OT: Current Affairs and Politics

[Gary Gutful]

Ping @Poupou Escobar

 

[Poupou Escobar]

No, there is no need to refinance the debt. The debtor holds an asset of equal value. It's called a bond.

And when it matures it needs to be paid, usually with money borrowed from somewhere else. Which is fine if lenders are happy with continued low returns.

 

[Bandwagon]

And when it matures it needs to be paid, usually with money borrowed from somewhere else. Which is fine if lenders are happy with continued low returns.

What is low is subjective, investors will be happy with returns which are commensurate with risk, and the time value of their money.

Returns will grow ( or decline ) as the market demands, higher returns will be based upon the same fundamentals as are lower returns, if investors feel the time value of their money requires greater returns, that will also be reflected in inflation.

As we know, inflation is bad for holders of debt, and good for issuers of debt, because it lowers the real value of that debt.

So rising returns are most likely to be in line with the devaluing of the debt upon which those returns are based.

 

[crocodile]

And when it matures it needs to be paid, usually with money borrowed from somewhere else. Which is fine if lenders are happy with continued low returns.

You haven't been reading. It has already been pointed out to you that the money supply needs to grow as the economy grows in nominal terms. The expanding money supply is what satisfies the bond coupon rate. Borrowing money to pay bond coupons is nonsense. Bonds never have high returns anyway due to their inherent low risk. Financial institutions by law and APRA regulations must carry a defined percentage of low risk type securities. Similar rules will apply to other nations. Australian bonds were popular just post GFC because we coped with it better than many others. Don't think too many investors would have been interested in US bonds at the time.

 

[Poupou Escobar]

Well it's not a given that they will remain interested in ours, especially now that we have an unprecedented level of debt already, and no guarantees the tax income will recover in our lifetime.

 

[Bandwagon]

Our debt levels are far from unprecedented.

 

[crocodile]

Well it's not a given that they will remain interested in ours, especially now that we have an unprecedented level of debt already, and no guarantees the tax income will recover in our lifetime.

Are you f*ckin' serious. Our debt post WWII was 125% of GDP. All retired by the early 70s without a single surplus anywhere. Buy a textbook.

 

[Poupou Escobar]

The world is different now. There will be no postwar boom. Hopefully there's a post-virus boom. We might not even need to borrow more to make it happen.

 

[Twizzle]

There will be no postwar boom.

probabaly because we are not at war

 

[Gronk]

The world is different now. There will be no postwar boom. Hopefully there's a post-virus boom. We might not even need to borrow more to make it happen.

I am largely lost sparring about macroeconomics, however I am heartened to see that I am not the only one.

BTW Standard and Poors maintains our AAA rating yesterday. How come ?

There is a one in three chance S&P will officially lower the AAA rating within the next two years. S&P said this would depend on whether the coronavirus caused economic damage that was more severe or prolonged than what it currently expected.

https://www.afr.com/policy/economy/aaa-credit-rating-downgraded-to-negative-20200408-p54i5u

 

[Bandwagon]

The world is different now. There will be no postwar boom. Hopefully there's a post-virus boom. We might not even need to borrow more to make it happen.

Admittedly the world is a different place, but in the end here you simply making predictions based upon what ever evidence you feel important.

That being the case there is plenty of historical evidence to suggest your predictions poorly founded, either way I'll concede predicting outcomes here is fraught with danger. I think the fact you used the word "unprecedented" to describe our levels of debt here demonstrates a bias in how you are weighting evidence though.

We don't need to go back to world war 2 to find precedent for this level of borrowing, we have plenty more modern examples in the world wide response to the GFC. Where the WW2 example is relevant is more that it displays the effect of time over debt. Obviously we need to go back decades to find the workings of decades of inflation.

I guess for mine it just looks like you are looking for evidence that supports your position, rather than forming a position based upon all the available evidence.

 

[Bandwagon]

I am largely lost sparring about macroeconomics, however I am heartened to see that I am not the only one.

BTW Standard and Poors maintains our AAA rating yesterday. How come ?

There is a one in three chance S&P will officially lower the AAA rating within the next two years. S&P said this would depend on whether the coronavirus caused economic damage that was more severe or prolonged than what it currently expected.

https://www.afr.com/policy/economy/aaa-credit-rating-downgraded-to-negative-20200408-p54i5u

It's worth noting our AAA rating isn't a historical constant, it has moved up and down, in fact it has been a constant AAA from the three ratings agencies since 2011, and was AA or AA+ all through the Howard years in government.

https://www.aph.gov.au/About_Parlia...agPost/2013/February/Australias_credit_rating

 

[crocodile]

The world is different now. There will be no postwar boom. Hopefully there's a post-virus boom. We might not even need to borrow more to make it happen.

The end debt will be nowhere near it either. Currently, our gross government debt is $541 billion or around 39% of GDP. Add $130 billion and we end up with 47% of GDP. Still way lower than most other nations. Well within our capacity to handle. Now stop being a merkin and buy a f*ckin' textbook.

 

[crocodile]

probabaly because we are not at war

Depends on what constitutes a war. A war against a virus indeed.

 

[Gary Gutful]

Now stop being a merkin and buy a f*ckin' textbook.

He could probably afford one if he didn't have so much debt.

 

[Poupou Escobar]

Admittedly the world is a different place, but in the end here you simply making predictions based upon what ever evidence you feel important.

I'm not the one making predictions. All your continued parroting of the way things work at the moment leave no room for the way things could stop working in the future. National economies are so interconnected now that their reactions to events can be extreme.

I guess for mine it just looks like you are looking for evidence that supports your position, rather than forming a position based upon all the available evidence.

'All the available evidence' doesn't tell us enough about black swan events until after they occur.

 

[crocodile]

I'm not the one making predictions. All your continued parroting of the way things work at the moment leave no room for the way things could stop working in the future. National economies are so interconnected now that their reactions to events can be extreme.

'All the available evidence' doesn't tell us enough about black swan events until after they occur.

f*ck me, it's always been that way. Nobody can predict the future. Let's all live in a cave wrapped in cotton wool just in case.

 

[Poupou Escobar]

Or at least check our assumptions.

 

[Bandwagon]

I'm not the one making predictions. All your continued parroting of the way things work at the moment leave no room for the way things could stop working in the future. National economies are so interconnected now that their reactions to events can be extreme.

'All the available evidence' doesn't tell us enough about black swan events until after they occur.

Huh? There's a flock of black swans flying around throughout history.

I mean maybe not Pou's super secret no merkin ever heard of black swan where the whole f**king world goes all opposite day on us, but plenty all the same.

 

[Gronk]

Do we need to bail out virgin ?

https://www.marketscreener.com/VIRGIN-AUSTRALIA-HOLDINGS-9597965/company/


https://twitter.com/ndrew_lawrence/status/1248398068464025606?s=21