Alex Mitchell’s Weekly Notebook – Sub-prime Australia

Late Traffic News

Long overdue road safety signs spotted on a main road near the Bruce Highway in Queensland declare:

Australia’s sub-prime economy is sinking fast

In 2008, sub-prime mortgages brought the US banking system and Wall Street to their knees. Thousands of mortgagees were kicked out of their homes, businesses went bankrupt and several million embattled Americans were kicked out of work.
The US government came to the rescue of the banks and big business with quantitative easing (QE) a.k.a. printing dollar bills. Trillions of them. At the same time interest rates were dropped to historic lows – about 2%.
The idea was simple: with banks awash with government-supplied credit and interest rates slashed, an ideal climate was created to borrow and build business. It was a textbook recipe from John Maynard Keynes for creating jobs and economic growth. It was the basis for Franklin Delano Roosevelt’s New Deal programme in the 1930s to overcome The Depression, so why wouldn’t it work again?
But the US Federal Reserve’s grand plan was a hopeless failure in 2008. Wall Street bankers and boardroom directors decided to trouser the money by paying themselves backdated salary increases and huge bonuses and the rest was spent lowering corporate debt.
Little or nothing was spent on plant, equipment, R&D, recruitment or employees’ wages.
Now, seven years on from the GFC, the US economy is again teetering on the brink of a fresh meltdown. Share prices are crashing, growth has stalled and companies are laying off workers in thousands.
Roosevelt’s New Deal “worked” because the United States went to war against Nazi Germany and imperial Japan after Pearl Harbour. It was the war economy that got Americans back to work, made huge profits for US businesses and lifted productivity to soaring heights.
In Australia, the chronically weak export-driven economy is facing its own sub-prime catastrophe. But it isn’t American-style sub-prime home loans that is eating at the heart of the economy but sub-prime credit card lending.
In the past couple of years Australian banks have been issuing new credit cards at the rate of 17,000 per month, mainly to people between 18 and 35. Some customers have not one credit card but three or four of them.
Some cardholders have only part-time jobs while others have no jobs at all. Many are students and others simply live at home with their parents, surviving on pocket money.
Some retirees are just as profligate as young people: many don’t use cash any more and put all their purchases on plastic. If one credit card company starts chasing them, they close the account and take out another card from another company.
After a lifetime of financial frugality, many have become credit delinquents in their old age. Why? Discuss!
According to the Reserve Bank of Australia, the nation’s total credit card bill is more than $50 billion. Charities are reporting that clients who have fallen into credit card debt are lining up for assistance.
Thousands of them are asking for food, clothing and financial help.
If interest rates go up this year, the number of credit card holders in desperate straits will soar.
Yet Prime Minister Malcolm Turnbull keeps saying: “There has never been a more exciting time to be an Australian.” He should amend his mantra to say: “There has never been a more exciting time to be a very rich Australian.”

Gough and Wilf Burchett

In December 1972 a few hours after he was sworn in as prime minister, Labor’s Gough Whitlam ordered the Department of External Affairs (as it was then) to issue a new passport to political refugee Wilfred Burchett.
During the previous 16 years Burchett, a distinguished war correspondent, had been denied a passport by the Menzies, Holt, Gorton and McMahon Liberal-Country Party governments.
When Burchett received an official telex to say his passport was awaiting collection at Australia House he flew to London to collect it.
If my memory serves me correctly, his supporters in London held an impromptu celebration at the Red Lion pub just off Fleet Street.
The late Murray Sayle, Phillip Knightley and a host of Aussie-born reporters, writers, lawyers and academics attended the function and toasted Burchett’s victory and Whitlam’s courage.
Years later Whitlam wrote a private letter to Burchett saying:
“Dear Wilfred,
“Thank you for your letter and your good wishes.
“I am delighted to know that you have made good use of your Australian passport. You would be better placed than most Australians to assess the new mood and spirit we have tried to bring to our foreign relations. Indeed, your own vigorous brand of journalism has done much to keep alive a fundamental goodwill towards Australia and ensure that the changed emphasis in our foreign policy is more readily understood and accepted in many parts of the world.
“I trust that your travels and your writings will continue to bring you personal satisfaction and further the hopes for our country that both of us share.
“Yours sincerely
“Gough Whitlam
“16 July 1974”
For the record, these are just some of Whitlam’s foreign policy initiatives: establishment of full diplomatic relations with China and appointing Stephen Fitzgerald as Australia’s first ambassador to Beijing; withdrawing all remaining troops from Vietnam and abolishing conscription; barring racially discriminatory sports team (apartheid South Africa) from Australia; instructing Australian delegates to the UN to vote in favour of sanctions against racist states of South Africa and Rhodesia; abolishing the British honours system and initiating Australian honours; introducing Advance Australia Fair as the national anthem in place of God Save the Queen; securing independence for Papua New Guinea; and slashing tariffs by 25% across the board.
As Gough self-mockingly declared: “Among Fabians, I am Maximus.”

