The End of Australia?

The End of Australia is a provocative title for a book.

It’s alarming. It’s upsetting. And it goes against much of what we hold to be true about this great country of ours.

As such, the title of a new tome by Markets & Money’s Vern Gowdie, The End of Australia both resonates and rankles with our everyday experience.

We all sense that something is amiss, but we’re living much as we have before. Despite the air of gloom, in many respects, we’re materially wealthier than ever.

Yet those among us unable to shake this feeling of unease are left to belabour Australia’s addiction to debt. We rail against policymakers meddling with interest rates. We shout about unaffordable housing and property bubbles. And we make endless predictions about an impending market crash.

When people first hear of this cautionary message, they sit up and take notice. Losing the fruits of a lifetime’s worth of work is enough to get anyone’s attention.

But, as this message repeats and nothing changes, most people grow tired of hearing it. Their direct experience tells them that nothing terrible is going to happen. Life is much the same as it’s always been.

Eventually, some graduate to outright scepticism, accusing the alarmists of fear-mongering.

If any of this describes you, you’re not alone.

Many people out there feel jaded by the negativity they hear, increasingly opting to tune it out. They see house prices and stock markets rising and wonder what all the fuss is about.

And, you know what? They’re right.

In truth, there is no ‘end’ to Australia. Australia was here long before the mining boom. It was here prior to this current ‘golden age’ of 25 recession-free years. And it’ll be here after whatever adversity may come our way in the future.

Let’s face it: A good number of Australians would weather a depression, let alone a recession, without losing the roof over their head or going hungry. And, as challenging as life might become for the less fortunate, people would find a way to get by. They always do.

So why is the message in The End of Australia so important? And why should you care?

For starters, it’s true that The End of Australia lays out a scenario in which markets potentially fall by up to 80%.

But it goes beyond that.

It points to an invisible process that’s been building for years.

Capturing the essence of modern-day Australian beliefs, The End of Australia speaks of the growing friction between expectations and reality.

For example, whatever financial freedom you’ve attained in life has almost certainly become the benchmark you judge all future achievements against.

Say you have a property that goes up 15% in one year (in Sydney and Melbourne, this has become the expectation). That becomes your new benchmark for future performance.

Should your home only rise by 2% in value the year after, you’d be disappointed. If it was to fall by 2% a year later, you’d be irritated. Now, if it was to fall 10% another 12 months down the line, you’d be fuming. Forget that you’re 5% better off than you were at the start. You certainly don’t feel that way. You feel poorer.

You can apply this to anything, be it your savings, the value of your property and stockholdings, or even your wages.

When you become accustomed to setting new benchmarks year after year, you begin to take what you’ve attained for granted. You expect things to keep improving.

This is something Australians know all too well. We’re a nation accustomed to more of everything, not less.

But you can spin this idea the other way too. Gradually-deteriorating financial circumstances become new, lower benchmarks. Over time, this leads to an acceptance of declining living standards, even though we may not even acknowledge that it’s taking place.

The most obvious example is the way in which inflation and low-wages growth work to erode the standard of living. When basic necessities become more expensive, even as wages remain stagnant, it hurts us financially. We’re paying more for less, with less.

Does asset price appreciation make up for this?

Perhaps, but this is largely the outcome of expanding credit. Credit is cheap, so people borrow. That drives up prices, which attracts even more debt-addled people into the property and stock markets. And so on…

The fleetingness of permanency

No matter how good or bad Australia’s economic situation becomes, we will always measure our current circumstances against the past.

The only problem is that Australians have no recent experience of economic relapse. For a quarter century, we’ve only known good times.

Because of this it’s impossible to genuinely prepare for hardship.

The End of Australia is a reminder that permanency can take many forms. A life of permanent hope can slowly degenerate into one of permanent despair.

More than anything, we’ve been blindsided by our own faltering expectations. And we don’t even realise it. We expect inflation. We accept record low wages growth. We tolerate ever-decreasing purchasing power. And we fool ourselves into thinking things have never been better.

Again, none of this is to say that Australia is going to implode. It isn’t. We’ll be fine in the long run, calamitous market crash or not. We’ll be fine because our inability to accurately measure the present against the past is leading to an acceptance of mediocrity and decline.

The End of Australia is your window into discovering how this happened, why this process is irreversible, and how you can make sure you lift yourself above the national benchmark of decay we’re mired in.

You’ll find everything you need to know here. Don’t waste another moment.

This week in Markets & Money

Last year, Treasurer Scott Morrison vowed to fix the budget deficit by paying down government debt. On 9 May, we find out how successful the government’s been at delivering on this promise.

Unfortunately, as Vern noted in Monday’s Markets & Money, the government may not be given the time to shore up the budget. The pressures from the greatest asset bubble in history could result in markets rupturing at any moment.

In the meantime, the government will likely look to raise taxes to shore up the budget. Expect to see any one of the 125 taxes Australians pay each year up for review, with GST and superannuation ranking high on the list.

With the government using a finger to plug a leaky boat, Vern says your only choice is to save your skin and start living within your means. For more on this story, click here.

Gold has been unkind to investors of late, as Jason highlighted in Tuesday’s Markets & Money. Gold was down almost US$60 from late February early this week.

Jason predicted gold would have its revenge, though, bouncing towards US$1,230 an ounce. And he was spot on. Gold was tracking just below that level yesterday.

What’s behind the precious metal’s latest surge? You’ll find all the details here.

Shifting now to black gold, on Wednesday, Jason explained why OPEC’s manipulative oil strategy is backfiring on the oil cartel.

Last year, OPEC announced it would freeze crude supplies at 1.2 million barrels. It was a tactic aimed at artificially bidding up oil prices. Unfortunately for OPEC, artificially-higher oil prices have helped resurrect the US shale sector. With US oil production at record highs, oil production is set to hit 10 million barrels a day over the next 12 months.

For crude oil bulls, the situation doesn’t look good. For more on the troubles facing oil producers, and where the oil price is likely to head in the short term, click here.

On Thursday, Vern again took aim at Treasurer Scott Morrison. This time over Morrison’s claim that the property market reflects ‘real prices and values’. As Vern noted, the prices and values are real…until they’re not.

History shows that expanding credit and debt accumulation never ends well. Asset values do not grow forever. These ‘real’ values and prices are not backed by real fundamentals. They’re supported by greedy investors using borrowed dollars.

But, in the end, the real truth always wins out. To find out why, click here.

To close out the week, on Friday, Vern had a simple message for readers: Brace yourself for 0% returns over the next 12 years. The evidence is damning. It’s a timely warning about the future facing investors already scrambling for returns in a low-growth world. Click here for the full story.

Finally, before we leave you, a reminder to tune into this week’s Financial Anarchists podcast.

In this week’s episode:

How Tesla shareholders are being held hostage…

How long do we have before we hit ‘Peak Australia’?

Can Australia snatch the world record for quarters without a recession?

Why Bill Evans is the only person still confident in Australia property…

And more…

Click here to listen to the podcast.

Until next week,

Mat Spasic,
ForMarkets & Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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