Australian Housing Market & Economy August 2024

Summary

In this episode of 'Nuggets News', hosts discuss the alarming global trend of censorship and the arrest of the Telegram founder in France, hinting at a shadow government controlling information. They delve into the social media's impact on freedom of speech, the challenges of diverse opinions, and the influence of government and big tech on public discourse. The conversation also touches on economic topics, including market fluctuations, the potential for US interest rate cuts, and the implications of China's economic slowdown on global markets, particularly for Australia.

Takeaways

• 🗣️ The discussion highlights concerns over freedom of speech and increasing censorship on social media platforms, with examples such as the arrest of the Telegram founder in France.
• 🌐 There's a growing awareness of a 'shadow government' influencing policies and narratives, with Mark Zuckerberg admitting to past censorship mistakes on Facebook.
• 🤔 The importance of diverse viewpoints for a healthy debate and the emergence of self-censorship in mainstream media due to fear of repercussions.
• 📉 The US markets experienced a significant drop and subsequent recovery, raising questions about the stability and future of market valuations.
• 📈 The equal weighted index is back at record highs, indicating a market broadening, but with concerns about overvaluation compared to historical price-earnings ratios.
• 💹 There's uncertainty about the Federal Reserve's next move, with implications that rate cuts might signal economic weakness rather than a simple return to neutral stance.
• 📊 Global debt has reached 315 trillion USD, with the US interest payments alone hitting 1 trillion USD annually, indicating a potential instability in the financial system.
• 🏛️ The Reserve Bank of Australia (RBA) is under pressure, with high household debt and conflicting economic signals, making it difficult to predict future interest rate movements.
• 🏠 The housing market in Australia shows signs of weakness with reduced auction clearance rates and an influx of properties on the market, affecting different regions differently.
• 📉 China's economic slowdown is impacting Australia significantly, particularly in the iron ore market, which could lead to a budget shortfall.
• 💼 Rising costs of living, including power bills and insurance, are putting pressure on households, with some individuals taking on second jobs to make ends meet.

Q & A

What is the main concern regarding freedom of speech and social media censorship discussed in the script?

The script discusses the growing concern over the attack on freedom of speech and censorship on social media platforms. It highlights the arrest of the Telegram founder in France and the increasing awareness of shadow powers influencing what can be openly discussed, which is seen as a threat to the diversity of views and opinions.

How does the script describe the current state of the US markets?

The script describes the US markets as having experienced a significant drop followed by a recovery close to all-time highs. It mentions the fear gauge (VIX) having a significant fluctuation and the market's reaction to various economic indicators and global events.

What does the script suggest about the Federal Reserve's policy direction?

The script suggests that the Federal Reserve is signaling a shift towards policy adjustment, with rate cuts expected. However, it also raises the question of whether these cuts are due to a neutral stance or because of underlying economic pressures such as potential recession.

What is the significance of the equal weighted index reaching all-time highs as mentioned in the script?

The script points out that the equal weighted index reaching all-time highs indicates a broadening of the market, suggesting that the market gains are not just concentrated in a few large tech stocks but are more evenly distributed across various stocks.

How does the script address the issue of global debt and its implications?

The script highlights the massive global debt of 315 trillion USD and the concern that the increasing interest payments, now reaching a trillion dollars annually for the US, are unsustainable. It suggests that this level of debt could lead to instability and is a significant factor that will influence economic strategies.

What is the script's perspective on the role of the US dollar in the global financial system?

The script discusses the debate over the role of the US dollar, questioning whether its preeminence is waning or if it will continue to be the dominant currency in global transactions. It also touches on the potential for dollarization and the impact of a strong or weak US dollar on global markets.

How does the script evaluate the current economic situation in China and its impact on other economies?

The script evaluates China's economic slowdown, particularly in the steel industry, and its ripple effects on other economies, especially Australia. It mentions the suspension of steel plant approvals in China due to weak demand and the subsequent impact on iron ore prices, which could create a significant budget shortfall for Australia.

What does the script suggest about the Australian housing market?

The script suggests that the Australian housing market is showing signs of weakness, with auction clearance rates dropping and more properties coming onto the market. It also discusses the high household debt-to-income ratio and the potential impact of sustained higher interest rates on the housing market.

How does the script view the role of immigration in the Australian housing market?

The script views immigration as a critical factor influencing the Australian housing market, suggesting that the significant population increase through immigration has contributed to housing price inflation. It contrasts this view with mainstream economists who, according to a survey mentioned in the script, largely do not see immigration as a key issue to address.

What is the script's commentary on the Reserve Bank of Australia's (RBA) actions and communication?

The script provides a critical view of the RBA's actions, suggesting that they have been slow to respond to economic changes and have not always made the correct decisions regarding interest rates. It also discusses the new Deputy Governor's speech, which cautions against false profits and the overconfidence of predictions, indicating a need for humility in economic forecasting.

Outlines

00:00

🌐 Global Censorship and Social Media Concerns

The conversation begins with a discussion on the alarming increase in censorship and the attack on freedom of speech across social media platforms. The speakers touch upon the arrest of the Telegram founder in France, hinting at a shadow government controlling narratives. They express concern over the suppression of diverse opinions and the difficulty in accessing unfiltered news. The conversation also includes the influence of social media on public opinion, with references to Mark Zuckerberg's regrets over Facebook's past censorship and the challenges faced by influencers and mainstream media in expressing unbiased views.

05:01

📉 Market Volatility and Economic Indicators

This segment delves into the recent fluctuations in the US markets, highlighting a significant drop followed by a recovery near all-time highs. The discussion includes the fear gauge, VIX, and its impact on investor sentiment. Economic indicators such as job data and the Japan carry trade's influence on market movements are analyzed. The speakers also consider the implications of interest rate cuts by global central banks, including the Reserve Bank of New Zealand and the Bank of England, and the potential for similar actions by the US Federal Reserve, alluding to possible market reactions to such policy changes.

