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With the Global Financial Crisis perceived to be behind us, people are out and about in Australia spending up big like it never really happened here. I suppose it didn’t for a lot of people.

I try to keep an eye on news articles, and forum posts on the Aussie dollar and inflation figures. While I’m certainly not an expert, I’m slowly beginning to understand how things work in this world of ours.

Money is important to everyone during these times. It puts food on our table and clothes on our back. It’s most people’s primary concern, and as a result they want more of it.

My mum was talking to me the other day about her superannuation, telling me how she needed more in there so she can retire comfortably. Already in Australia, super funds have taken huge hits in their returns. Over the last few years people have lost more money than they have made in their super fund, yet we are still all told that we should invest all of our money into super for retirement.

Following the Real Estate Bubble in Australia and the opinions of those who know their economics, it’s very plausible that our country will suffer high levels of inflation in the future. All to support a housing bubble.

So we are all banking on being rich. People invest for the future, so they have more money. Shares, property, super and so on. It’s all so we have more money, later.

The question I ask everyone is, “what is the value of a dollar?”

What’s it worth to you? What will it be worth in 20 years time? Are you banking on being rich?

I tell my mum to plan for the future. In my opinion, she should be planning to have everything she needs before she retires (within reason of course). Planning to have the money to do it later is a dangerous idea. If inflation hits, and the car that once cost $25,000 now costs $100,000, she’s stuffed!

I keep telling my friends who are rushing into the idea of buying a house to take their time and get to it when they are ready. No one will listen because of the free money on the table from the government, and the fact that they want to get in “before the next boom”. They aren’t necessarily making money from a boom. They are making “more dollars”, but not actually becoming wealthier in the long run. While their house is “worth” more and if they sell they will have “more dollars”, everything they will want to buy with those extra dollars will be more expensive. Essentially, they are perceived to be richer, yet everything is more expensive. They are back at square one. Essentially, if their money is making 5% interest, and inflation is 5%, they aren’t making anything. The numbers are just changing.

True financial planning, true investing is beating this situation. You need to make more money than inflation is absorbing.

It’s amazing how common sense this is for most people, yet how completely confused some people are by this information. To some, a dollar is worth a dollar, nothing more.

It must be nice to pick up a copy of the local paper, read it, and believe 100% of what is written. Maybe I’m just too cynical.

I read an article today about the Victorian state government buying 10,000 hectares of grassland, with an additional 50,000 hectares being considered. The land is being purchased “to compensate for rare grasslands lost with the expansion of Melbourne’s urban boundary”.

So land that the government sold off years ago for a song, now is being purchased back by the government at top dollar no doubt. When everyone is told that there is a “shortage of land”, clearly having the government buy it from the developers is just going to create a greater shortage, right? Either that or the government are trying to encourage a shortage – dare I say, to prop up the housing prices?

If your intentions are just to keep house prices high, it makes sense I suppose. Encourage population growth, limit new land developments, and force people to cram into the cities – it will force land prices to stay high.

Our good friend Obama plans similar things. Fifty cities like Detroit, Philadelphia and Baltimore, once industrial boom towns, are now abandoned by business with no future employment in sight, and as a result most residents have followed suit. The neighborhoods are now filled with abandoned homes, and some low income families.

Decaying houses are bulldozed, and with the removal of existing residents, entire neighborhoods will be levelled, returning the land to nature. There’s not much information on how the displaced families are compensated for losing their house in this process!

I just can’t see information like this without ulterior motives staring me right in the face. The way I see it:

• Either there is a huge surplus in land (which it’s alleged that there isn’t) so it is ok to reclaim the land for nature, or
• Property values are far too high, and a shortage needs to be created to prop up these values.

I’m all for “greening the earth”, just not when it is an underhanded attempt to keep a bubble inflated.

Every Australian knows what a first-home buyer is entitled to by now. A heap of free money! But is there really such a thing as free money?

According to a recent report by market research firm Brandmanagement, young home buyers’ loans have jumped an unsustainable $52,000 (23%!) in the past two years.

From February 2008 to February 2009, first-home buyers have flooded the market, up 9.6% now comprising 26.9% of the market. It’s almost as though there’s something they don’t know!

Here we essentially have a boom within a boom. The increased madness of first-home buyers rushing to get into the property market before they lose their “free money” or “before the next boom” has pushed prices up, despite times of economic doom and gloom. This “mini-boom” in itself gives first-home buyers more reason to commit earlier than they should. In the belief that property will only increase in value, they want to enter the market as early as they can at any cost.

Andrew Inwood, from Brandmanagement is quoted saying:

“What the government incentives appear to have done is transfer the money from the people who are borrowing money to buy their first homes into the pockets of those who are selling at a more attractive price.”

The issue for me is the short sightedness of this whole situation. Anyone who has taken the time to do the research knows that Australia is not in a sustainable economic situation right now, and propping up the bubble with grants like these is just prolonging the inevitable. Why give people a false sense of security and then screw them over?

