Australia's Great Depression

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" height=35 BGCOLOR="#000099" TEXT="#F7F7FF"> <div> <B>Australia's Great Depression</B></div> <div> <A HREF="id61.htm" TARGET="_top" TITLE="Sydney Property Crash">Sydney Property Crash</A>   |   <B>Australia's Great Depression</B>   |   <A HREF="id99.htm" TARGET="_top" TITLE="Australian Property Crash">Australian Property Crash</A></div> <div> </div> </td> </tr><tr> <td valign="top" height=445 BGCOLOR="#FFFFFF" TEXT="#080000"> <bR> <div> Articles:</div> <bR> <div>  <A NAME="hey_big_spenders_it_s_time_to_worry"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> <div> <B>Hey, big spenders, it's time to worry about all that foreign debt </B></div> <bR> <div> Ian Verrender, smh.com.au, May 14, 2011: </div> <bR> <div> Tick, tick, tick, tick, tick. The sound of a time bomb, or Australia racking up a little more foreign debt? This week, after Wayne Swan delivered the budget, the thorny subject of our national debt hit the headlines.</div> <bR> <div> The Opposition Leader, Tony Abbott, and his finance man, Joe Hockey, jumped all over it. And with good reason. It is an easy mark for an opposition attack, certain to stir unrest and indignation within the electorate. Unfortunately, they are picking on the wrong target.</div> <bR> <div> <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>There is no doubt Australia is one of the most heavily indebted countries</B></FONT>.<FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B> A list compiled by the American Central Intelligence Agency puts us at No. 14 on the foreign debt scale with about $1.2 trillion owing to offshore lenders</B></FONT>.</div> <bR> <div> <FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B>When you consider our relatively small population, and our strong but comparatively tiny economy, that means we are punching well above our weight in the spendthrift stakes</B></FONT>. In fact, <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>total foreign debt easily outstrips national income</B></FONT>.<FONT SIZE="2" COLOR="#FF6000" FACE="Verdana" ><B> The CIA reckons we owe the rest of the world 132 per cent of our annual gross domestic product</B></FONT>.</div> <bR> <div> <B>That's not too far behind Greece which, at 165 per cent, finally appears to have tipped the balance and is heading towards bankruptcy </B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >(more politely expressed these days as a debt refinancing).</FONT></div> <bR> <div> But hang on, I hear you say. Didn't the Treasurer boast the other night that we are one of the least indebted nations in the developed world?</div> <bR> <div> Indeed he did. Australia's net foreign debt would peak at just 7.2 per cent of GDP in the coming financial year, he claimed.</div> <bR> <div> That's a long way shy of the figure calculated by the CIA, and far too big a gap to be explained by rounding or the rubbery calculations involved between net and gross debt. So who is telling the truth?</div> <bR> <div> The simple explanation to this conundrum is that the Treasurer was only talking about government debt, the loot he's responsible for borrowing. At about $120 billion, it's certainly a lot bigger than the $38 billion debt in the first year of the Rudd government. But despite the theatrics from Tony and Joe, government debt is negligible compared to the size of our economy and barely makes an impression when calculating who owes what to the rest of the world.</div> <bR> <div> <B>The real culprits in the foreign debt splurge are you and me</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> <B>Between us, with our mortgages, the renovations, our investment properties, our margin loans, the new car, the credit cards and that interest-free loan on the new fridge, we account for the vast bulk of that $1.2 trillion foreign debt</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> <B>Big companies are in for a hefty slice as well, but nowhere near as much as ordinary folk like us</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> Again, I hear you scratching your heads. How could that possibly be the case? Haven't we all been complaining about the dominance of the big four Australian banks, and how they have a stranglehold on the market? <FONT SIZE="2" COLOR="#FF6000" FACE="Verdana" ><B>Who on earth is borrowing all this money offshore?</B></FONT></div> <bR> <div> I'll tell you who. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>The Commonwealth Bank of Australia, Westpac Banking Corporation, ANZ Banking Group and National Australia Bank</B></FONT>. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>For years now, they've been running around the world, raising vast amounts of cash, and then bringing it back home to lend to us</B></FONT>.</div> <bR> <div> <FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B>Depending on the bank, up to a half the money they lend us comes from offshore markets</B></FONT>.<FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B> The other banks were all into it as well before they were rudely interrupted by the financial crisis three years ago</B></FONT>.</div> <bR> <div> <B>Ever since financial deregulation, which began here in the 1980s, the impediments to capital flows between countries have been chipped away</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> <B>Before that, our banks essentially only lent out money they gathered from deposits or from local investors</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> Foreign investors and financiers played a role in big rural, resource and industrial projects but when it came to household lending, Australia was a closed shop.</div> <bR> <div> Deregulation has delivered wondrous benefits to the Australian economy and all who sail with her. Living standards have risen, jobs have been created and we have become a far more open and sophisticated society.</div> <bR> <div> But I'm fast warming to the idea that Newton (Sir Isaac, not Matthew or his old man, Bert) was as much an economist as he was a physicist.</div> <bR> <div> Newton's third law states: for every action, there is an equal and opposite reaction.</div> <bR> <div> You see it all the time in finance and economics. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>What seems a terrific idea at the time often has unforeseen and unintended consequences years down the track</B></FONT>.<FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B> Nowhere is that more apparent than in the Australian housing market</B></FONT>.</div> <bR> <div> <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>Ridding the nation of those regulations about foreign money inflows delivered bucket loads of cheap and easy finance to Australian households</B></FONT>. <FONT SIZE="2" COLOR="#FF6000" FACE="Verdana" ><B>Mostly, we invested it in bricks and mortar</B></FONT>.</div> <bR> <div> <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>And because we had more money to splash around for housing stock that was growing at a much slower pace, real estate prices rose</B></FONT>. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>From the mid-1980s, residential housing maintained a furious pace, delivering spectacular tax free capital gains to homeowners</B></FONT>.</div> <bR> <div> It now has reached the point where most community leaders complain our housing is ''unaffordable''. <FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" >The fact is, real estate was always unaffordable</FONT>. Prices now may be the impediment.<FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B> Before deregulation, the bank simply wouldn't lend you the money which was why, back in the good old days, prices were so low</B></FONT>.</div> <bR> <div> <B>Incredibly, the biggest beneficiaries of this credit-fuelled real estate boom have been the very organisations doling out the credit</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> <B>Rising house prices meant bigger mortgages</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >. The expanding mortgages meant larger bank profits. It has been a virtuous circle for our banks, the financial equivalent of a perpetual motion machine.</FONT></div> <bR> <div> That is why <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>our big four banks - which among them hold more than 85 per cent of all Australian residential mortgages - are raking in record profits</B></FONT>. Commonwealth Bank, once an arm of the public service, is on track to post a mammoth $6.7 billion profit this financial year. <FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B>And as prices have risen and mortgages expanded, the funding shortfall has come from debt raised offshore</B></FONT>.</div> <bR> <div> <B>No matter which way you measure it, Australian real estate is among the world's most expensive although prices have eased in recent months</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >. Unlike America, Europe and Japan, we haven't experienced a catastrophic bursting of the property bubble, if indeed it is a bubble.</FONT></div> <bR> <div> Despite the predictions of the doomsayers, there are no indications of an imminent property slump. We would need to see a huge rise in unemployment for that to occur which seems unlikely in the short to medium term given all the forecasts about the resources boom. Still, there's another fundamental law of physics that applies equally to finance. It is called gravity. <FONT SIZE="2" COLOR="#FF6000" FACE="Verdana" ><B>Nothing goes up forever</B></FONT>. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>And perhaps we should think sensibly about all that foreign debt</B></FONT>.</div> <bR> <div>  <A NAME="australia_s_version_of_the_us_subprime_crisis"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> <div> <B>The future Australian version of the US sub-prime housing crisis</B></div> <bR> <div> "Australia faces its own version of the US sub-prime housing crisis, with young homeowners risking bankruptcy thanks to the PM's economic stimulus package.