10:01

🏛️ Political Influence on Economic Policies

The focus shifts to the influence of political decisions on economic policies, with a critique of governments controlling economic narratives. The conversation discusses the potential for increased market volatility due to uncertainties around the US elections and differing policy implications. The speakers also touch on geopolitical issues, such as tensions in Ukraine and the Middle East, and their potential impact on global markets. Additionally, the conversation includes the challenges faced by Europe regarding immigration and the UK's handling of the issue, emphasizing the complexity and uncertainty in current economic and political landscapes.

15:03

💵 US Dollar Dynamics and Global Debt

This part of the discussion centers on the US dollar's role in the global economy, questioning whether its preeminence is challenged or if it will continue to dominate. The conversation explores the implications of a strong or weakening dollar on global financial markets. Additionally, the speakers address the issue of global debt, which has reached 315 trillion USD, and the burden of interest payments on economies. They discuss the potential instability caused by high debt levels and the challenges it poses for future economic stability and growth.

20:05

📉 Decoding Market Trends and Economic Challenges

The speakers analyze market trends, noting the disconnect between central bank policies and the continued expansion of the debt market. They discuss the concept of quantitative tightening and its limited impact on curbing the growth of the money supply, as governments continue to issue bonds. The conversation also highlights the potential for market instability due to the current monetary system's structure, with a pyramid of debt and derivatives resting on a small base of tangible assets. The discussion concludes with a consideration of alternative financial systems, such as digital currencies, as potential responses to current economic challenges.

25:06

🏠 Housing Market Insights and Economic Impacts

This segment discusses the Australian housing market, focusing on the challenges faced by renters and the impact of high-rise developments on the property market. The speakers note the struggles of builders to complete and lease high-rise properties, despite incentives. They also highlight the broader economic impacts, such as the increase in people taking second jobs to cope with rising living costs and the ongoing inflationary pressures from factors like insurance costs. The conversation underscores the complexity of housing market dynamics and their interplay with economic conditions.

30:06

🌐 Economic Outlook and Policy Critique

The final part of the discussion revolves around the economic outlook, with a critique of mainstream economic perspectives. The speakers express skepticism about the effectiveness of current economic policies and the reluctance of economists to address critical issues like immigration's impact on housing markets. They also discuss the Reserve Bank of Australia's challenges in managing inflation and interest rates, highlighting the need for humility and scenario planning in economic forecasting. The conversation concludes with a call for a nuanced understanding of economic complexities and the importance of considering multiple scenarios in decision-making.

Keywords

💡Freedom of Speech

Freedom of speech refers to the right to express one's opinions without censorship or restraint. In the video, it is discussed as being under attack, with instances of censorship on social media highlighted as a concern. The script mentions the arrest of the Telegram founder and Mark Zuckerberg's comments on past censorship, emphasizing the importance of this freedom for debate and the surfacing of truth.

💡Censorship

Censorship is the suppression or prohibition of any parts of books, films, news, etc. that are considered politically unacceptable or offensive. The script discusses the rise of censorship on social media platforms and its impact on the diversity of views and opinions, suggesting that it is being used to control the narrative and stifle debate.

💡Shadow Government

The term 'shadow government' is used to describe a supposed group of powerful individuals or entities that operate behind the scenes, influencing government policies without being publicly accountable. In the script, it is suggested that such a power structure may be pulling the strings and affecting freedom of speech and information dissemination.

💡Social Media Influencer

A social media influencer is an individual who has the power to affect the purchasing decisions of others because of their authority, knowledge, position, or relationship with their audience. The script mentions the perspective of a social media influencer on the topic of censorship and the importance of diverse opinions in social media spaces.

💡Diversity of Views

Diversity of views refers to the range of different opinions and perspectives on a particular matter. The script argues for the necessity of such diversity for forming one's own opinions and for the health of democratic debate, which is being threatened by censorship and a lack of unfiltered news.

💡Mainstream Media

Mainstream media refers to the traditional mass media, such as newspapers, television, and radio, that are the dominant and widely accepted sources of news. The script points out that some individuals within the mainstream media self-censor and avoid certain stories due to potential repercussions, which curtails the diversity of views reaching the public.

💡Quantitative Tightening (QT)

Quantitative tightening is the process where central banks reduce the size of their balance sheets by selling off assets, typically after a period of quantitative easing. In the script, QT is discussed in the context of global debt and its potential impact on the economy, with central banks now reducing their balance sheets, which could affect market dynamics.

💡Global Debt

Global debt refers to the total amount of money owed by all countries, corporations, and individuals around the world. The script highlights the staggering figure of $315 trillion, which represents a significant portion of global GDP, and the challenges it poses for economic stability and growth.

💡Interest Payments

Interest payments are the funds that must be paid by borrowers to lenders, typically at a percentage of the principal amount borrowed. The script notes that U.S. interest payments have reached $1 trillion a year, which is a significant financial burden that could impact fiscal policies and economic stability.

💡Digital ID

A digital ID is a digital version of a legal identity, which can be used online to verify an individual's identity for various services. The script mentions Australia's plan to roll out a digital ID for social media, which raises concerns about privacy, freedom of speech, and the potential for increased government surveillance and control.

💡Economic Update

An economic update typically involves a review of current economic indicators, trends, and forecasts. The script provides an economic update discussing various factors such as market performance, interest rates, and global economic conditions, which are crucial for understanding the broader economic landscape and making informed decisions.

Highlights

Discussion on the increasing censorship and control over freedom of speech on social media platforms.

