View From The Couch - 17/Sep/2015

The Crippling Global Debt

Walk-Off HBP had this little conversation he wanted to share. It's Satyajit Das talking about the problems of our global economy. The gist of it is pretty much in line with the prevailing observations about where we are in the debt cycle. There's a mention of Hyman Minsky in there as well, describing the various stage of debt financing and how the Australian housing market is definitely in the third phase out of three phases wherein it is no capable of paying off the loan principle or interest, and the only hope of making the money back is through capital gains of the underlying asset.

Satyajit Das' cheery interview leads us to understand that there is no real distinction between public and private sector debt, which in turn means our colossal private sector debt in Australia is ergo problem for the government and society at large. Not that it matter much today, but when Tony Abbott was going on about the debt, he really should have looked at the private sector debt instead of the government sector debt.

Even so, Das doesn't think there's much governments can really do to address this problem. After all, when looked at globally, since the peak of the GFC we've leveraged up 17% more global debt rather than pay any of it down. Nobody really deleverages, nobody really get through austerity and austerity in of itself does nothing to address the large mountain of debt. Das doesn't think debt jubilee is even possible without wholesale destruction of value.

Which is in many ways the crux of the problems. Nobody wants to give up the price tag on what they are sitting on. The people who carry on how there is no property bubble in Australia do so on the basis of trend lines and market relativism (so to speak) but completely ignore the absolute numbers and what they mean. They argue "It's in line with what things are worth" and totally ignore the fact that "worth" might be the most contestable notions - much more so than "I never had sex with that woman" or "I am not a crook". Thus, as Das points out, we're living in houses with price tags that have been 'financialised' and inflated - but we're happy to bask in the wealth effect which is the dtluionary thought that we got wealthier sitting in our houses doing nothing. Worse still, the inflated price represents how global capital tried to find returns and being unable to do so, landed in housing. As the money recedes when debts are called in, people's positions are exposed, and suddenly the price tags don't look so tenable any more.

Yet the world over there are people who borrowed money to buy things and when the debt gets called in early, are forced to cash out on the spot and lose money, or work very hard to stave off the debt collector. The post-GFC world has been marked by one effort after the other to secure these positions of 2007, trying to fix them in amber so people don't have give up their positions, their things, their assets that they got through borrowed money. The reason we kick the can down the road is essentially to preserve those people. And to that end the world has seen Quantitative Easing to facilitate that there is enough cashflow otherwise to make up for the debts that *can't* be called in, added with the monetary easing through low interest rates.

If that's not spooky, I don't know what is. We're doing all this "kicking-of-the-can-down-the-road" so Deutsche Bank doesn't blow up over Greek Bonds and derivative products based on Greek Bonds. Thus the Greeks have to wear austerity to save a German bank except of course in Iceland, they just let the banks fail. It probably worked out a lot better for Iceland to do so. The Greeks have no such choice. But Greece is actually what the future looks like for many parts of the 'Emerging Markets' world. Global debt will rob sovereignty from nations, communities, right down to individual people.

On Tony Abbott Being A Sore Loser

Look, he might be a sook. In the vernacular I grew up with, we call those, sore losers. Being a sook is what my office cat does on Fridays. Sore losers is what humans do, even when they're told not to do it. Kevin Rudd was a sore loser too, but hey, he came back like a champion. At least, my old tennis coach PB would mount those kinds of post-hoc argument: "That's what Champions do!" (Bless you PB wherever you are today.)

Julia Gllard's speech about being a woman wasn't everything and wasn't nothing, but something, was her only sore loser moment. Judging from 'The Killing Season' she does like to kid herself of a lot of things, but she doesn't seem to go sore all that often.

...but Tony Abbott? he's just.... argh...  For fuck's sake he faxed in his resignation to Sir Peter Cosgrove. Who the fuck does that in this day and age?  It says everything about the man who came to power promising ruin the NBN and 'fulfilled that sorry promise". To the end, a techno-loser, unfit to be PM in the 21st Century.

So I get it - he's a sook AND a sore loser. If you don't get it there's something wrong with you. But then this is a nation of sore winners, which is  a category I've never comes across outside Australia. Yes, we as a people can bask in the moments of great defeats and deep humiliation even though we won the war, so make of it what you will. Tony Abbott was in some limited ways, an exemplar of his nation.