</div> <bR> <div> "That's the grim warning from the economic expert who first called the debt crisis that is driving the global financial meltdown. Dubbing the looming crisis "Sub-Prime Lite'', Professor Steve Keen said Australia was making the same mistakes as the US.</div> <bR> <div> "Prof Keen said that in trying to avoid an economic crisis caused by too much borrowing, Australia was in effect encouraging the poorest in the community to take on even more debt.</div> <bR> <div> ""Yet these low-paid first-homebuyers are the people who are most vulnerable to the economic downturn,'' he said.</div> <bR> <div> "The top end of the nation's housing market has been suffering for some time. Meanwhile, the first-home buyer end of the market has been booming.</div> <bR> <div> "But economists fear this flurry of activity at the lower end has inflated prices to unsustainable levels.</div> <bR> <div> "The average Sydney property already costs nine times the average annual household income, yet Britain and the US reached a peak of only seven times average income before their markets crashed.</div> <bR> <div> "According to Professor Keen, the First Home Owner Grant has cost the Government about $200 million, but has inflated property prices by close to $3 billion.</div> <bR> <div> ""This is all illusionary wealth that could disappear very quickly,'' he said.</div> <bR> <div> ""The additional $2.8 billion or so has come from increased mortgage debt taken on by those most vulnerable to a serious economic downturn at a time when we can see very clearly that the global recession is coming our way.''</div> <bR> <div> "The Government may well extend the First Home Owner Grant beyond its planned end-date of June 30, which Prof Keen says will end up pumping the market to even higher levels.</div> <bR> <div> "The University of Western Sydney academic said he had sold his Sydney house because he feared a property crash, but his gloomy view on the market has been backed by other experts.</div> <bR> <div> "Gerard Minack, chief economist at Morgan Stanley, said property prices were likely to fall by 20 per cent in some cities.</div> <bR> <div> ""People paid Hamptons prices for properties up there but it is not the Hamptons,'' he said.</div> <bR> <div> ""Traditionally what has hurt people has not been rising (interest) rates but rising unemployment. I don't care what rate you're paying, if you have a mortgage five times your income and you lose your job, you're toast.''</div> <bR> <div> "Mr Minack said while he understood the motivation behind the grants, encouraging marginal buyers to enter the market at this stage of the cycle (just ahead of a sharp rise in unemployment and with interest rates so low), Australia risked "creating a sub-prime underbelly in our own housing market''.</div> <bR> <div> "With unemployment at just over five per cent, many economists are forecasting it will peak at eight or nine per cent in 2010, leading to a "bloodbath'' in the property market as thousands of mortgagors default on their loans.</div> <bR> <div> [As usual "many economist" were wrong in their timing: "During the recession we supposedly didn't have, the turnaround in the budget balance, from a surplus of $19.7 billion in 2007-08 to a peak deficit of $54.8 billion (4.3 per cent of GDP) in 2009-10, represented the budget being highly stimulatory, helping to prop up the private sector and minimise the downturn in the economy" (Ross Gittins, <I>Lousy budget? Don't be fooled by harsh critics</I>, smh.com.au, May 13, 2011). But "a bloodbath" will occur in the not to distant future].</div> <bR> <div> "Most buyers were also taking out low, variable-rate mortgages, which left them exposed to rapidly rising rates when the economy began to recover and this would also spell trouble for many buyers.</div> <bR> <div> "AMP Capital chief economist Shane Oliver said the tendency for buyers to take out low, variable-rate mortgages would spell trouble for many buyers when interest rates rose" (Glenn Milne and Nick Gardner, <I>First-homebuyers at risk thanks to stimulus package</I>, news.com.au, March 22, 2009).</div> <bR> <div> "THE NSW State Government has been accused of inviting a house-price crash with its "second-homeowner grant" announced in last week's budget.</div> <bR> <div> "Economists say the move to halve stamp duty on newly built second homes or investment properties - saving up to $11,000 - will encourage people into the market at the worst possible time.</div> <bR> <div> ""It's a terrible idea to encourage people to over-extend themselves on properties they can barely afford, because unemployment is going to rise and that means prices will fall," said Steve Keen, professor of economics at the University of Western Sydney.