Thank you bjaensch for raising some common misunderstood...

Thank you bjaensch for raising some common misunderstood believes of the current economic environment.

Here is my response to your points:

1. To compare today's scenario to the 1980's high interest rate period is pointless. Completely different. During the 80's high interest period of 17-18% there was also high inflation. High inflation ACTUALLY helps manage high debt levels. Effectively your debt is reduced in real dollar terms every year.

Also, there was high wage grow during that period. Yes, your interest payments on a mortgage would have increased BUT so would your income.

People continuously go on about how bad the high interest period of the 80's were for people with home mortgages. IS WASNT THAT BAD. Sure the high rates would have been hard to swallow but you have to look at a bigger picture. Include inflation, wage growth, loan to value ratios, income to house price ratio, 20% minimum deposits, no interest only loans ect.

Today's scenario is completely different. Raising interest rates with stagnant inflation and zero wage growth. And not to forget about unprecedented levels of leverage.

2. You just confirmed one of my major points. Liar loans!!!! this generation thinks its ok to mislead the industry on your expensives. And then for the banks to turn a blind eye.

Absolute madness!

3. If only the Australian banks could create CDO's here. Then they could pass their massive (soon to be) worthless mortgage books onto poor un-expecting wealth funds.

But they cant. So it has to all stay on the books. The potential losses will be huge.

4. Agree. Rising interest rates only makes the problem worse. More stressed mortgages and eventually higher defaults.

5. Current 90 day delinquency rate is 0.71% Watch that number VERY closely in 12-24 months. When the number hits around 5%. The writing will be on the wall



These are my opinions, not facts.