Building the mortgage revolution

Most Australian households take home less than $50K a year. That’s not average wages, that’s average income per household. There are plenty of households, and people, that don’t pull a wage. See ABS stats if you’re curious.

Despite this, the vast majority of those households manage to acquit themselves financially. It’s called surviving, and the alternative is homelessness.

This is in stark contrast to the recent track record of the well-rewarded employees of some of the world’s largest banks during the global financial crisis.

I don’t capitalize the global financial crisis, because logic is hardly a proper noun.

It’s a banking crisis. It started when a whole bunch of people, a lot of them coked to the eyeballs, played pass-the-parcel with a whole lot of other people’s debt. They bundled these debts up and sold them as a bet – that the debts would be paid off.

Some very large banks bought into the bet and did their dough big time.

Corporate culture is wholly set against bad news. Bad news meant the sack, or at best, a transfer to somewhere harmless, and less lucrative. At the very least you were risking your bonus, which, as IPO shares picked up in contra deals with institutional investors – our superannuation, were almost certainly going to be a cashable asset, at a profit; certainly worth more than $50K a year.

So we leave a bunch of overpaid junkies in charge of this section and they all smile and nod and rake in the cash – then it all goes to shit.

The commodity was fundamentally flawed. It came from a drive to raise a whole pile of debt, and pass it on. It was a scam; a Ponzi Scheme (now there’s a proper noun!); a screw-up, and most certainly a poorly researched asset.

It came off the back of an explosion in credit for people previously considered a marginal security proposition, which morphed from easily available credit cards to mortgages on marginal housing acquisition; marginal in the sense that it relied on a housing bubble for people to make money and repay their mortgages. Joe Bageant was writing about it 2005. It was hardly a secret.

So the US housing bubble bursts and a chunk of assets are worthless. The debtors walk away from the wreckage and move to a trainer park outside Toledo. The banks stop giving each other money to get people into debt to make money to get people into dept to make money..,

As Kurt Vonnegut Jr. was wont to say: and so it goes.

In Australia we have four main banks. Outside of them there are a range of outfits from credit unions (some of which have aggregated over the last decade), community banks (which are more than Jimmy Stewart in It's A Wonderful Life telling everyone that their money was invested in their lives), to payday lenders and swarthy chaps in dark cars in supermarket car parks.

When the money dried up internationally the Rudd Government moved quickly to shore up the four main banks, the spine of Australia’s financial system. Our money.

Some people thought we would hit the wall hard, Steve Keen the most celebrated example. Australia was a country that has slashed employment in traditional primary industries, let its manufacturing industry roam free across Southeast Asia and kicked on with digging up rocks and a service economy which relies on the money churning around.

The Australia’s big four banks injected a lot of money into the Australian economy by borrowing quick money, and lots of it, and lending it to people. That was where the American banks came in. Problem was the American Banks had run out of dosh. Unless the Australian banks got money, and got it fast, the whole joint was going to end up like a Steinbeck novel.

The Rudd Government, or more accurately Treasury, put together a plan that was equal parts devious and genius.

The Rudd government couldn’t give the banks cash, because this was a free-market economy and the banks were at the epicenter of free-enterprise through offering credit. At the very least they were creating money that people needed to pay the bills and make Gerry Norman richer, etc.

The government gave the banks a AAA credit rating, underwriting them and making them a safe haven for what money was still in circulation internationally, which was still substantial despite its epicenter, Wall street, watching its assets diminish daily.

And they gave a lot of money, something around the size of the entire NSW budget, to households.

Ken Henry said go big, and go households. And they did, and why wouldn’t they, politicians love to spend money, but for the last thirty years they’ve been no good at raising it.

Most Australian households earn less than $50K a year after tax. They get along by running a continuing line of credit with financial institutions. In recent years it has ballooned to over 100 per cent of disposable income. So the households gave it to the banks.

We are a service economy. A lot of people run around in white vans with ladders, and utes, while a whole pile of invisible others cram into trains and buses from 6am onwards in our capital cities. It has been pretty much business-as-usual for this part of the economy. The concerns they had in 2007 are pretty much the same concerns they have now.

