ctindale"The only thing that would work is fiscal stimulus,...

ctindale

"The only thing that would work is fiscal stimulus, fiscal stimulus is where the government borrows the money and spends it on capital works."

I thought this is what Japan has been doing since its massive bubble burst around 1991, and I think China is doing this now and plans to do a lot more.

This has not really worked in Japan because they just keep trying to stimulate their way using borrowed money, and over time you get massive public sector misallocation and huge govt debt burden. It might however, work a bit for the US because it needs to rebuilt/repair a lot of its social infrastructure.

I wonder how good the Rudd govt's pink bats and school hall/whatever program was for the economy and who really benefitted. We ran a deficit for no gain and borrowed the money from overseas, I suppose.

If govt stimulus requires a high level of added imports then much of the the stimulus benefits will go overseas.

The basic issue is that credit supply needs to be for productive uses and not consumption, which is what our credit system is increasingly designed for. Having local banks compete with foreign banks simply encourages them into wilder lending practices to keep their market shares. Overseas banks do not care what they do, they are thinly capitalised and it is the local economy that will suffer if they go under because of their loose approaches to lending.

It is time to undo much of 1980s Hawkeating's banking deregulation. Foerign borrowing by our banks should not be for housing (which is a long term consumption item), it just stimulates the housing bubble (together with foreign investment in our property sector).

The only solution is inflation, which would kill bond holders over time, and banking and foreign investment re-regulation. Deflation is an alternative solution, but it will also involve massive pain for much of the community.

I have a feeling our goldies will stink today.

loki







It is bit like the does keep doing it without