It’s hard to make a comparison, and this example is probably a little extreme, but during a war what would you prefer? To have your country bombed and suffer considerable damage in an instant, and then have the attacking country leave? Or to have troops attacking nearby, tormenting the families and fighting for five or ten years? The way I see it, instant annihilation, while hard for everyone, allows the country to be rebuilt immediately. People will realise what is actually important in life, and pull together to reconstruct their homes, hospitals, and so on.

It’s amazing how this whole situation is only centered around money, not life or death, and yet people still want to believe that everything is peachy, while all they are really believing in is a slow and painful death of the market.

Enough with the grants already!

Australia already has a First Home Owners Grant to “help” people get into one of the most overinflated investment bubbles in the world.  Free money has been handed out to Australians as part of stimulus package, which will cost this country dearly in the future too. Now we have the Holden Owners Grant. Not actually a government grant of any kind, just clever advertising that will no doubt convince thousands of uneducated Australian’s that there’s never been a better time to buy an overpriced, poorly engineered piece of devaluing steel.

Whether it’s a car, a house, computer, clothing, or so on, if people can’t afford it it’s either one of those items that only a special few can afford to buy (which is part of it’s appeal), or quite simply the price is too high. For example, people pay big money for clothing brands like Prada. It’s high prices and label is what makes people aspire to wearing that label. Now obviously Prada are making a profit at their current prices, so their business model works. By selling only to the “elite”, they can turn a decent profit.

On the other end of the spectrum though is the brands that need economies of scale to make their products profitable. Holden is one of these brands. They need the masses to buy their cars, and in order to get the masses to purchase your product it needs to be affordable.

If these items aren’t affordable, quite simply your business is going to fail. Although housing is a tricky one to compare this all with, it’s still a similar situation. People can’t afford to buy houses at it’s current value so there needs to be a grant to get people into the market. All this does is keep the prices inflated and in the long term helps no one except for the “investors” already in the market.

A so called Holden Buyers Grant is just ridiculous. Obviously they can’t move Holdens at the moment at their recommended retail price, so they need the grant to sell their cars. Australians are more likely to buy cars from Asia and Europe as they are either cheaper, or a similar price and of a much higher standard.

For Holden it’s a simple case of provide the market with what they want, or fall down. Unfortunately they and many other Australian businesses fail to see this. In Australia I foresee this crash being harder than any other that we have had in the past, as it is going to be an enormous readjustment for our businesses, and as a result our people.

I write a lot on here about money and the economic situation of the world, and I’m usually pretty negative about things. Talking to those in my office, where pretty much everyone is under the age of 30, most others have the same attitude. That said, it’s only the opinion of the older generations that we are so negative. I’ll explain…

It’s well known that most Gen Y’s aren’t very loyal in a workplace sense. They are happy to jump ship after a short period of time just for some extra money here or there. Apparently the way we were brought up, we have a short attention span or something. I’m not sure, someone was telling me about it once but I wasn’t really listening… haha!

Does this extend further than just employment though? Local car manufacturer Holden is in a heap of financial trouble at the moment – being down the food chain from General Motors isn’t the best place to be in an economic crisis. Talking to the Baby Boomers, they think it would be a great loss to this country to lose Holden, but talking to the Generation Y’s paints a completely different picture. The general consensus is that Holden have been producing poorly built, inefficient and overpriced cars for too long now. Technology has moved in leaps and bounds for European and Japanese cars, but in Australia we are essentially using the same outdated technology as the yanks. It’s nobody’s fault that Holden is going under but their own, and good riddance.

In this specific example I see a crash and “the world coming down” as a massive positive. The US and Australia manufacturers will be brought to their knees and forced to produce more efficient cars and work with a business model that actually makes money rather than lose it. Lots of other people just see the doom and gloom and not the positives from it. These are usually the older generations.

Now does that make us positive or negative? Loyal or disloyal? Short term I can acknowledge that peoples lives will be “ruined”, but once again I see a positive in that. Without making too much of a generalisation about Holden employees, the meaning in their life is in their car, their TV and their Jim Beam. Now while I like cars, watch too much TV and enjoy the drink, I’d be stoked to live in a world where all three didn’t exist. Others would be literally lost, but before long find some real meaning in their life, and enjoy it for real rather than all the superficial crap that we live for nowadays.

While bankruptcy and losing your car and what not is a big negative in the short term, it offers such a huge positive in the long term.

All of this doom and gloom has enormous positives out of the other side, yet the Baby Boomers struggle to see this. Why so?

My father for one would be sad to see the Aussie icon that is Holden lost to the Global Financial Crisis, but I’m happy for it to sink. House prices crashing, banks falling, economies crumbling, exchange rates not so good. Baby boomers would faint if this stuff wasn’t sugar coated when it all happens. However what is bad for some is great for others, you just need to be able to open your mind and explore the situation, rather than just look at it with your blinkers on. Gen Y’s are able to see the positives in this situation much more easily than the Baby Boomers.

Gen Y’s are loyal, Baby Boomers just can’t see that in order for their country to become strong again they need to cut off the dead wood first.