The Rudd government decided to call this Keynesian act of largesse to the major banks names like The Building the Education Revolution, and the Home Insulation Scheme, and so forth. There’s probably a pile of others – all with the same object, getting people who have mortgages paying their mortgage. By a good old-fashioned bit of pump priming, jobs for blokes with utes and ladders popped up like mushrooms.

Even those that don’t have mortgages have helped by creating a jobs boom at our retail oligopolies. And those people with the name badge at K mart certainly have a mortgage, or want one. You must really need money if you’re prepared to work retail for it.

This explains why the Rudd government has seemed distracted about the detail of the implementation side of all this spending, because its not about the project – it’s about making sure the money go round continues, with the bottom sink, or sump, being the banks.

It’s the reverse trickle down effect and it has worked a treat. It’s objective was to shore up the financial sector, and its done that in spades.

Meanwhile, the structural problems – infrastructure bottlenecks, skills shortages, overpriced housing, bubble merrily along as if nothing has happened.

And for people on $50K a year and less, nothing has.

The Man Who Wasn't There

Interesting developments in the race to be Emporer Of The World, with new data in the US showing the country is pretty much in recession. Which, of course, is no news to working stiffs in the States, as they've been pushing shit uphill with a toothpick since the big NAFTA job losses started to bite, and modern management practices meant growth went north while wages went south. In short Yanks are working harder for less. This successful business model has been having the sort of effect on the US middle class that Vikings had on monasteries in Britain in the ninth century - it's a litany of pillage and plunder from corporate America. Democrat presidential candidate John Edwards, of course, cottoned on to this sentiment writ large amongst American proles being squeezed by unsustainable credit and declining incomes. His anti-corporate position was viewed with concern, not just by Wall Street, but by hard heads in the Democratic National Committee, who have long plumped for the corporate friendly Clinton II. But this piece in The Nation by William Greider illuminates how Hillary and the ubiquitous Barak are now jumping on Edwards' Keynesian bandwagon. They're not alone, over to you Bill:

Bill Gross, the insightful managing director of PIMCO, the major bond-investment house, has called for virtually doubling the federal deficit in order pump hundreds of billions into new economic activity. When bond holders are more alarmed about the economy than political leaders, you know something is backwards in American politics.

This is gonna be one hell of a ride kids. There may just be enough fuel in the tank for this election to turn into an "I'm more left wing than you" slanging match. Bring it on I say; after all, these people are shallow enough and hopeless enough to get led around by pundits and pollsters then this is the sort of lunatic groupthink it leads to. In the meantime the architect of returning to the sanity of a pump priming economy after three decades of supply side economic madness, John Edwards, has been run over in the stampede by Obama and Clinton to seize the populist high ground. Strange days indeed. As the good Doctor would say, Mahalo