Pell the fugitive

On January 17 Cardinal George Pell delivered the opening keynote address at a Global Foundation conference at the Vatican to an audience of 200 guests.
Sydney barrister John McCarthy, Australian ambassador to the Vatican and a slavish Roman Catholic, and Grayndler MP Anthony Albanese attended the speech and praised His Eminence’s wisdom.
A couple of weeks later we learned that Pell was too ill to travel to Melbourne to answer questions at a public hearing of the royal commission into child sex allegations. It sounded like the same illness suffered by the late Alan Bond when he spent months evading charges of stealing hundreds of millions of dollars from Bell Resources for his ailing Bond Corporation.
To avoid an embarrassing clash between Church and State, arrangements have now been made for Pell to give answers via a video link.
I’m still wondering why the Swedish government can’t arrange a video link with London to interview Julian Assange as his lawyers have suggested.

Primary sexism

Members of the US Democratic Party are deciding whether they want a woman in the White House (Hillary Clinton) or a self-proclaimed socialist (Bernie Sanders).
Leading American feminists Gloria Steinem and former US secretary of state Madeleine Albright have raised their voices for Mrs Clinton.
Ms Steinem suggested younger women were backing Sanders just so they could meet young men. “When you’re young, you’re thinking: ‘Where are the boys? The boys are with Bernie’.”
Ms Albright’s contribution to the Clinton campaign was just as intelligent: “There’s a special place in hell for women who don’t help each other.”
The reaction was brutally swift: Sanders took the New Hampshire primary with 60.4% of the vote while Mrs Clinton floundered on 38%.
The defeated Republican candidate, Carly Fiorina, former CEO of Hewlett-Packard and the GOP’s sole female contender, tweeted: “To young girls and women across the country, I say: do not let others define you. Do not listen to anyone who says you have to vote a certain way or for a certain candidate because you’re a woman. This is not feminism. Feminism doesn’t shut down conversations or threaten women.”
Moral of the story: women are intelligent voters who are interested in politics, economics and the real issues of a fairer society.

Quote of the Week

“I want to separate from as many Palestinians as possible, as fast as possible. Let’s build a large fence between us. The situation will be clear to everyone. We are settling here, you are settling there.”
Israeli Labor Party leader Yitzhak Herzog
Sounds very much like apartheid to me. When will Bill Shorten’s ALP oppose the racist/Zionist direction of its fraternal Israeli party? AM

One comment

  1. Hi Alex

    I recently watched The Big Short – the latest film on the GFC – as part of a packed house at Mt Vic Flix in the Blue Mts. Towards the end of the film , which does a pretty good job exposing this massive tale of greed and corruption, a voice over says that , of course hundreds of bankers and financial advisors went to jail as a result of the GFC. There’s a pause, then the voice adds: Just kidding, only one person was actually jailed. The Big Short ends by telling us that we should expect another GFC very soon.

    When the lights went up, an elderly woman sitting next to me said she’d lost her house in the GFC.

    Although we have former bankers as NSW Premier and Prime Minister – I’m not holding my breath for either of them to make banking scams a political issue any time soon.

Leave a Reply

Your email address will not be published. Required fields are marked *