retail sales are faring worse now than they did during GFC. Household debt is extremely high as you said. House prices have become a proxy for bonds. Mortgage rates decrease by 15% and you find house prices increase by the same %. As there is no real increase to the size of interest repayments, no pain is really felt. No deleveraging is occurring. SO what will happen to retail sales when deleveraging starts, should it ever happen. Also, I don't buy the whole housing shortage garbage. If there were one, then rental yields would be high as demand for rental properties would be high. However, they have trickled down to around the 2% mark, which is just atrocious. It shows that only excessive debt is driving the housing market. ​

With bank margins as tight as they have ever been, the only way they can grow their profits is by increasing the size of their book but then you are putting that book at high risk. House prices could up exponentially again this year with another 2 cuts which could cut interest repayments by 20% (mortgage rate drops are amplified when the cash rate is cut from an already low base) but then what is going to happen.​

Yes, let's hope the farmers and all those being affected by the horrible events recently are given plenty of flexibility. They don't deserve any more pain. ​

We have covered heaps of economic topics over the last couple of months and possible solutions. ​

All in all, the economic situation is very concerning. ​

I foresee further pain for some time yet unfortunately. The AUD will unlikely be travelling north for some time yet. ​