</div> <bR> <div> ""At the same time, you've got interest rates near the bottom of the cycle and if the economy starts improving, rates will go up very quickly. So buyers are in a no-win situation: falling prices or rising rates - probably both."</div> <bR> <div> "Morgan Stanley chief economist Gerard Minack said the added stimulus would prove useless.</div> <bR> <div> ""All the evidence says that artificially boosting demand is ultimately futile," he said.</div> <bR> <div> ""A lot of the stimulus payments simply end up in higher house prices.</div> <bR> <div> ""In areas where there are lots of first-time buyers, we're already seeing prices rise by more than the First Home Owner Grant.</div> <bR> <div> ""So you'd be better off waiting for the stimulus to end, at which point prices will fall back again.</div> <bR> <div> ""It's basic economics. If you push up demand by giving people cash handouts or reducing costs, prices will rise. But when you stop that assistance, they'll fall."</div> <bR> <div> "The NSW Government also announced that the $3000 it adds to the First Home Owner Grant of $21,000 would be available for a further six months, taking the total grant to $24,000 for buyers of a new-build property.</div> <bR> <div> "Economists also say it is debatable whether people who can afford to buy only with government assistance should be buying at all.</div> <bR> <div> "If you can't afford to buy without government help, you're clearly stretching yourself," said Brendan Darcy of property research company Hometrack.</div> <bR> <div> ""And to stretch with interest rates at historic lows is a recipe for disaster. What about when rates rise?"</div> <bR> <div> "However, the Government's move was welcomed by AMP Capital's chief economist Shane Oliver because it was targeting new properties, so should help the construction industry.</div> <bR> <div> ""It's better than the usual handouts that just apply to everybody," he said.</div> <bR> <div> ""But there's always the chance that developers will simply up their prices and effectively pocket the stamp-duty savings in the form of higher prices."</div> <bR> <div> "All experts agree that Sydney's house prices are unsustainably high - unless unemployment and interest rates do not rise.</div> <bR> <div> ""Given the likely deterioration in the economy, I think unemployment is going to get worse from here and, of course, when the economy recovers, probably next year, we'll see rates go up too," Mr Oliver said.</div> <bR> <div> "Estimates vary about the size of the property price falls that Sydney faces, but they range from Mr Oliver's 10 per cent to nearer 40 per cent from Mr Keen" (Sunday Telegraph, <I>Price crash risk from home deal,</I> news.com.au, June 21, 2009).</div> <bR> <div> <B>Update:</B></div> <bR> <div> * Elizabeth Knight, <B>Vintage housing bubble may give us trouble</B>, smh.com.au, June 1, 2011:</div> <bR> <div> The number of loans in arrears - particularly those 90 days past due - is now at the highest it has been in 15 years.</div> <bR> <div> <B>What is particularly interesting is that this more troubled crop of loans (or vintage, as it's called in the industry) was written in 2008 and 2009 - and largely coincided with the government's stimulus package and the various incentives given by way of the first home owners' grant and stamp duty concessions</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> It was also a period of strong growth in new mortgages. People were feeling confident; were spending on housing and retail. From mid-2008 to April 2009, the Reserve Bank cash rate had fallen from 7.25 per cent to 3 per cent.</div> <bR> <div> Buyers were scrambling to get into the property market to catch these cheap interest rates and the home owners' grant. And as a result of this burst in mortgage growth, house prices were also rising. It was a time when the growth in the cost of essential services was lower than the growth in income. No wonder we were all feeling prosperous.</div> <bR> <div> But by last year the party was over. Interest rates were on the rise again, and in particular those who had borrowed in the preceding two years were facing higher repayments, plus rising fuel and utility costs.</div> <bR> <div> Today the income growth is lower than the rise in the cost of essential services. So it's no surprise that we are feeling the falling ''income effect''.</div> <bR> <div> <B>While the those that took up the first home owners' grant are not falling behind in interest payments any more than the average, there is no escaping the conclusion that the burst in housing demand they created pushed the property market and contributed to the problem we are facing today</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> Analysis from the investment bank UBS estimates that of the combined loan books of the big Australian banks, 23 per cent were originated in 2009 and 17 per cent in 2008. Overall only a small portion of these are in arrears but more of this crop is vulnerable than earlier or later vintages.