The disappointing thing for me about OLO is that every thread seems to deteriorate into personal abuse within 2-3 pages. Play the ball not the man. Lets openly discuss the issues and try not to make personal attacks.

It's a difficult issue to work through. Let's not forget that Ron Paul is a highly qualified and awarded economist, not just a politician. He predicted that the actions of the Fed were leading to GFC, so Yabby, "its easy to be smart with hindsight" Yes that's true. But maybe we should start listening to Ron Paul, one of the few people who was smart with foresight.

I disagree with you Yabby about inflation being good for those with home loans. Your numbers are probably sound but you are not taking into account the cost of everything else rising by 4% as well. And I don't know about you but it's been a while since my pay-rise was more than 4% p.a.

I have to make a comment on blame, because I really hate people who can't take responsibility for their own actions. Yes, the banks and the Fed made money cheap and easy so are definitely responsible for "dangling the carrot" in front of the consumer. But, at the end of the day it is the responsibility of the consumer whether they can afford to take that money.
I like to use the McDonalds "do you want fries with that" analogy. Like the banks, McDonalds offer you more. If you don't want fries, can't afford fries, or don't want to get fat from eating fries, DON'T BUY THEM. If you do, accept the consequences, don't blame McDonalds.

Precious metals as an alternate currency to USD? I think along the same lines as most of the comments here, the theory of creating a more stable currency (which has long been recommended by Paul) that can't be inflated away, is probably sound, but it seems to falls apart a bit in practice.

Hey good idea, maybe Australia should get aboard. We have precious metals in abundance, or rather did have.

1997, I think, Costello decides to sell off half our gold reserves. 167 tonnes of gold for around $350 per ounce. Made us $2 billion and helped pay for his other failed investment that cost us close to $4 billion.

Today with gold at $1236 per ounce that same gold would be worth over $7 billion. Even adjusting for inflation thats a lot of bananas.

Are you sure, burbs?

>>Let's not forget that Ron Paul is a highly qualified and awarded economist<<

I know he is a Doctor of Medicine, and a qualified surgeon. But I had no idea that this extended to economics. Do you have any information that supports this?

>>He predicted that the actions of the Fed were leading to GFC<<

Yeah, sort of, I suppose. Mind you, he has been saying the same thing since the early 1970s, so it took the best part of forty years to happen. In between times, the US became a fairly potent financial force in the world, I think you will agree.

And don't forget, he wasn't alone in his predictions of fiscal doom.

There's also Barnaby Joyce.

http://www.dailytelegraph.com.au/news/sunday-telegraph/barnaby-i-predicted-the-gfc/story-e6frewt0-1225809741119

He actually has a fairly relevant degree, too. Commerce, majoring in Accountancy.

Then there was Nouriel Roubini

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

Pretty well credentialled. Economics Doctorate. Professor of Economics and International Business. Who not only predicted the generality, but also the specifics.

So forgive me if I take leave to share your view.

>>Ron Paul, one of the few people who was smart with foresight.<<

But here's something we can enthusiastically agree upon - hooray!

>>But, at the end of the day it is the responsibility of the consumer whether they can afford to take that money.<<

That's a stark contrast to the view that we are being manipulated against our will by dark forces, bent upon our enslavement.

>>Lets openly discuss the issues and try not to make personal attacks.<<

The problem is, that there are posters here who refuse to engage with the issues, but instead simply regurgitate the same nonsense, time after time.

While for the first year or so it is possible to address their lack of factual content, and ignore the massive emotional freight they carry, after a while it is simpler to direct attention to the messenger.

Who a) has not learned a single thing from previous jousts, b) has not changed a single word in the slogans put forward in lieu of argument and c) is beneath it all, fundamentally economically illiterate.

* And I don't know about you but it's been a while since my pay-rise was more than 4% p.a.*

So burbs, your salary basically keeps up with inflation. If we
stick to the 4% figure for ease of the example, after 10
years, your salary in $ terms will be 40% higher. If you made
no repayment, just paid interest, your loan would effectively be
40% less then when you borrowed it. If you sold the house, it
would be worth 40% more, all profits tax free!

Indeed its the mortgage owner who benefits from inflation. The loser
is the bank deposit holder. For the real robbers are the Govt.
They don't allow for inflation in their taxation calculations.

So if the deposit holder is being paid 5% and inflation runs
at 4%, by the time the holder has paid marginal tax of say 30% on
the full interest amount, he/she is losing money fast.

"Let's not forget that Ron Paul is a highly qualified and awarded economist"

It appears on closer examination that I may have been talking out of my arse. He has "studied" economics but I mistook that to be the formal "study" not the educate oneself version. Thanks for picking that up Pericles.

Yabby, I think we will end up having to agree to disagree.
Lets say my house/loan is worth $500K now.
I pay my interest only (6.5% on $500K over 10 years)$325K
House rises in value by 48%(taking into account the cumulative effect of inflation) when I sell it = $740K

So, I've spent $325K on interest to make a "profit" of $240K.

But, even taking interest out of the equation, where am I going to live once I've sold my house! Every other house has risen due to inflation as well so to buy an equivalent house will cost $740K now, not $500K anymore.

Where's that profit again?

The profits all in ya head. If you are worried about a carbon tax, why don't you do something about it.
Anyone that borrows $300,000 or more is going to pay back a million dollars. So if you just pay interest it would be a dead loss.
The best thing for you to do is shave off about 15 squares, of excess.
Interest rates are going up for a while yet, thank god whoever that may be.
You will crawl before you can walk.
The best business to be in is the one that doesn't cost any set up money.
If i was starting again i would be living in a modest house on the outskirts of town. With the money tradies are getting now , i would be a millionaire in 5 years.
I won't be paying any carbon tax i am self sufficient.