The Quiet American

The quadrennial popularity contests that are the US Presidential Primaries are being inflicted upon us again for the right to see who will take the reins of empire from Nero as Rome slowly burns. It should be a doddle for the Democrats after eight years of malfeasance under the most corrupt and incompetent Republican administration since, well, the last one. But the Democrats have an uncanny way of snatching defeat from the jaws of victory and this years fun could go the way of so many others in recent memory. Who'd a thunk that a wealthy trial lawyer could re-invent himself as a champion of the little guy? But that's exactly what the former junior senator from North Carolina, John Edwards, is doing. Edwards, but a blip on international consciousness, is probably best remembered as John Kerry's southern insurance policy in his ill-fated tilt in 2004. But Edwards has sniffed the wind and learnt fastest and best from the mid-term shellacking the GOP received in 2006 when voters turned out in droves and threw out them there Republican bums. Why? Because organised labor - the dreaded unions - outreligious-righted the religious right, by rocking (literally, if John Cougar Mellencamp is to be believed) out the vote on the first Tuesday in November and snatching control of Congress by turning those elections into a referendum on the minimum wage. Most of the dumb-as-a-box-of-hammers international media didn't get it, particularly our own wine soaked brand, reading it as a referendum on Iraq. Sure, Iraq was floating around in the background, but every credible exit poll had conflated Clinton's dictum, "it's the economy, stupid", into "it's the economy, you goddam corrupt sons'o'bitches!" Edwards got that message and has hopped into bed with organised labor faster than a sailor on shore leave into Madame Fifi's House Of Relaxation. It was telling that in Iowa he gave his final stump speech at a Steelworkers Union function in Ottumwa (which Australians probably know best as Radar O'Rielly's home town). The result is that he has come from nowhere to take second spot in Iowa and is holding up in New Hampshire. This pushed Clinton II into third spot, made the excellently named Barak Obama frontrunner and the whole Democrats nomination process a wide open free for all. Despite being all but ignored by the Mainstream Media he is saying things middle America wants to hear. He has a credible single payer health care plan and is running the most populist presidential campaign since Truman. It's not every day you hear a Presidential candidate saying stuff like "Unions made manufacturing jobs the foundation of our middle class, and they can do the same for our service economy." or "Union membership can be the difference between a poverty-wage job and middle-class security." but it's all there over on his website. But does he mean it? He's probably no Joe Hill, but his plan is to make it easier for service industry unions to organise, so obviously manufacturing would go the way of Betacam in a John Edwards America, which NAFTA is ensuring anyway. But it's the best deal working stiffs have been offered in Septicland since Franklin Delano Roosevelt's New Deal. It is also dawning on Yanks like Euclidean geometry on a 14-year-old that the good ole land o' the free mightn't be quite ready to share that freedom with either a woman or what is politely referred to in progressive circles in this week's most powerful nation on earth as "a man of colour". And sitting next to that elephant in the room is another elephant - Iraq - as this excellent piece by Scott Ritter explains. Remember Scott Ritter? He was the UN Chief Weapons Inspector in Iraq who suggested to the Bush Administration that they might wanna just hold on a cotton pickin' minute here, before Rumsfeld, Wolfowitz and all those other Loonies pushed him out the door. He seeked Weapons Of Mass Destruction here, he seeked Weapons Of Mass Destruction there, the length and breadth of Iraq, before coming up with nada; which was not what his betters in the Pentagon wanted to hear. And, as he points out, there isn't a single candidate in the whole goddam shooting match who has the vaguest clue about what to do with that stinking fish. Especially the Republicans - for whom the "surge" in Iraq is working. Thank the Lord and pass the sauce that the Nutjob Huckabee won Iowa - the man's unelectable. Scarier though is Rudy Giuliani, who is electable, and who will run a tarred and feathered Ms Hillary or Obama out of town on an iron rail - and take US foreign policy to the solarium for a few years. It shall be an interesting election, but it will be fought on domestic issues. This 'sub-prime mortgage' BS is just code for easy credit - too easy credit - but they can't call it a credit card crisis (which is what it is) or US consumerism will gridlock into a depression that will make the Thirties look like the Fifties, all on the back of what economists call 'sentiment' and what the rest of us call blind crazed mass hysteria. The US economy is going to hell in a handbasket and there isn't really much the Yanks can do except drown in cholesterol and exhaust fumes - and learn Mandarin. Someone who knows Rudy Giuliani all too well put it nicely a few years back:

Its like what my painter friend Donald said to me Stick a fork in their ass and turn them over, they're done

Have a nice day!

The Balcony Scene

Lots to move through this evening as we peruse the wreckage of what will forever be known as the Black Weekend Of Horror, and it's only 9.30 Sunday night.

Balconies and fireworks' factories don't normally rub shoulders, but they did this weekend when there were too many shoulders a-rubbin.

The carnage started when a shop awning collapsed in a torrential storm at Balgowlah, killing an unsuspecting Craig Taylor, 53, who was described by his family as a "fantastic human being".

AAP reports that 'investigators' will examine if the weight of pigeon droppings left after years of roosting in the hollow awning contributed to its fatal collapse.