</div> <bR> <div>  <A NAME="the_kevin_rudd_james_scullin_and_gough"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> <div> <B>The Kevin Rudd, James Scullin and Gough Whitlam Rhyme</B></div> <bR> <div> The Australian Labor party defeated Conservative parties and came to power just as the American post-war booms were about to go bust - post-WW1, 1921-1929; post-WW2, 1949-1973 and post-Cold War, 1991-2007.</div> <bR> <div> James Scullin Labor PM, October 22, 1929 - January 6, 1932.</div> <bR> <div> Gough Whitlam Labor PM, December 5, 1972 - November 11, 1975.</div> <bR> <div> Kevin Rudd Labor PM, December 3, 2007 - June 24, 2010.</div> <bR> <div> Dow Jones Industrial Average peaks:</div> <bR> <div> September 3, 1929.</div> <bR> <div> January 11, 1973.</div> <bR> <div> October 9, 2007.</div> <bR> <div> The nominal high in the American blue-chip sharemarket, index the Dow Jones Industrial Average, peaked six weeks before the Labor took office in 1929;</div> <bR> <div> the Dow peaked five weeks after Labor took office in 1972; and</div> <bR> <div> the Dow peaked eight weeks before the Rudd Labor government took office in 2007.</div> <bR> <div> The Great Depression of the 1930s, the Great Stagflation of the 1970s, the Great Recession of the 2000s were the economic backgrounds behind Labor Prime Ministers, who came to power as the Dow Jones was peaking, were in office for just over 2 years, just under three years and two and a half years respectfully.</div> <bR> <div> Labor was defeated in the December 19, 1931 election.</div> <bR> <div> Labor was defeated in the December 10, 1975 election.</div> <bR> <div> "[The Gillard Labor was] <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>the first government since 1931 [that] was not returned with a majority of seats at the end of its inaugural term</B></FONT>" (Gerard Henderson, <I>Coalition can lay blame at its own door</I>, smh.com.au, August 31, 2010).</div> <bR> <div> While Labor has retained government (for how long?) there are some interesting 'rhymes' with the 1930s and 1970s in the election. But a couple of quotes to set the scene.</div> <bR> <div> "<FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>The All Ordinaries index [in 2008] also had its worst calendar year on record, plummeting 43%, compared to the 32% slump during the oil shock of 1974 and the 34% fall in 1930, during the Great Depression</B></FONT>" (AAP & Reuters, <I>Stocks post worst ever year</I>, @smh.com.au, December 31, 2008).</div> <bR> <div> "The Leading Index continues to point to a dramatic improvement in growth prospects," said Westpac senior economist Matthew Hassan...</div> <bR> <div> "<FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>This large swing is not only the fastest reversal since the economy bounced out of recession in the mid-1970s </B></FONT>but also puts the growth outlook back on a par with that seen in 2007 at the height of Australia's resources boom" (Chris Zappone, <I>Economy headed for 'boom-time' growth</I>, smh.com.au, February 17, 2010).</div> <bR> <div> When Rudd defeated John Howard the latter entered the record books, in a way that he would not be too proud of:</div> <bR> <div> "<FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>The declaration confirmed Mr Howard's position as only the second sitting prime minister to lose his seat at an election, after Stanley Bruce in 1929</B></FONT>" (AAP, <I>Howard congratulates McKew on win</I>, @news.com.au, December 12, 2007).</div> <bR> <div> James Scullin, who defeated Stanley Bruce, was defeated in the 1931 election by Joseph Lyons, who was</div> <bR> <div> "a Minister in the James Scullin government from 1929 until his resignation from the Labor Party in March 1931. He subsequently led the United Australia Party and was the tenth Prime Minister of Australia from January 1932 until his death" (Wiki).</div> <bR> <div> Kevin Rudd, who defeated John Howard, instead of being 'dismissed' by the Governor-General as occurred with Whiltam, was 'dismissed' by Gillard a minister in the Kevin Rudd government from 2007.</div> <bR> <div> Whitlam was dismissed on November 11, 1975 and was defeated in the election one month latter on December 10, 1975 by the caretaker Prime Minister Malcolm Fraser.</div> <bR> <div> After 'dismissing' Kevin Rudd, Gillard, the new Prime Minister, called an election that occurred just under two months after taking office and as noted above Labor became "the first government since 1931 [that] was not returned with a majority of seats at the end of its inaugural term". Gillard followed Fraser in that the Prime Ministers, between the 'dismissals' and the elections, retained office.</div> <bR> <div> Where to now?</div> <bR> <div> When Scullin left office in 1932 there was over a year left of the Great Depression, but once it was over the American economy was to expand for four years.</div> <bR> <div> When Whitlam left office in 1975 the American Recession of 1973-75 was eight months out of recession,  in an expansion that lasted just under five years.