Australia’s Place in the World of Debt – An Each-Way Bet On The 21st Century

Australian government debt (Federal) crossed the $200 billion barrier last year. In a few short years, then, the government has gone from a modest $20 billion surplus to a $200 billion debt. That debt is still small as percentage of GDP compared to the US, Japan, and the UK. But it’s a lot larger than it was a few years ago…and once these things get rolling, they have a way of building momentum.

Incidentally, for you Poms out there, the UK has passed the £1 trillion debt level for the first time in its history. Government debt is now 64% of GDP. Well done Anglo-Saxons! But you’ll have some work to do if you want to catch up with our homeland. US government debt is over $15 trillion and counting-more than 100% of US GDP.

You can see where all this is going, can’t you? Systemic, chronic public sector debts in the Western world. Low productivity. Lazy people. Distorted incentives. Corrupt finance systems. Rot, corruption, putrefaction everywhere. Zombies running the show…zombies with no brains, but a bottomless appetite for the contents of your wallet and an increasing determination to strip you of your pride, dignity, and liberty in public places.

Pretty encouraging, isn’t it?

But wait! We have reached an epiphany of sorts in the last week. We don’t care anymore. About the zombies, the Greeks, the central bankers, the politicians, and the ne’er do wells. We finally realised they’ll always be around.

Things might be a little worse now than in the past. And it may get worse still. But you’re not going to change it. You just have to figure out how to live with it, survive it, laugh at it, and, when you can, punch it in the mouth if it gets too intrusive.

That doesn’t mean we won’t be analysing things in detail and figuring out what to do. But we’ve given up taking a lot of it seriously. Seriously…how long can you pretend that Greece will not default…and how long can you take each new round of negotiation seriously…before you realise it’s all a big charade designed to delay and obscure a simple fact?

And what is that fact? The fiat-money-based global credit boom has gone bust. The Welfare State model is broken. Much of the world is broke and will face lower standards of living for many years as household and government balance sheets are rebuilt. A great many people will endure a lot of personal pain and privation because they were led to believe the world owed them something.

The golden parachute, so to speak, for Australian investors, is that while Australia has the same economic DNA as the UK and the US, and is subject to the same financial and cultural diseases and decay, it’s also in the same economic ecosystem as China and India.

The Eastern ecosystem could replace the Western one. If it does, Australia can exist in a peaceful, prosperous, symbiotic relationship with those rising powers, if it adapts to the new circumstances of the global economy. Or it can fail to adapt and view its regional neighbours as predators.

But if you think we’re taking this East-West passing of the torch business a bit too seriously, you should see what Warren Buffett is up to! The greatest investor ever, turned rent-seeker extraordinaire has serenaded 1.2 billion Chinese in honour of the Lunar New Year, celebrated on Monday.

Wazza, working on the railroad, all the live long day

Wazza, working on the railroad, all the live long day

Source: YouTube

In the Chinese calendar, 2012 is the Year of the Dragon. Is the Oracle of Omaha, a man who says he’s still bullish on America, placing an each way bet on who will win the commanding economic heights of the 21st century? Or does he just like trains and ukuleles? More to come…


Dan Denning
for Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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7 Comments on "Australia’s Place in the World of Debt – An Each-Way Bet On The 21st Century"

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“The Eastern ecosystem could replace the Western one.” No it couldn’t and never will. A key to understanding the working relationship of nations is seen in this Scripture: “God shall enlarge Japheth, and he shall dwell in the tents of Shem and Canaan shall be his servants” (AV). “he” refers to both God and Japheth. This post concerns the Japhethic interpretation. Modern Japhethic nations include Japan, South Korea and China; while modern Shemitic nations include Britain, America and Germany. (France is western Japhetic). God’s design was that the Shemitic nations, one in particular, should provide the ‘umbrella’ that all nations… Read more »

Imagine public servants losing their 12% super, 9 day fortnight and actually having to be productive. There will be riots in the streets.


Re Comment Number 1. Stay off the drugs..

Unfortunately watcher, any narrative that owes its existence to a body of work created by institutions committed to the “chosen ones” narrative leaves me cold. I was reading Gibbon and his Decline and Fall of the Roman Empire this week and found his description of the radical Roman reaction to the Christian “sect” and the Jews quite usefull. He set about describing why Rome would not have continued its tradition of tolerance toward religious traditions of all manners within and beyond their own empire when it came to dealing with the Jews and Christians. His answer on the Roman elite’s… Read more »

Watcher7’s comments are no stranger now than they were back in late March 2009, when he predicted: “The peak to trough fall in Sydney house prices maybe anywhere from 60 to 80 percent, in the Next Great Depression…”

“ ‘Now these always go well, and we know you like them,’ the auctioneer, Gary Murphy, says, referring to a one-bedroom flat in a large block in the Dublin Docklands. ‘You’ll look back at this day and think, I could have got that – it’s just so cheap,’ Murphy encourages, as the bidding reaches €110,000. It sells a few minutes later for €124,000; at the height of the Irish property boom in 2007, similar flats in the same block sold for €390,000” (Philip Watson, “Ireland at the end of the road”,, January 14, 2012). “Ireland’s landscape is dotted with… Read more »

Moray (27/01/2012) is definitely onto something here.

Ireland? You’re raising my ire, son… :D

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