Telegram founder's arrest in France highlights the growing concern over powers behind the scenes controlling information.

Mark Zuckerberg's admission that Facebook shouldn't have censored certain topics that later turned out to be true.

The importance of freedom of speech for the emergence of truth through debate is being compromised.

Concerns about self-censorship in mainstream media and the influence of undisclosed payments on public opinion.

Robert F. Kennedy Jr.'s decision to form his own party to openly discuss controversial topics like the pandemic and vaccines.

The potential dangers of social media regulation, such as arrests for expressing government-disagreeable opinions.

Over a thousand people in the UK have been detained for association with riots, highlighting the crackdown on social media activities.

US markets' volatile performance with a significant drop followed by a recovery close to all-time highs.

Analysis of the fear gauge (VIX) and its implications for market sentiment.

Debate over the Federal Reserve's decision to cut interest rates amidst economic uncertainty.

Concerns about market valuations being potentially overdone and the impact of potential earnings revisions.

The impact of AI and technological advancements on market valuations and the economy.

The upcoming US election's potential to cause market volatility due to differing policies of the candidates.

Geopolitics, including tensions in Ukraine, the Middle East, and China, contributing to market uncertainty.

The European situation with riots, immigration policies, and their effects on the economy and society.

The US dollar's strength and its influence on global financial markets.

US interest payments reaching $1 trillion annually, indicating the scale of global debt and its sustainability.

Quantitative tightening by central banks and its impact on global debt and money supply.

The potential instability of the current financial system, with a focus on derivatives and unfunded liabilities.

The role of gold and other real assets as potential safe havens in times of financial instability.

China's economic struggles and its ripple effects on global markets, particularly impacting Australia.

The Reserve Bank of Australia's stance on interest rates and inflation amidst a complex economic landscape.

Australian household debt levels and their implications for economic stability and policy decisions.

The impact of China's economic slowdown on the Australian property market and the broader economy.

The disconnect between mainstream economists' views and the realities of housing affordability and supply-demand imbalance.

The challenges faced by renters due to rising costs of living and the lack of effective租 protection measures.

The uncertainty principle in economics and the need for a multi-scenario approach to navigate the complex economic environment.