</div> <bR> <div> Rudd left office in 2010 in the same month as the American economy began its climb out of the Great Recession one year earlier, as we learnt today:</div> <bR> <div> "The worst U.S. recession since the Great Depression ended in June 2009, the National Bureau of Economic Research said today...</div> <bR> <div> "Marked by a collapse in housing and sub-prime mortgage lending that triggered a global meltdown in financial markets, the 18-month downturn trailed [the] Great Depression that lasted from 1929 to 1933, surpassing the 16-month contractions of 1973-75 and 1981-82...</div> <bR> <div> "The world's largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, the biggest slump since the 1930s, revised figures from the Commerce Department showed in July. Household spending dropped 1.2 percent in 2009, the biggest decline since 1942.</div> <bR> <div> "The previous contractions in the post-World War II era lasted 10 months on average" (Steve Matthews, <I>Worst US Recession Since 1930s Ended in June 2009</I>, bloomberg.com, September 20, 2010).</div> <bR> <div> The Prime Ministers, and parties, that won the 1931 and 1975 elections were still in power when the American Recessions of 1937-38, 1980 and 1981/82 respectively, occurred.</div> <bR> <div> Still looking for a new nominal high in the Dow in the cycle that began in 2009, interest rate increases to counter inflation leading to a Great Depression comparable and most probably worst that the Hoover recession of 1929-33, occurring during a Republican administration.</div> <bR> <div> Some other rhymes:</div> <bR> <div> * Sewell Chan, <B>Fed Leaders Show Division Over Deflation</B>, nytimes.com, July 14, 2010:</div> <bR> <div> <B>The central bank has already held interest rates lower for longer than at any time since the Great Depression, keeping the benchmark short-term interest rate near zero since December 2008</B><FONT SIZE="2" COLOR="#000000" FACE="Verdana" >.</FONT></div> <bR> <div> * Michael Duffy, <I>Judgment day for bikie brotherhood</I>, smh.com.au, July 5, 2010:</div> <bR> <div> <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>History suggests this law has the potential to greatly diminish these outlawed gangs</B></FONT>. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>The organised crime expert Bob Bottom has noted how a consorting law introduced in NSW in 1930 wiped out the razor gangs and the cocaine trade, which had been flourishing</B></FONT>. The question now is the extent to which the new law will be applied.</div> <bR> <div> * NewsCore, <B>Curfew imposed in Christchurch, New Zealand after major quake</B>, news.com.au, September 4, 2010:</div> <bR> <div> Scientists have described the earthquake as the most significant since the 1931 magnitude 7.8 Hawke's Bay earthquake, the <I>New Zealand Herald</I> reported.</div> <bR> <div> * Charles Waterstreet, <B>Combat fatigue</B>, smh.com.au, September 5, 2010:</div> <bR> <div> <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>The tragedy of this war came home during the week when US President Barack Obama announced Operation Iraqi Freedom was over and handed responsibility for security back to the people from whom we took it</B></FONT>. Iraqis will no longer suffer from a false sense of insecurity.<FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B> It was a melancholy reminder of president Richard Nixon's announcement on January 23, 1973, that Henry Kissinger and special adviser Le Duc Tho had just initialled an agreement ending war and restoring peace in Vietnam</B></FONT>. Within two years Saigon fell to the relentless peacemakers from Hanoi. Nixon had called it peace with honour. Thereafter the war would continue by proxy.</div> <bR> <div> <FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" >Lyndon Johnson had officially died the day before but in reality he began to die when he realised as president that the war was unwinnable and unrewarding but there was little he could do about it</FONT>. <FONT SIZE="2" COLOR="#005000" FACE="Verdana" ><B>There does seem to be a bit of deja vu</B></FONT>.</div> <bR> <div> * David Leonhardt, <B>For Blacks, Progress in Happiness</B>, nytimes.com, September 14, 2010:</div> <bR> <div> In 1975, per capita black income was 41 percent lower than per capita white income. Since then, the gap has shrunk only modestly, to 35 percent. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>The black unemployment rate today is nearly twice as high as the white rate, just as it was in 1975</B></FONT>. And by some measures - family structure, college graduation, incarceration - racial gaps have actually grown.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div>  <A HREF="id61.htm" TARGET="_top" TITLE="Sydney Property Crash">Previous Page</A>                       <A HREF="id89_m.htm" TITLE="Australias Great Depression">Top of Page</A>                       <A HREF="index.htm" TARGET="_top" TITLE="Future Watch">Home Page</A></div> <bR> </td> </tr></table></body>