Turns out that all those interest cuts are not flowing into consumer spending as predicted by our financial masters after all. Interest rate cuts going to our loans, not pockets.
Money burning holes in our pockets is how we got into this mess and more of the same is not, either on a grand or small scale going to help, but this shower of fools can't think of anything else so more must be good.
The same story says that in December last year there were 150,000 fewer applications for credit checks on personal loans and credit cards, (ie spending power) than the previous year. That would take $300 million at least out of the potential spend and as the retail sector shows, we are cutting back even from those levels, so you can bet that automatically reducing payments is NOT going to create pocket-burning, it will just see the credit card debt paid down faster, further undercutting bank profits (don't tell me you hadn't figured out what Rory's point really is).
Finally the suckers have woken up to the reality that consumer debt=slavery and mortgages as speculation is suicide, so they are learning a new and uncomfortable way of doing things; living within their means.
But the geniuses at Macquarie and other banks still think they are living in the rah rah days of 2006 when the mass of people willingly took on massive debts that they had no hope of living long enough to pay off. The world has changed sharply and frugality is having a major run on the rails.
Of course, the fact that most people's jobs are dependent on everyone else maintaining insane levels of spending beyond their means will result in an even faster collaspe of the system and a desperate need to find new ways to run our economies. But since we seem incapable of learning by thinking, we will probably have to go through the whole learning by personal experience of hunger, worn out shoes, wearing last year's clothing and living under bridges thing.
I vote Rory boy and his colleagues for the cutting edge of that experience.
An interest rate strategist at Macquarie Bank, Rory Robertson, said interest rate cuts would "pack more of a punch" if banks had to automatically reduce repayments.
"If the Reserve Bank is cutting by 4 basis points and no one's taking the option of lower loan repayments, it means that the policy is not particularly effective in putting cash in people's pockets. I would have thought that was the point of the exercise.
Just as you squeeze budget constraints by rate hikes, you remove budget constraints by rate cuts. If the money's burning a hole in pockets, you have got a better chance of it being spent."
"If the Reserve Bank is cutting by 4 basis points and no one's taking the option of lower loan repayments, it means that the policy is not particularly effective in putting cash in people's pockets. I would have thought that was the point of the exercise.
Just as you squeeze budget constraints by rate hikes, you remove budget constraints by rate cuts. If the money's burning a hole in pockets, you have got a better chance of it being spent."
Money burning holes in our pockets is how we got into this mess and more of the same is not, either on a grand or small scale going to help, but this shower of fools can't think of anything else so more must be good.
The same story says that in December last year there were 150,000 fewer applications for credit checks on personal loans and credit cards, (ie spending power) than the previous year. That would take $300 million at least out of the potential spend and as the retail sector shows, we are cutting back even from those levels, so you can bet that automatically reducing payments is NOT going to create pocket-burning, it will just see the credit card debt paid down faster, further undercutting bank profits (don't tell me you hadn't figured out what Rory's point really is).
Finally the suckers have woken up to the reality that consumer debt=slavery and mortgages as speculation is suicide, so they are learning a new and uncomfortable way of doing things; living within their means.
But the geniuses at Macquarie and other banks still think they are living in the rah rah days of 2006 when the mass of people willingly took on massive debts that they had no hope of living long enough to pay off. The world has changed sharply and frugality is having a major run on the rails.
Of course, the fact that most people's jobs are dependent on everyone else maintaining insane levels of spending beyond their means will result in an even faster collaspe of the system and a desperate need to find new ways to run our economies. But since we seem incapable of learning by thinking, we will probably have to go through the whole learning by personal experience of hunger, worn out shoes, wearing last year's clothing and living under bridges thing.
I vote Rory boy and his colleagues for the cutting edge of that experience.
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