Thread: So what will a depression do to you.

If I were to be honest I would say I don't get the whole concept and definately cant fathem the outcome for myself and partner. If someone could explian what sorts of things happen that would be nice Then I can worry about it on my trip away.lol.

I will be living off savings for the next 3 years while I do uni, don't have any loans, debts or anything but I have no idea what will hapen to fuel, food, and the bills. We own our house and vehicles

IF fuel, food etc.. go up then my budget will fall apart... Right now I have decided $2.30 a litre for diesel is pretty much my max point. I can live cheaply on food etc.. but fuel is totoally necessary. I'm worried about it but not sure about what.

I did want to sell my house in a year and move out west further but that ain't looking very promising in this market.

Xav

You know, in 1930 the world was an entirely different place.

The tertiary industries ( eg engineering, finance, banking, insurance, computer professionals,community service) that rely on human capital (brains)were in their infancy.
The % of GDP that was taken by rural industries was AFAIR over 60% of the Australian economy, manufacturing 30% or so.

Now rural is 5%, Tertiary is 70-75% , and Manufacturing around 20%

The productivity of most industries was very low. There was NO bulk handling eg wheat was packed into bags. My first job when I was 13 in 1962 was packing bags of wheat.
There were no large mining machines. Miners dug out coal with picks and shovels. There were no computers.
Many many people worked in jobs that are now non existent, eg typing pools, bag packers, miners,farm workers who gathered in the wheat etc

In China where mining is still primitive there are thousands of miners killed each year, more than the entire number of miners in Australia.China is still a primitive economy with about 70% or GDP taken by the rural sector. I suggest that you read "Mao's Last Dancer" if you think any Chinese would like to revert to communism.

So in 1930 unemployment rose to about 40% in the USA because there was no great use of capital equipment, so farming and industry laid off a lot of their productive equipment , which was basically unskilled people.

The "workers" could not afford houses because of an immature risk averse financial system, and this remained up until at least 1970 or so. I can recall the ANZ bank knocking me back for a loan (at 3.75%) because they would NOT consider my wife's income. We went out and borrowed 95% at 11% interest from a "loan shark".
So The ability to buy houses, cars, to have a credit card, to borrow to consume are relatively new developments, and the World in general and Australia in particular has benefitted enormously.

The IMF is predicting this week that Australia will have 2.5 % growth in 2009 and 2.2 % in 2010. Seeing population growth is not that high this means that per capita income will go UP.

Posters are correct that the whole thing depends on confidence But PLEASE keep it in perspective, because some posts here hint of irrational panic. The Central Banks now have seen what happens when credit is frozen, and are working to alleviate the problem, but it doesn't happen in a day.
Regards Philip A

Quote:
Originally Posted by Captain_Rightfoot
No, so my children had a chance of buying a house for themselves one day

Well thats ok then..... Can't your children get a job, save up a deposit and buy a house like everyone else has had too?

A major price drop, bankruptcies, people losing their homes etc seems like a small price to pay so your children can get a cheaper house....

I am fully aware of the fluctuations in the house market, and if it does drop, it will go up again, but saying you want it to happen is probably not a particually sensible comment.

Id have to agree with Pete on this one. A property crash affects if you are in the market selling property....over time it will always increase. Look at people who bought land for $15000 and now it is worth $1mill plus over a 20-30yr period. When my children are looking to buy property, they will have to do as everyone else has had to. Work hard, save a deposit etc.

This whole current mantra of people can't get into the market is a load of crap. There are people who are their own worst enemies and pay for everything on credit...young and old. They are in debt to the eyeballs and one hiccup, the cards come tumbling down. My future FIL is a case in example of what can be done....he decided mid 40's to change career, went back to TAFE, did a course in IT, had nothing financially behind him. 5 odd years down the track, he is a fully qualified IT teacher, has worked hard, saved his pennies and now has 3 properties. Young folk...same thing....got a 100% home loan, got into their first property at 21&22, worked hard, got stuck in and made the repayments, have now sold it, made a profit and getting an 80% lend on their next place. I dont owe my children or anyone elses children the right to buy property when their time comes.....just like me and everyone before me, it will be up to them.

