People who believe the good times
will soon return are harder to find these days. It’s not just the loss of trust
in our institutions and the political class but a more deep-seated scepticism
as to whether the suggested remedies will work.
The laws of economics are not
immutable. Many are mere transient beliefs that may provide a reasonable
explanation of current machinations, but when a black swan event occurs, like
the Global Financial Crisis, something outside previous experiences, the old
ways of thinking are of little help.
Likewise, our treasured institutions
have failed us. As part of the reported proceedings of the Royal Commission
into Banking, investment banker UBS estimated $500 billion out of $1.7 trillion
in mortgages across Australia, that’s one third of the total mortgage debt,
could be ‘liar loans’, based on dodgy documentation.
With residential mortgages growing
faster than the rest of the economy, our economy is out of balance. Everyone
knows it. We shuffle existing assets amongst ourselves at ever increasing
prices using borrowed funds under the mistaken belief we are growing the
economy when the reality is we are involved in a giant Ponzi scheme. Now we
discover that up to one third of the mortgage loans may be based on suspect if
not fraudulent documentation.