Blame also fell upon the continuing ferocious weather that has led to the SES receiving 359 calls for assistance across the state.

I find this rather scary as I live about a metre from a pigeon infested balcony. Hang in there building, I need this place. My fire inspection scheduled for Tuesday is scary enough. As an anarchist I'm wary about such things.

I mean, it can't be for my benefit, as society is full of entrapments designed to kill me off, from MSG to mobile phones.

Well, at least according to the fine print.

Then on Saturday night in Surry Hills someone was having a house party - never heard of that before - when, whooshka bang, and seven people are carted off in meat wagon to St Vincent's and the RPA for their sins after a balcony gave way and crashed to the ground.

Someone probably put on Plastic Bertrand. That'd make sense. All those cokehead yuppies would be smashed by 10.30pm.

According to AAP (again) about 50 people were at the party on Saturday night in Smith St, in Surry Hills, when the balcony collapsed at the back of the premises around. Their injuries ranged from cuts and bruises to a broken arm, a broken ankle and back injuries.

Then the carnage got weird - on Saturday seven people were injured - three seriously - when a balcony collapsed at a house in the Dandenong Ranges east of Melbourne.

Luckily all this carnage is good business. Archicentre - the building advisory arm of the Royal Australian Institute of Architects (RAIA) - took the opportunity to issue a warning about unsafe balconies and decks.

Further Whooshka bang happened closer to this blogs' abode when Wallerawang got the sort of entertainment reserved for Harbour Bridges on New Years Eve.

The police bomb squad attended the scene at Wallerawang, near Lithgow, and thjough the cause remains a mystery it hasn't stopped the media howling that there were "suspicious circumstances" surrounding the impromptu cracker night.

The company? Howard and Sons.

Mr Howard explains.

"These fireworks, they're professional fireworks and they're not deemed to be extremely sensitive in that capacity," he said.

"[They] really require ignition or an ignition source, or a fire or sparks of some nature, to set them off."

Well, that's a relief. I'd never have thought of that about firecrackers, would you? This man is an expert.

When the Dane pondered Man as "How noble in reason, how infinite in faculty, how like a god in apprehension" he wasn't referring to this guy.

Amidst all this architectural mendacity a slimy banking monster decided to rise from the deep

Westpac Banking Corporation's boss David Morgan said exposure to competition from foreign banks was good for Australian banks.

For competition, read buying up one of the big four. You heard it here first - the banks are selling up and getting out. That's a vote of confidence in our economic future if ever I've seen one.

My advice is to gather together everything of value and keep it secreted in a good strongbox buried very deep.

David Morgan is set to retire - as should I if I continue to peddle this tripe as news - the difference being Mr Morgan will have considerably more digits in his bank account when he joins John Howard and pulls on the plus fours.

"This country has given me unbelievable opportunity and I want to give back to this country and to people who are starting life or going through life without the same extraordinary good fortune that I have."

We know it has - that's the problem.

Luckily Doonesbury is in fine fettle, and keeping things in perspective in the forthcoming presidential primary race - which is descending into who is going to wrestle the fiddle off Nero.

The one beacon of hope that emerged all weekend was a stirring performance by the Katoomba Krushers fourth grade cricket side, where we rallied after being dismissed for 36 in our first innings to skittle Gentlemen of Hazelbrook relatively cheaply, and yours truly managed to bat out the day for over 90 minutes and put us in a reasonable position to go for the outright.

As a batsman with an average that looks like the half life of Khomeinium, it was no mean feat. I cannot continue my not out innings next week as I am attending the wedding of This Man.

We do wonderful things for our friends.

The ACTU agrees, they've decided to agree with me and have told the ostriches how it is.

They said voters last month had rejected the former government's election advertisements against unionists.

"What we'll be doing is talking to the government and those people who are responsible (for workplace relations)," Jeff Lawrence, who is numba wan union pela these days - said today. Which isn't much - but it's something.

Things are looking up for our heroes amidst the carnage