From a small American hedge fund manager Praetorian Capital, an excerpt from their August letter, discussing America’s economic situation:
“While I like to point out the economic suffering of flyover country, there’s a certain brilliance to how our economy is structured today. Simply put, the world produces goods that we consume, goods that are often cheaper and of better quality than we ourselves could produce here in America. Then they even lend us the capital to purchase their goods. Honestly, there’s a certain irony of poor people in sweat shops, earning minimal wages, and then lending us their meager savings to buy the goods they’re toiling to produce, but that’s effectively what’s happening. Then, when the wealthier citizens of these poor countries, those who own the sweatshops, take their profits in Dollars, they often recycle those Dollars into our financial system, buying our financial assets, making our Dollar stronger, and increasing our capacity to buy more products from their sweat shops. Given the size of the bubbles engendered, which have warped everyone’s perceptions of valuations, we no longer even have to trade them productive assets for their recycled Dollars. Instead, we sell them shares in various Ponzi Schemes and FartCoins. You may laugh, but we’ve been doing this for decades now—remember CDOs Squared?? It's an amazing system if you’re at the top of the pyramid, and I understand why no one wants to make changes”.
A similar thing has happened here, except we are a little more privileged and live in a continent stuffed with iron ore, natural gas, coal, gold and agricultural goodies - and there are only 27 million of us to share it between.
Buggered if I know how this is all going to play out for either Australia or America. But I suspect ongoing government deficits and increased inflation (despite today’s rate cut) are a near certainty. As will be Australia copping an increasingly heavy hand from China.