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March 2004 | |
Interview: Baby Bust Safety: Dust To Dust Bad Boss: Shaming in Print National Focus: Work's Cripplin' Us International: Bulk Bullies History: The Battle for Kelly's Bush Economics: Aid, Trade And Oil Review: The Art Of Work Poetry: Sew His Lips Together
The Soapbox Sport Politics Postcard
Be Afraid
Taskforce "Disgraced" in Court Jockeys Down by Width of Strait Bracks Spin Machine Towels Nurses Good Will Still Hunting on Rail Developer "Monsters" Safety Cop
Crucifying Refugees Saving The Planet
Labor Council of NSW |
The Soapbox Iraq and Your Mortgage
******** But before we get to Iraq lets look at how we became so hooked on borrowing again. Already, our debt burden is back to the level of the early 1990�fs. But then interest rates went to a whopping 17and a half percent. Many people simply walked out of their homes, as prices crashed creating unbearable interest bills. But banks both here and overseas found out something quite strange. Most people continued to meet their mortgage payments even though repayments had doubled and some even owed more than their house was worth. So when this housing boom began in the late 1990�fs, banks felt quite a bit more relaxed at lending more on housing. Writing mortgages was even safer than they had thought. But these days, you don�ft get a house in most cities under three or four hundred thousand dollars, which means borrowing a lot. Even a small increase in interest rates now has a big impact. So how much more of an interest bill can we take? At some point interest rates will affect both house prices and new activity. When that happens, people will see their equity vanish and be asked to pay more for it. And because so much economic activity has been caused by the housing sector, the end of the housing boom could well slow economic activity. This could produce a new recesssion. Which brings us back to Iraq. Formal fighting has ceased, but the US military is still spending hundreds of millions a week there. This is one factor in the US budget deficit running at about $400 billion a year. While this has pumped lots of money into to the sluggish US economy, it's placing pressure on global interest rates. The US is hoping to quickly leave Iraq and hand over to a domestic government. So the fate of global interest rates hinges partly on whether the US military campaign in Iraq can be wound up quickly.
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