In terms of the current economic client...where is the surprise.....for many self employed....the whole of 2008 has been a tough year. I still believe Australia will fair reasonably well. Also as far as I am aware with the US, home owners can just hand over their keys and thats it, different over here, we would fight to keep a roof over our head if need be. It also can be dependant on what industry your in, line of work, current financial situation as well. Anyone can read a negative headline and run with it and to date it is predominately overseas. My old man sent me a clipping today about a unit bought off the plan for $360...sold for $165k....chances are it was a margin call, person owned it outright and was in debt to the eyeballs and need $$$ quick.

As I said in another thread, just dont read a headline at least do some research and be objective. This has been around since the beginning of the year and 10mths later people are now talking about it

Regards

Stevo

My super has taken a hiding but seeing as i won't get my hands on it for at least another 15 years I don't see too much point in worrying.

I expect my super will recover, grow and then crash again at least once before I can use it.

Until then it is staying right where it is, in the section that copped the most beating - shares, because shares show the most growth over time.

Originally Posted by PhilipA

The "workers" could not afford houses because of an immature risk averse financial system, and this remained up until at least 1970 or so. I can recall the ANZ bank knocking me back for a loan (at 3.75%) because they would NOT consider my wife's income. We went out and borrowed 95% at 11% interest from a "loan shark".

Agreed. We paid off our first very small, fibro/tile house (no garage) in about 9 years. We bought it when I was earning very good money of around $100 - one hundred dollars - per week with penalty rates. We had no furniture apart from what we bought second hand from Vinnies and similar places - except the bed, we bought new for that!

When we sold it in about '81 and needed to borrow $25K for our current house, we couldn't get a loan from a bank or building society, not even from the building society with which we had the previous quickly paid off loan. Money was almost unobtainable even though I was still earning good money. We ended up borrowing off an insurance company (GIO). The interest rate quickly rose to around 18%. I took a job in Saudi Arabia (without my family) to earn some money to reduce that debt.

Yes, I know $25K sounds like very little money but it was a fair whack at the time (about 3 Holden Coomodores).

Unlike a lot of people today, the last new car I owned was bought in 1971 - the next in 2008.

Today it seems people have to have a 2-storey McMansion with all new furniture (and lots of it to fill the large 2-storey house) plus home theatre plus two new cars. If interest rates ever rise to the level of the Eighties, those people will be up the creek.

Originally Posted by stevo68

. My old man sent me a clipping today about a unit bought off the plan for $360...sold for $165k....chances are it was a margin call, person owned it outright and was in debt to the eyeballs and need $$$ quick.

They are the bargains waiting to be found. I'm looking for a unit in the city!

Today it seems people have to have a 2-storey McMansion with all new furniture (and lots of it to fill the large 2-storey house) plus home theatre plus two new cars. If interest rates ever rise to the level of the Eighties, those people will be up the creek.

As Ron points out, these are the highest at risk people and that hasnt changed. Lose a job, economy goes sour, there is no fall back position. Some folks learn...some don't. When I lost everything in a divorce, through being one of those folks, I swore if I couldnt pay cash...I wouldnt get it. Hence didnt have a credit card for about 8 yrs. I have one now purely for paying for a few things over the net, other than that I owe money on a house and 2 cars. All our furniture, office and home equipment is owned outright.

My problem at the moment hasnt been whether rates rise or fall, it has been the slowing of the economy and hence people sitting on their hands. SME's arent buying not just because of recent events, as stated before this has been going on for 10mths. Beginning of the year, rates going up, change of government late last year, the sub prime issue overseas and inflation rising. That combined with the generally negative media has sapped the market of its confidence. Rates are dropping, fuel has dropped, hopefully things will start to improve....though it is still a bumpy road ahead,

Regards

Stevo

Originally Posted by p38arover

They are the bargains waiting to be found. I'm looking for a unit in the city!

And also in the stock market - with the all ords below 4000 points.