Transcripts

hi guys thanks for tuning in to another

episode of nuggets news or our monthly

housing and economy update With Our

Friend Martin North how are you Martin

I'm extremely well thank you good to be

back for another month and boy what a

month it was yeah we're kind of joking

about how crazy the world had got last

month and we'll see what happens in the

following month but maybe we should

start on a few of those world news

points and I think um some of the things

that I'm finding interesting is just

this attack on freedom of speech that

we're seeing everywhere and censorship

on social media and we've seen it

firsthand I know I've got strikes in the

past for saying the wrong thing but just

in the past week we've seen the telegram

founder being arrested in France where

he' got a citizenship and I think more

and more people waking up to the fact

that a lot of these things that were

conspiratorial a number of years ago are

out in the open now that there are

powers that be behind the scenes that

are almost above government or a shadow

parallel government who are pulling the

strings um and so it's a bit of a worry

Mark Mark Zuckerberg Facebook's come out

and said as well that they shouldn't

have succumbed to the pressure that they

got back in the the co era and censoring

a lot of things that people were trying

to say that ended up being true a few

years later so this is the whole reason

we have freedom of speech to allow

debate and the truth to surface but what

are your thoughts on um on all this

stuff happening in the social media

World being being a social media

influencer yourself Mar well it's an

interesting question what is truth right

and if truth is is essentially what uh

you know the government wants you to

think then I have a problem with that to

my mind we should be having diversity of

views and opinions and we should be able

to make up our own minds about things

unfortunately uh that is getting tougher

when in fact there is a filtering going

on sometimes uh people self-censor for

example I know people in the mainstream

media you know for the in the ABC for

example who won't touch specific stories

because they know that if they do

they're going to get into trouble

another example would be that Senator

jarard renck recently announced that he

was actually going to found his own

party um and in fact I'm interviewing

him later in the week on this very fact

the reason is that the noise and opinion

around covid is now being fundamentally

questioned and yet in the mainstream and

in government circles they don't want to

talk about it so you've got to I think

understand that it is quite hard to get

unfiltered straightforward opinion

straightforward news and quite often we

need to ask about what filters are in

place and uh you know Twitter is

actually an interesting or X is an

interesting example where of course Elon

Musk is uh essentially saying well this

should be a you know an open Forum but

even there I'm not sure it's as open as

some people think so it's tough and

wherever you look governments are trying

to control the message um you know

formally through sping doctoring and

informally through their own use of of

social media um and there are a lot of

influencers of course and many of those

influences are actually being paid under

the table as well to say specific things

and uh not say other things you only

have to look at the US election where

you've got uh YouTubes and uh you know

other channels where people are

absolutely pushing one side or another

side but there's no actually good debate

about this versus that it's always this

is right and everybody else is wrong and

I have a problem with that so as a

philosopher I like to have multiple

views multiple opinions triangulate them

and then form my own views and

governments get in the way of that

sometimes yeah and I guess Al think to

touch on his RFK now running with with

Trump is a pretty big um I think it's

pretty significant because his views and

he said pretty openly even just the past

couple of days I want to look into

things like the pandemic um

vaccines uh Chemtrails these again

things that were full on conspiracies 10

or 20 years ago and RFK saying well at

least can we have a debate and talk

about these whether or not they're true

I just think it's really interesting

watching this and we have got to be so

careful because as you said in UK

they're already arresting people for

saying things that the government don't

agree with on social media and Australia

wants to roll out this digital ID for

social media I think it's pretty soon I

think isn't it September 1st comes into

effect and they're saying it might be

voluntary and blah blah blah because I I

see Australia is almost a test bed for

these orus nations where we had the

harshest lockdowns and the harshest

mandates and they're probably going to

be the harshest here on social media so

pretty worrying times in Australia if

they do roll this out we start seeing

people going to jail for even just

retweeting something or maybe liking a

Facebook post that they deem as you know

hateful or racist or anything so yeah no

it's a big deal so more than the

thousand people have been locked up in

the UK because of the uh association

with the uh riots now I think riots is a

bit overstating it in some cases other

not but just sharing social media posts

um and in fact very going after people

not just in the UK but around the world

who actually was part of that um res

sharing process that's a bit of a

concern again you know I'm not saying

that everything on social media is true

or right and there are some really nasty

things out there but as soon as we

actually say what the government needs

to decide what we can see then I have a

major problem yeah Okie do let's dive

into these slides of yours and starting

off with um us markets have been on a

tear

again well we had this heart attack

right so over the last month we had this

massive drop and we'll talk about what

caused it in a second but we're now back

up close to all-time highs and if you

look at the next Slide the fear gauge

the uh the vixs also had a massive

Hiccup and then came back down again now

two or three weeks ago when there was a

trough everyone was saying oh the

markets are going to crash uh the ett

econom is going to crash uh we had job

data so the next slide just gives you an

example of that so suddenly there was a

big revision to to us jobs d dat and of

course the other factor that was driving

it was the so-called Japan carry trade

which is the next slide just showing you

the significant movements in the um in

the Yen and how that played out and of

course a lot of people were borrowing in

Yen at pretty much no interest rates and

were actually investing elsewhere and

suddenly the Yen moved and that created

an issue so all of these things

basically hit the markets and everyone

was thinking oh it's going to be pretty

bad and there were people calling for 50

basis points emergency rate cuts from

the us and all of those weird things and

then of course some it settled down

meantime we had the uh Reserve Bank in

New Zealand cutting interest rates we

have the bank of England and the UK

cutting interest rates for the first

time so the the rate cycle is beginning

to turn and then of course this last

week we had pal on the next slide uh at

Jackson Hall basically coming out and

saying the time has come to adjust our

policy the direction of travel is clear

but the timing and pace of right Cuts

will depend on incoming data the

evolving Outlook and the balance of

risks and so now of course the markets

are saying whoopy the rate cuts are

coming the rate cuts are coming and uh

the markets are now saying at least one

maybe two maybe even three or more this

year um and more next year so that's the

story that's the back cloth and we're

now in the situation where the FED is

looking as though it's also going to cut

too now of course the real question is

why why are rates now being cut is it

just coming com back to a more neutral

stance or is it because the economies

particularly in the US are actually

under recessionary pressure and that's

really the unknown unknown so you've got

the Bulls and the Bears battling now

over you know is this good news because

it means that we can actually uh

basically go again on higher Market

rates or is it actually something more

serious in terms of job compression

unemployment rising and valuations

