There is too much doom and gloom.Money is only the oil that lubricates the economy.We have turned it into an commodity so the most unproductive sectors of our economy prosper at the expense of real growth.
We here in Aust don't really manufacture anything and have a balance of payments deficict of $560 billion or $50,000.00 for every working person with record sales of resources.
It is very easy to find reasons why our economy will fail,so don't just let negative thoughts ruin your day.
Letting China and India make everything was a big mistake,since if a crash does happen ,then the service industries which form the basis of our economy will evaporate.Gee you lot depress me.Can someone say something positive about Aust industries?

Col Rouge
So much for old men among whom I am numbered. FDR was credited from lifting the USA out of the depression and said the following,
Roosevelt’s Inaugural Address – 4/3/1933
… “the withered leaves of industrial enterprise lie on every side.”
“Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.”
“In our progress towards a resumption of work we require two safe guards against a return to the evils of the old order; there must be a strict supervision of all banking credits and investments; there must be an end to speculation with other people’s money and there must be provision for an adequate but sound money.”
Time has proven that unregulated banking will eventually lead to a disaster but as the comedian Will Rogers said, "There have been three great inventions, fire, the wheel and central banking." Moving away from regulating the supply of money and allowing banks to create money under the control of only their capital adequacy ratio has played a major role in the current predicament and is the cause of the high fees now charged by all the main banks.
It can be argued that we have high levels of employment but much of this is only in manipulation of money and paper certificates or in jobs no better than taking in one another's washing. A good example would be that every wisit to a doctor keeps two or three people employed collecting insurance money and tax and paying some of it back to us. yet we are short of nurses. Some jobs, enterprises and transactions are far more important than others!

Col Rouge

Has asked me:

'What qualifies as “productive investments”?'

Put simply, a productive investment is made when one invests in an activity that adds to the supply of goods & services.

And to correct the record - I was suggesting that speculation in the price of established (or existing) homes is non-productive.

Building a new home by way of contrast, is productive. It adds to the stock (or supply) of houses.

a nice, straightforward & obvious example of passive vs. productive investment.
A passive investment can yield an income or capital gain without adding anything to supply.

Passive investment profits through changing ownership. It has nothing to do with adding to the supply of services.

This is not to say that all speculation is in non-productive enterprises. One might invest in say, a rural or manufacturing business with a view to making a short-term gain.
The price of that investment when (bought or) sold may exceed its underlying value but at least the company is producing something.

Excessive speculation nonetheless is essentially non-productive regardless of whether the investments are passive or not.

A speculative investment is made in anticipation of selling at a higher price for short-term capital gain rather than receiving an income through long-term management of the asset.

Excessive speculation (asset-price inflation) occurs when the price exceeds the fundamental value. To avoid a loss then, the speculator will need to sell before a ‘correction’ occurs.

Speculation in short, is gambling. In excess it merely inflates asset-prices without commensurately adding to productive capacity.

While speculation & correction will always occur, polices that encourage excess - bubble markets, crashes & recession are simply bad policy.

Col Rouge said:
“Where two parties make a contract, for any reason, is where “economic activity” is generated

Those two may be the punter & his bookie, that doesn’t necessarily constitute a productive activity.

Col,

We here, the young & the old, are perfectly capable of distinguishing between passive investors & service providers or production & gambling.

This issue is highly significant & real. Definitions, obfuscation & semantics won’t diminish it.

-Mr Smith

Yabby “It seems to me, that the market is slowly sorting things out.”

As it always has done and always will.

One certainty, government intervention never has done and never will.

Foyle, as I approach my 7th decade, I too could claim to be among the “old men” .

However, I still value the spirit, energy and aspirations of “youth” (and still feel the blood course through my groin).

Maybe that is what separates us.

“manipulation of money and paper certificates or in jobs no better than taking in one another's washing. . . . Some jobs, enterprises and transactions are far more important than others!”

I would observe, for a person in good health, with dirty laundry and no time, the efforts of a laundress is more “productive” than , say, a nurse.

As for “more important”, surviving in the market determines how “important” (or otherwise) any enterprise or job is.

Mr Smith, your theory re passive investment is illusory.

An older existing property, available for rent, is an equal participant in "rental supply" with a newly built property.

Add or take away either source from the rental stock and supply diminishes, regardless of the age of the building.

I would note, “short term capital gain” (your speculative investment) is already treated differently, under the existing tax acts to “longer term” investment.

“Those two may be the punter & his bookie, that doesn’t necessarily constitute a productive activity.”

Who are you to judge the “merit” of someone elses speculative / investment decisions?

Personally, some “investments” I thought I was making would, in hindsight, have produced a more “productive result”, had I spent the money on a day at the races.

Money is a commodity, it has no morals.

Pretending that some “investments” are more virtuous or noble than others, because of their nature is, only observable in terms of their “end product”.

Typically, one rental property is synonymous with another, subject to size and location.

Perhaps you will illuminate us with your analysis to the “productive merit" of say: DefenceSA versus TAB versus Luna Park?

Yabby “It seems to me, that the market is slowly sorting things out.”

Unfortunately it'll do that through something called a depression. I don't know about you, but I'd rather avoid such a situation.

Col Rouge: "One certainty, government intervention never has done and never will."

What a load of utter idealistic tripe. The extremist view that the market is an all solving mechanism to solve every problem will cause as much damage to our economy as pure communism did others.

I don't think Foyle quite made the point with his washing example, so I'll give it a go: Imagine I have a widget that I sell to my neighbour for $1, and he sells it to his neighbour for $2, and so on for $3, $4, etc. The end result, once passing around all 20 million odd Australians is we've created $200 trillion of 'economic activity' and everybody has made a dollar! But really we've done nothing at all. Although everyone has 'invested' to their own financial benefit, no wealth has actually been created.

Col Rouge: "An older existing property, available for rent, is an equal participant in "rental supply" with a newly built property."

The changing of ownership of an existing property does not add to the rental supply like the construction of a new one would. Both would be weighted equally in terms of economic activity and create equal individual wealth, while only one increases the total wealth of the society.

Money and the market are tools we use to manage the division of wealth within our society. Some investors make money through investments that take wealth from others. Some investors make money through investments that actually create wealth. We need to do more to encourage the later.

We are consuming far too large a portion of our resources fighting each other over the wealth instead using them to create more wealth to go around.

If you really want to know where all the wealth goes,study the symbotic relationship between lawyers and insurance companies,whereby litigation creates the need for insurance and lawyers feed off the spoils.Consider also the banks,money spent on crime/policing,more insurance because we are becoming more dishonest,Govt waste and corruption,social security beauracracy,fraud and waste,money spent on arms a and incompetent defence beauracracies that cost us $billions.You only have to look at the classic of all monumental stuff ups,that of the NSW Iemma Govt.The list goes on.
Speculative fever is only one of our woes that need to be fixed and we had better start by making Govt more responsible.We need a rationalisation of all our Public Services.