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Hangover Awaits After Years Of Extravagance


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http://www.smh.com.au/text/articles/2005/0...0044256636.html

Hangover awaits after years of extravagance

Date: March 7 2005

We are seeing the first signs of the pain that will follow a decade of greed, writes Clive Hamilton.

In a previous era, when rich people found themselves in financial difficulty because they were living beyond their means, their plight attracted little sympathy. Today, when the affluent complain about having to repay mortgages taken out to fund extravagant lifestyles, it becomes a matter of public concern.

Thus last week's interest rate rise has sparked a chorus of whining from wealthy people who believe they deserve sympathy because life is tough.

This newspaper carried the story of a 28-year-old with three properties whose interest bill will go up by $2125 a year after the 0.25 per cent rise in interest rates. That translates into mortgages of more than $1 million, yet he whinged about the "extra burden that young families don't need" and how he will have to sacrifice the family holiday.

It must be tough being a millionaire unable to afford a holiday.

The papers are full of "ordinary families" saying that the rate rise will make things "that much more difficult". How difficult is it to live on incomes that have been growing rapidly for more than a decade and are now unprecedented by historical or international standards?

Another paper reported the sorry tale of a Rose Bay divorcee who has borrowed more than $600,000 to live in one of Sydney's most exclusive suburbs and send her children to private schools and now complains that she won't be able to shop in Rose Bay but will have to travel "to Maroubra or somewhere like that". The ignominy of it.

These people need a reality check. They borrowed huge amounts of money to fund profligate lifestyles and want sympathy now life has not turned out exactly as they hoped, even though everyone knew that interest rates would sooner or later rise.

A survey last week found that 28 per cent of Australians with a mortgage said they'd have trouble making payments if rates rose by half a percentage point. Well, that means that 28 per cent of Australians with a mortgage are fools for entering into 25-year contracts while only thinking of the next few months.

We are witnessing the first signs of the pain that will follow a decade of unprecedented greed and luxury fever in which large numbers of Australians have bet their futures in order to meet grossly inflated lifestyle expectations. They wanted it all and they wanted it straight away. This is illustrated by the fact that interest payments on household debt as a proportion of disposable income have now reached their highest level ever.

This has occurred at a time when interest rates have never been lower and incomes have never been higher. The figure is even higher than it was when interest rates were 18 per cent under the Labor government.

For the mortgage whingers this year's "mortgage stress" is the flip side of last year's self-indulgence. Ignorant of history and deaf to the warnings, too many believed that the asset-price party would go on forever and that their own position was impregnable. So what was inherently highly risky behaviour seemed safe; after all, everyone was doing it.

The Howard Government has ridden the extraordinary debt binge to resounding political success and has been loath to spoil the party with the sobering advice and policy signals that any responsible government should have dispensed.

As long as it was riding high, it was never going to warn the public that their overspending was unsustainable; that sooner or later spending more than you earn must be matched by earning more than you spend; that the price of one asset - houses - cannot get too far out of kilter with the price of other assets; and that capitalist economies have always been subject to business cycles, and always will be.

The Government has profited from the financial illiteracy of great swathes of Australians blinded by the promise of instant wealth and egged on by tax rules that stimulated massive investment in rental property.

But now the chickens are coming home to roost. For, despite growing incomes and wealth, the lifestyle aspirations and financial benchmarks Australians have set for themselves have grown faster still. As a result, while richer than ever, Australians actually feel more deprived than ever. For those locked in to this way of thinking the psychological impact of interest rate rises will be overwhelming. A recession is unthinkable, but likely nevertheless.

The Government will be under intense pressure to bail out wealthy households in financial difficulty, and it will be the prudent who will be forced to pay for the mistakes of the reckless. This should be resisted at all costs. Not only would it be profoundly unfair, it would send a message to the imprudent that government will save them from their mistakes and they are free to repeat them.

[Clive Hamilton is executive director of The Australia Institute, a public interest think tank.]

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Haha - all the property speculators chickens are coming home to roost. I'm waiting for the big Sydney crash - the prices there are ridiculous. Fatty Beazley, the new leader of the ALP, couldnt even afford to buy a house there.

Funny how when you borrow more money than you can afford to repay it is someone else's fault.

Biggest chorus of whining has come from the left leaning journalists

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Good old straight talking Ozzies,, straight to the point, people have been sucked along on the crest of a wave.But it was ultimately their decision and they would not be complaining if prices continued to rise and interest rates stayed the same.

Unfortunately for those who bought last year and those that are buying now are going to be the biggest losers.

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Excellent i've just found my signature...