perhaps overdone so this is now going to

be the next thing to watch

yeah okay so even that equal weighted

index is um back at record highs yeah so

this is the other thing so the you know

if you look at the um high-tech sector

and particularly Nvidia Nvidia is about

7% of the total um Market at the moment

in terms of its move so are we're going

to have the Nvidia results coming out

later on today and uh if those results

are significantly below expectations we

could see a significant drop the reverse

is true but actually what's happened is

that the markets have broadened so in

fact what we're seeing now is the equal

weights index moving to alltime highs

which is quite interesting but it is

just noting worth noting the fact that

if you look at the the price earnings

ratio it's 21 times across the market at

the moment the long-term average is

15.7% and okay you can argue that some

of this is to do with AI and the tech

sector but you got to ask the question

is this overvalued and it really comes

to the question of well what's going to

happen to the economy um if the US

economy is going to continue to go ahead

quite strongly and some of the results

from the results season were pretty good

then that's fine but it does look as

though in the US some consumers are

finding it quite difficult some of the

reports particularly from some of the

retailers for example were much less

strong and here's the real Clincher if

you go to the next slide what you can

see there is that every time pretty much

the Federal Reserve has started to cut

markets have corrected the average

actually over over the sort of the last

five or six times is 23% down and in

some cases more some cases less so when

the FED pivots that is an indication

potentially of Market weakness and look

it could well be that we are going to

see um earnings easing back because if

we are seeing a bit of a recessionary

Trends unemployment Rising Etc ET in the

US that could actually mean lower

earnings if earnings are lower that

means that market valuations are way too

high and that means that market need

needs to handle that so that's one side

of the equation the other side of the

equation is different this time we got

AI um you know we're still in an

relatively tight interest rate um

environment and one of the big debates

of course is what our star is which is

what is the neutral rate you know what

is the rate at which interest rates

neither boost nor weaken growth and

nobody quite knows where that is so

we're feeling our way towards our star

it's probably above three rather than

below three which is what the FED thinks

at the moment but my warning is is

actually when the FED starts to cut and

they probably will in September expect

markets to fall yeah I I tend to think

it's going to be pretty choppy up until

we get a clearer result of who's going

to win the election even if it's just um

because whoever wins that is going to

change where you want to put your money

so much with their differing policies so

I think a lot you might see people just

taking a few more chips off the table

and raising cash levels depending on who

they think is going to get elected um I

guess that's my gut feel for the next

couple months yeah I think volatility is

absolutely in in the mix of the moment

and we're going to see people swinging

from one side of the boat to the other

side of the boat you know there's a

recession Iceberg over there panic panic

or no no no everything's fine it's all

sunny and we'll go the other way so it's

interesting there a lot of money um held

by investors out of the financial

markets at the moment and you in

shortterm funds whether you get 5% or or

what whatever because there's a level of

uncertainty among investors and I think

we're seeing that and the risks ahead if

you just go through them we've obviously

got September and October were generally

are weak months for the markets if you

look at where crashes have happened they

often happen in September and October

we've also got the US election and as

you say there are some significant

differences between the two parties I

would also make the point that in some

cases the differences are being overdone

so both sides of politics are sort of

thinking about tariffs particularly to

do with h with China by the way Canada

imposed um EV tariffs on on China very

recently as well um we've also got

geopolitics things like Ukraine the

Middle East China Taiwan all of those

things the bricks is um you know having

a bit of a go at the moment and there's

some meetings going on there to um

continue to propagate alternatives to

the US dollar so all of those things are

in the mix I don't think anybody can

call how this is going to shake out over

the next three to six months and so uh

expect volatility expect uncertainty and

um I think the only thing we can be

certain about is uncertainty yeah and

the only thing I'd probably add to that

list is uh Europe where we've seen um

you the riots and immigration we've seen

some countries start to take a tougher

stance or even stop immigration or even

look to reverse it maybe so this is

really becoming a hotly debated topic

that um raises the emotions of people

yeah well in the UK they've basically

said well what we're going to do is

we're not going to just uh Chuck people

out of the country who come in illegally

uh that's is what the previous

government was trying to do we're

actually going to have to handle them

and that means in some cases finding

them places to live so there's a real

uproar here now where effectively some

people are saying well hang on a moment

is it true that some of these uh

migrants who came in through um

nefarious means are now being offered

housing ahead of uh um people in the UK

it's it's a you know weird policy um we

have to deal with some of these

migration issues of course in Australia

we've also now got um uh the student

caps coming in so next year 270,000

rather than 500 and something thousand

this year and of course the universities

are calling poor there so wherever

you're look you've got all this noise

and uncertainty so it's uh I think it's

going to be a you know a bit of a weird

time yeah was there another US state um

was it California or somewhere I'm

thinking of that's um if for the

immigrants they can get home loans with

zero down and they're also giving them

um some sort of payments and

accommodation all these things that

they're giving to immigrants in that the

homeless um you know people on the

street drug addicts all these other

things that the money could be going to

and fixing looking after your own

population people saying well hold on

why are these people that have just come

here getting all these benefits and

you're not looking after the people that

are really battling locally so some of

these things don't make sense to me how

that policy can be effective or fair to

everyone no and I think um fair for

everyone is the interesting question

right it depends a little bit on your

perspective as to where fairness lies

but if you look at Ordinary People in

many countries um cost of living is

still Rising you know inflation may be

coming back slightly but it's still

extended compared with two or three

years ago income have not been growing

um to the same level so a lot of people

are under pressure cost of housing have

gone through the roof for all the

reasons we know about and so many people

feel that the political class are

completely disconnected from reality

when it comes to Ordinary People and

ordinary businesses and I think that's

probably the truth and so at at what

point do people say we've had enough of

this um or do we just um roll over again

and you know in some of the recent um

experiences in the UK was that people

were saying well no actually there are

issues here that we should be talking

about give you another example in the UK

they just announced a 10% rise in the

cost of energy over the October period

onwards and they've withdrawn a lot of

the energy support programs that were in

place previously so effectively a lot of

particularly older people are going to

find it very tough to pay their energy

bills through the next winter season and

this is another classic example of when

politicians say one thing before the

election and then after the election oh

it's all much worse than we thought and

we can't do what we said we're going to

do and we going to do other things and

made stala made a speech in fact uh just

yesterday saying it's going to get

