Don’t anybody mention the war (Household Debt)

This comment was made this week at http://www.macrobusiness.com.au  (link may be locked but there is a free trial available)

http://www.macrobusiness.com.au/2015/02/treasury-greybeards-warn-australian-financial-crisis/#comment-1086849

Not sure about retired Treasury officials, but is pretty clear that the current crop have been struggling, over an extended period, to make decent predictions.

The reason for that would seem pretty clear – their models for understanding the world and Australian economy are defective.

Slowly, ever so slowly we see are starting to hear the occasional mention of household debt.

Until that topic – the ending of the housing debt boom’ – is being discussed right alongside the end of the mining boom in every discussion, we are going to go nowhere.

For the simple reason that any solution MUST include a plan for dealing with household debt.

The current nutty extend and pretend approach of ZIRP / NIRP is simply delusional. At least it is delusional when it is discussed without any acknowledgment that it is extend and pretend.

Everyday we hear pollies from all parties and business leaders rabbit on endlessly about the government debt but completely ignore the private sector debt as though it doesn’t matter.

If those debts and defaults on them did not matter the RBA would not be driving down interest rates to zero.

The myopia of the public debate – outside a few locations like MB – is simply astounding.

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