"For the mortgage whingers this year's "mortgage stress" is the flip side of last year's self-indulgence. Ignorant of history and deaf to the warnings, too many believed that the asset-price party would go on forever and that their own position was impregnable. So what was inherently highly risky behaviour seemed safe; after all, everyone was doing it. "

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Guest Charlie The Tramp
The Government will be under intense pressure to bail out wealthy households in financial difficulty, and it will be the prudent who will be forced to pay for the mistakes of the reckless. This should be resisted at all costs. Not only would it be profoundly unfair, it would send a message to the imprudent that government will save them from their mistakes and they are free to repeat them.

What! and stop the moneylenders having their boodbath. These people beggar belief. Send them to the penal colonies I say. :)

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Is it just me, or why are plasma screens such an icon of desitability? Maybe they are setup wrongly in TV shops, but the picture on them looks dreadful compared with a bog standard monitor. Why do people want them?

The little thing you have stumbled upon is the closely guarded secret that, in reality, flat panels do not display an image as well as a CRT monitor. Darn, I've gone and given the game away now - the black helicopters will be coming for me tonight.

The other thing that is not commonly mentioned is that the average life of a flat panel is about 2 - 3 years. They just aren't going to last. Sadly, the days of going into Dixons, buying a quality Sony CRT and it lasting 10, 15 or 20 years is probably now long gone.

There has been enormous discussions about this in recent years between, on one side, the traditional makers of TVs and, on ther other side, the new boys from the PC end of the spectrum who saw huge growth potential. Then it, ahem, went all quiet so you can imagine that they came to a mutual understanding.

Basically, the flat panels sold today are sold along the PC lines of "Oh well, early adopters will pay anyhow and we can get the general public to pay whilst we iron out the bugs!". This would have been unacceptable less than 10 years ago in the consumer electronics sector.

If you have a good CRT then hold on to it for aslong as you can.

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The little thing you have stumbled upon is the closely guarded secret that, in reality, flat panels do not display an image as well as a CRT monitor. Darn, I've gone and given the game away now - the black helicopters will be coming for me tonight.

If you have a good CRT then hold on to it for aslong as you can.

I do use a TFT for internet and e-mail as I like the (apparent) clarity and light. But for my design work I have to use a CRT because graphics and hi res images are better balanced and more "true". I also have a large TFT purely to see what a design will actually look like on everyone else's monitor, but I notice that the larger the screen size, even at hi res, the more artefacts and image distortion there is. Watching TV on a Plasma monitor is even worse since the relatively low res of TV broadcasting further degrades the image.

So I think you are right: Never was so much spent on something which delivered so little!

VP

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I do use a TFT for internet and e-mail as I like the (apparent) clarity and light. But for my design work I have to use a CRT because graphics and hi res images are better balanced and more "true".  I also have a large TFT purely to see what a design will actually look like on everyone else's monitor, but I notice that the larger the screen size, even at hi res, the more artefacts and image distortion there is. Watching TV on a Plasma monitor is even worse since the relatively low res of TV broadcasting further degrades the image.

So I think you are right: Never was so much spent on something which delivered so little!

VP

It's all about marketing

to give one good example - Rolex watches

Rolex have been around for many years - good watches - but too cheap for Chav appeal

Then in the eighties they more or less doubled the price, introduced copies for chav's - got Don Johnson to wear one in Miami Vice

Now everybody knows the brand Rolex

In fact good marketing is often more important than the product

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The other thing that is not commonly mentioned is that the average life of a flat panel is about 2 - 3 years. They just aren't going to last. Sadly, the days of going into Dixons, buying a quality Sony CRT and it lasting 10, 15 or 20 years is probably now long gone.

Sorry you're wrong.

http://ws4.richersounds.com/information.ph...tips_plasma-tvs

And I'd be quite happy with one. :rolleyes:

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Amazing how these posts change into another discussion!

I was in John Lewis and remarked to an assistant how poor the plasma TV pictures appeared. He said that it must be because of the communual aerial. I then pointed out the crystal clear picture on the smaller CRT conventional TV's. He smiled and admitted defeat. I also would query the 100hz ficker free television. The picture always appears pixillated and not at all sharp. Same thing when wide screen came along. As soon as a fast moving picture was on screen, such as a tennis or football match, the screen seemed to be playing catchup.

Takes me back to my old stereo cassette deck days and the Dolby noise reduction system. As soon as you switched it on the Dolby seemed to simply filter out any treble which would then deaden the sound. The number of times I went down Tottenham Court Road and tried to argue the point. Idiot experts made me out to be tone deaf.

Anyone remember Laskys?

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CD vs vinyl debate anyone :D

I still can't believe that CD managed to gain any credibility whatsoever in high-end audiophile magazines.

I understand why the masses went for them, but play the same track on a decent turntable and the sense of imagery and presence is incredible by comparison, it makes the CD sound like it's in mono.

In fact you can test the theory out, switch the amp into mono when playing a CD and it doesn't change the "stereo imagery" at all, because it doesn't have any depth in the first place.

Convenience/style always win.

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