really tough for the next two three four

years before we can actually get some of

these things under control so once again

what we are seeing is that polit

politicians say one thing before they're

elected and then say something else

afterwards and then claim everything's a

lot worse uh we're in a Nutty world we

are okay so US dollar has just been

range bound of late well it's

interesting because of course the US

Dollars come back it was quite strong

and now the question is what happens

next and there's a lot of debate and

it's all tied up with um are we going to

see dollarization you know has the role

of the dollar effectively gone forever

or um are we going to continue to see

the preeminence of the US dollar

remember a lot of the US Dollars live

not in the US but around the world euro

dollar and those sorts of things it's

almost an uncontrolled and very large

market and um just to be clear if we see

a significant move up in the dxy that

could lead to dollarization

if we continue to see the rate go the

other way it's more likely to continue

the preeminence of the dollar so in fact

where the dollar sits is actually very

important not just for the us but for

many other countries as well and also

those people who don't believe

necessarily that the US dollar is um a

firm currency that should be effectively

grasping the whole financial system

globally which it does pretty much

because the majority of transactions are

still in US dollars so this will be a

interesting a really interesting one to

watch

yeah okay so next up we've got us

interest payments hitting that magical

$1 trillion a year

mark well it it is just worth standing

back and looking at the slide on the

right the global debt

315

trillion dollars that's US Dollars 315

trillion it's gone up and keeps going up

and uh it's 333 per of gdps but yeah

with higher interest rates of course the

costs of that debt is actually huge and

you can see here that the1 trillion

dollar now that the US interest payments

have now reached that's horrible what

that means is that it's basically

sucking uh taxpayer money out to pay the

debt of course or more likely what

they're really doing is actually

mortgaging the future even more severely

and the point I've got is that with this

amount of debt in the system and with

this amount of interest payments now

being made we've got huge instability

here how much longer can it gone for

probably longer than people think but at

some point where there were some really

hard questions to be asked and in even

in the US now a few people are beginning

to question whether the path of Greater

debt makes any sense at all um they've

got some capacity to go even higher of

course some other countries less so but

this Global debt story and the interest

rate payment story is one that I think

will determine the strategy over the

next one to two years yeah all right

next up uh quantitative tightening

yeah so the point here is whilst the

global debt is going up it's now not

central banks driving it so if you look

at the bank of England the ECB uh Bank

of Japan they're all to a more or lesser

extent talking about or actually doing

quantitative tightening so they're

actually effectively reducing the size

of their balance sheet that means

getting rid of some of the bonds and

other assets that they held uh in some

cases they're holding to maturity uh in

some cases they're not they're actually

selling early of course problem there is

a lot of central banks have negative

balance sheets as a result of the big

Bond movements and that's a significant

factor there but if you go to the next

slide um if you look at the M2 that's

the sort of the money supply in the US

you can see that even with the uh fed

effectively doing QT money supply is way

out there and it's ticking up again and

that's because of course the treasury in

the US is still massively issuing more

bonds to fund very large programs in the

us and we're seeing other players around

the world so the debt bomb is still

expanding even if the central banks are

actually going into QT yeah so just to

yeah drive that point home that man's

talking about so if you think of this as

the total money supply um while the

central banks are talking about

unwinding it

and reversing what we've done in the

past blah blah blah I think it's

important to say that this is almost the

best they can do now is put things on

Paws and go sideways for a little bit

well they have all these other exotic

policies that no this isn't QA or this

bailout or we're going to guarantee the

bonds that are sitting on bank's balance

sheets at a loss all these things that

are trying to patch the holes of the

water spilling out before it we take off

on the next big debt binge but um as we

saw those numbers it's really getting to

the point now where people are saying

this is falling apart this is

unsustainable it's not something that's

10 or 20 years away now it's we need to

talk about it well you know how

sustainable is is the question and of

course it amazes me that uh you know

governments around the world seem quite

happy just to mortgage the future even

more and more but just be to be clear

future Generations are going to have to

pay one way or the other now if they go

on issuing more and more debt that means

that effectively more and more debt

needs to be serviced and that means that

there's there's less money available to

do other things like health care and

those things or if somebody says well

we're going to start paying down the

debt well you know that is a lot of debt

to try and pay down and just go to the

next slide it's it's worth understanding

this if you look at where the it's

called the money pyramid is you know the

claims on the monetary base so you've

got gold there that little tip which is

sort of you know at least linked to

something and then you got the paper

money above that and then you got the

government bonds and treasury bills

above that and then you got the

corporate Min and the other bonds and

the securitized debt and the listed

stocks and then you've got the

non-monetary Commodities and private

businesses and real estate which is a

massive but the biggest is actually

derivatives and the unfunded government

liabilities that's where a lot of the

problem is in terms of the size of the

problem and uh what we can see here is

that this is a very unstable pyramid

right it's on a very small base and

that's why a lot of people are

questioning to what extent the whole

monetary system is actually going to be

able to actually continue in a stable

state or are we going to get more

wobbles and more difficulties and that's

one of the reasons why of course the

gold price is now at um 2,500 us that's

pretty much alltime High China and some

other countries are buying up world big

uh and so there's a real a question

about what do we use as the Cornerstone

of the financial system which of course

takes us then into well what about some

digital alternatives for example which

is another angle that some people are

exploring yeah and I was just going to

say the uh the smaller textt is hard to

see but that derivatives is in the 1 to2

quadrillion range so you we're talking

thousand trillion dollars so for me it's

always been this this race of these fake

money derivatives and oblig ations and

IUS at the end of the day it's always

going to rush for something that's real

um whether that's go I really think you

could put almost all assets in that that

tip in terms of people are going to rush

for Real Estate or any anything real oil

Commodities this is where I think we can

see a lot of inflation when the system

collapses and obviously crypto Believers

say well hold on bitcoin's also um

scarce and finite and it has basically

no risk of default you know no one else

is the counterparty if you holding it

yourself and and that sort of thing so

interesting times yeah let me just pick

you on one point real estate of course

is in that um triangle further up

because the value of real estate is

directly linked to the devaluation of

dollars and other currencies right so in

fact the reason that there hasn't been

an asset explosion is not necessarily

because assets are really worth a lot

more it just means that the value of the

dollars and other currencies over the

last 20 to 30 40 50 years have been

devalued and devalued and devalued and

devalued

and when I talk about high home prices

what we're really talking about is low

