Wednesday, October 05, 2005

Australia's MacFarlane says debt sustainable.

Australia's central banker, Ian MacFarlane, puts himself in the sustainability camp regarding our huge debts. A world savings glut, from lack of a safe place to invest domestically, is easily financing our spending bindge, including real estate. He points to the supposed soft landing of r/e bubble in Australia, no doubt which has been helped by the commodoties boom. I would just like to point out one thing in this rosy senario. It will only take one recession to wipe out the heavily leveraged homeowner. All these thing look good, as long as everything in the economy goes your way. But to quote Alan Greenspan, long periods of low risk premiums are invariably followed by falling asset prices.



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