value of the dollar yes and that's the

cause of the problem why because of

course all of the money printing because

of all of the massive quantitative

easing that happened ultra low interest

rates government stimulus all of those

things so it's very interesting that

back to Jackson hle um chair poell said

that Supply shocks drove inflation no no

no no didn't it was one of the factors

but the biggest Factor was this massive

money printing quantitative easing

government support no surprise at all

that we had massive inflation and I

can't believe that central banks are

still in denial that they caused it in

the first place yeah now so I should

clarify that a bit more I think um what

I'm getting at there with Ru assets M

when I say real estate is I think more

and more people are seeing something

like a bit of land maybe out of the city

where you can maybe grow some of your

own food collect some of your own water

like what value can you put on that

compared to yeah I agree like a house or

an apartment in the city it's completely

different way to Value but people want

something that's real and can if times

get tough they want to know that they're

safe and that type of thing so I think

that's becoming the dream for a lot of

people now SPO on well talking about

times getting tough let's talk about

China briefly um so China's economy is

still struggling uh there's a lot of

issues with torist as I mentioned but

one of the really interesting

developments over this last month was

that that China has suspended steel

plant approvals um basically because

there's a demand slump and uh they can't

find a way to export it um the world's

second largest economy has grappled with

weak consumer demand and the prolonged

property slowdown prompting greater

intervention from policy makers in

recent months to try and shock

confidence but the consequences of this

is dramatic particularly for Australia

and if you go to the next slide you can

see there that the uh harsh winter for

uh China is going to cause economic pain

for Australia the plunging iron oil

price could believe a$3 billion hole in

the federal budget um it's collapsed

significantly down about 30% over the

year and interestingly and the point I

want to highlight isn't just the big

miners that are actually catching a cold

here the impact of China's economic

slowdown not was not just felt in the

commodity markets but shares in A2 milk

for example one of the largest suppliers

of INF milk formulate to China plunged

by more than 18% on Monday um and that

the point there's a really significant

Fallout so we've been very Reliant in

Australia on China and trying to trade

trade and of course the iror price so

this is something which is very very

significant and important to watch

because the impact for the local economy

in the Australia is actually very

significant in my view absolutely okay

so the RBA holding firm for now and

there's been a lot of commentary about

the RBA on Twitter recently absolutely

so we can spend the whole show talk

talking about the RBA but look the fact

is they came out and said uh inflation's

too high um we look through some of the

government handouts and support so the

headline inflation dropped a little bit

because of the electricity support but

they're not looking at that they're

looking at the underlying they're

expecting that interest rates will have

to stay higher for this year into next

year Market still think it's going to be

there's going to be a cut um who knows

but um The Reserve Bank is quite stuck

now in so far that it's one of the few

central banks that really has no chance

in the short term to cut rates and of

course if the FED does cut in September

that's going to put more pressure on the

reason is that local inflation is is

there some of it's to do with the uh

recent decisions that the government

took in terms of the programs to support

the economy um guess what $40 billion of

um tax cuts and other stimulus measures

from the government is inflationary and

in fact the RBA Albert said that and if

you go to the to the next slide you can

see there that um Christopher Joy is of

course all over this highlighting the

fact that house prices in Australia are

significantly higher we've got um

taxation um issues in Victoria squeezing

Victorian people migrating to Interstate

um the Michelle government talked um

about where right are going so

effectively giving some forward guidance

without officially giving forward

guidance so where where's that going and

of course he's been talking about the

fact that there's a really big

contention now between what the RBA is

trying to do and what the government is

trying to do the government of course is

saying well we're trying to Bear Down on

inflation when in fact they're doing

strategies that are actually creating

inflationary pressures and uh the RBA is

looking through those short-term support

measures so underlying inflation it came

down just slightly looking at the most

recent data that came out overnight and

interestingly there you can see that the

energy relief was one of the reasons why

inflation dropped that's the monthly

data so we are in a very significant

problem at the moment China slowing

recessionary pressures building

inflation still high RBA a bit caught

and um frankly I think they've muffed it

again

yeah all righty so we anything to add

here Martin with that so on the yeah

just quickly to say if you look at the

household debt to opposable income

everyone is talking about Kenna's

Canada's a bit of a basket case

Australia is the prize though we are so

leveraged and this is one of the reasons

why there res bank has been very quiet

on terms of keeping rates lower than

other players around the world because

they know the debt pressure on

households um the problem is the debt to

income ratio household debt is huge and

that's going to create another problem

for the RBA and then of course then the

question becomes well what's going to

happen in terms of ahead um if prices on

uh interest rates are going to stay

higher for longer how's that going to

catch people and we're starting to see

some signs of home price weakness in

some areas so for example the most

recent auction clearance rates were a

little bit weaker than some expected

particularly in some geographies and the

clearance rates were down a little bit

there are more properties now coming on

the market and so expectations now have

been moderating about where prices may

go that said of course home prices have

been quite strong in Perth in particular

it's very very strong at the moment

ridiculously strong in Melbourne of

course prices are still going backwards

and going back directly to what I said

before about what Christopher Joy said

guess what people are actually still

running away from Melbourne some

investment properties are actually

coming on the market and um people are

worrying about the um you know economy

particularly in in Mel my point is um we

can't necessarily expect this strong

this strength in house prices to

continue given all those external

factors we've talking about and some

places are are cheaper than a decade ago

but I'd say that's um fairly few and far

between yeah well I mean it's it's like

in everything you can always find a data

to prove whatever point you want to make

but this was an interesting article

because it made the point that in some

areas over the last decade prices have

gone absolutely nowhere and that

includes quite a lot of units in the

number of areas some houses in some of

the outer Suburban areas too and that

may be because of some of the different

changes of mix of property over that

time but it is interesting that this

story that everything's going up

everywhere which is what the mainstream

has been pushing is is way too

unsophisticated for what's actually

happening sure there are areas where

prices are very strong particularly in

houses particularly in the west but um

in other areas not so much oh and by the

way if you want to give another angle on

that if you look at the story about um

the highrise sector so a lot of um

Builders are actually struggling to

build high-rise at the moment but

they're also struggling to let those

highrises so this was an article saying

that landlords are being offered um uh

landlords are offering one month's rent

or something try and get people to take

those properties there's a lot of

vacancies in some of these new high-rise

developments that everyone's thinking is

is going to solve the housing sector

problem um I'm a little bit skeptical of

that and some of it is because rents are

still relatively High relative to income

um and again the inflation numbers that

came out today show there was a little

bit of an easing back but not

dramatically so yeah and more broadly if

you look at the other story here you've

got things like the um Power bills are

still very high um we've got the

hardship some for power spiking so we

had

35,000 um 40% % rise in the number of

customers looking for help about their

power that's significant others are

being forced to get a second job as one

of the Articles showed here we're seeing

that in our surveys quite a lot of

people um because frankly if you are not

seeing your income rising and your cost

of living Contin to rise what can you do

well you can try and find another job

and so more people are getting second

jobs and that of course puts more

pressure on on the those and then their

families another factor to bear in mind

is that um the insurance costs are

Contin to rise that's one of the biggest

inflationary factors we're seeing that

coming through again so a lot of people

are really struggling to make ends meet

at the moment even now there are others

doing well and not everyone's in the

same boat but a lot of people are are

finding it difficult now in that context

I just want to make a point that a lot

of renters are really

struggling and some people have tried to

use the official processes to try and

get some help and so this article was

stunning when it came out and said there

was just one penalty notice issued to a

landlord about excessive rents in the

last Financial year despite formal

complaints to the state government

storing two other letters were actually

issued this is the New South Wales Fair

trading um there's 200 complaints over

the last 12 months with excessive rent

increases but it's the tip of the

iceberg and that's the point A lot of

people are not even bothering to make a

fuss about Rising rents that's a problem

um rents are really soaring still and

I'm I'm skeptical as to whether the

reduction of students we mentioned ear

on is going to have any major impact on

the uh on the rental situation because

there's such significant demand at the

moment yeah that yeah it's crazy and I

do feel for people and um another thing

we saw after Co was that move away from

the city and we've seen the measures

being put in place to try to track

people back into cities but like we

discussed before a lot of people don't

want that lifestyle um anymore so all

these things are still I guess finding

their new equilibrium as we move

forward absolutely and the last three

slides I just wanted to give you three

little insights which I think give you a

little bit of a flavor of of if you like

a contrast between what people are

saying on reality the first one relates

to CBA so CBA came out and said that

they're reducing some of their interest

rates on new own occupied borrowers

0.25% down if you've got a 20% deposit

now that may sound interesting um and by

the way the banks are actually squeezing

term deposits now to try and actually

create capacity to lend as they go into

the spring selling season but just worth

noting that CBA has tended to have

premium rates on its mortgages but then

actually um when you actually negotiate

with them they'll wriggle a bit and and

give you a better rate so I think this

is more to do with marketing spin than

reality and I don't regard it as a major

sea change in in the mortgage industry

so that's the first sort of interesting

gap between reality and uh what the

media has been talking about the second

one is this one here so there was a very

interesting set of

um surveys run talking to Leading

Economist about basically what's wrong

with the housing SE sector and what

needs to be done and it's fascinating

that the mainstream Economist that they

surveyed only 6% rated immigration as

one of the critical levers that should

be addressed that's fascinating they're

talking about planning restrictions or

more public housing or tighten negative

gearing capital gains concessions and

maybe reducing stamp duty all of those

things are sort of interesting but the

migration one which is the critical one

you know we've had massive migration in

Australia and that's one of the reasons

why the demand Supply equilibrium is all

over the place the mainstream economists

want nothing to do with it and that's

what we're seeing in a lot of the press

that people don't want to talk about

this but for me this is one of the

things that should be being spoken about

yeah it's just just a no-brainer when

you let increase your population by 5%

in 18 months the basics of supply and

demand how can that not be one of the

main drivers of price inflation it's

absolutely astonishing but you know

pretty much all the mainstream

economists no no no immigration's fine

and by the way the greens are still

saying you know Mass immigration's fine

too it's nuts and then the final one and

this was just worth spending just a

moment or two on um the the RBA we

mentioned the RBA earlier on but um

Andrew Hower the new Deputy Governor a

Brit actually has come to Australia made

a very interesting speech and he

basically well he told he told the um

the audience that uh they should um be

aware of false profits those people who

make predictions about um uh where

interest rates are going and he was

definitely you know throwing bricks at

the mainstream economists and the the

mainstream media in Australia uh and boy

did that create a Rea reaction so we had

um Christopher joy and a few other

people saying no no no actually we

should be having these debates and you

know the RBA got it wrong it's not the

economists getting it wrong but you know

there's there's a really interesting

point that that I think I to highlight

what he was actually saying was there is

massive amounts of uncertainty out there

at the moment it's really really hard to

try and figure out what's going on so

maybe it's not surprising that sometimes

the RBA forecasting isn't very accurate

and of course it's not been very

accurate they left rates too high for

too long um they then cut rates too

dramatically they didn't respond when

rate inflation started to get away so

you know pretty much every time the

rba's done the wrong thing and what he

was basically saying is we need to be

humble and you know maybe we don't

always get it right now I have a feeling

that some of the economists out there

should be actually taking some of that

on board saying well we should be a bit

more humble because there are so many

things that are uncertain at the moment

we've touched on a lot this evening and

and the bottom line is this it's very

hard to make a clear call about where

things may be going I think it's very

interesting that bank's review of the

bank of England said people should be

running with multiple different

scenarios about how things can play out

because nobody knows nobody can actually

be clear about all of these factors out

and therefore anybody who says

definitively interest rates are going to

get cut in the next two months or three

months or rates are going to go high or

house prices are going to go up or down

um it all depends and so I want to leave

you with this thought Alex the

uncertainty principle is one that's

really important there are so many

factors here all interl all pushing in

different directions it's very hard

whether you're a central bank an

economist or an ordinary person to try

and work out precisely how this is all

going to play out so what you need to do

is you need to basically have a little

bit of a sense of if this happens I

might do that if that happens I might do

this have a series of scenarios rather

than trying to sort of pin your tail on

the donkey and say I know for sure

what's going to happen over the next

year yes absolutely and I'm looking

forward to that interview with Senator

renak one of my favorites I follow on

Twitter Martin if you're having him on

your show um I'll make sure I share that

one on Twitter for you as well but um

it' be great yeah we'll hopefully be

that be on Friday looking forward to it

awesome well guys I hope you've enjoyed

that chat as always we'll see you Martin

next month all the links to follow his

stuff down below and all the links to

follow my stuff and our crypto research

down below too otherwise we'll see you

next month Martin cheers take care