rates rising, RBA confident of bumper Christmas,

There is always a great deal of discussion about consumer confidence going into Christmas. It is a busy time of year for travel, tourism, retail, groceries, etc. In October businesses, government and households were holding their breath leading into this busy spending period - mostly hoping for continued low interest rates, ie. cheap money, easy money. However, the reality is that easy money is easily spent and as such the money flowing through the economy is starting to speed up again. As money speeds up, businesses need to hire more labour. As labour demand increases the RBA is moved to act, in this case rase rates early so that the economy doesn't bounce back too hard, so it raises interest rates, ie. tightening the money supply, effectively making money (borrowed money) more expensive.

There is caution because of what economies have just come through in the last year or so, note this article in response to recent interest rate rises (october): http://www.theaustralian.com.au/business/news/rba-rate-rise-premature-says-anz-chief-mike-smith/story-e6frg90f-1225792367182
But despite the recent interest rate rises this is what we have just found out, in fact will lead to more rate rises(december): http://www.theaustralian.com.au/business/markets/fall-in-unemployment-rate-fuels-case-for-rba-to-lift-rates-in-february/story-e6frg926-1225809074692

There are a range of mechanisms for fine tuning our economy so that it doesn't grow to quickly - overheat; cause price instability; inflation - or too slowly - recession; unemployment; stagnation - quite a difficult balancing act. It is interesting stuff to learn more about, to watch the RBA in action as they attempt to create conditions which favour long run growth and price stability, it is also very interesting watching people squirm as rates move - there'll be more discussion on this. In the meantime, enjoy the bumper Christmas spend and get swept up in the event. Whilst your doing it, make sure your doing it on debit.

Thinking of buying in to the ASX?

Profit taking, high dollar acting as a break on the economy, yet our big miners continue to grow.
The news headlines in this last week are of real interest to anyone considering buying in to the ASX soon. Use the hyperlinks for each company to see the chart with recent price movements - note into your workbook the percentage rise, fall or volatility - chocolate prizes in class Wednesday!
http://www.theaustralian.news.com.au/business/story/0,28124,26218546-20142,00.html

Does the news from the last few weeks give us any confidence about the timing of our current investments? Read this next blog before you come to class. Bring some summary notes so that we can discuss... http://blogs.news.com.au/news/smartinvesting/index.php/news/comments/market_timing_an_investors_game_of_chance/

What stocks were tipped as 'sure things' at the beginning of the year?

http://www.news.com.au/business/money/story/0,28323,24846506-5013953,00.html
Why don't you start building your understanding of the Australian stock market with this article. You can see it is an attempt to summarize the best/safest options for investment this year. Take some notes identifying why each stock was recommended, do some research to find out what certain terms mean or ask me Wednesday. Finally, check out the chart for each stock and see how they've performed through the year. (you can use the charting tool supplied by The Australian - the link is in your email from Friday)

The worst is over? Stimulus working?

http://tools.goldcoast.com.au/stories/32711621.php - the negative data continues to reveal that the GFC is far from over. Personal debt levels are still far too high, people cannot afford the debt they have accumulated to accrue the assets they aquired in recent years! So much wealth was 'created' in the last decade, but much of it created on speculative demand fueled by cheap debt - whilst the initial crisis have occured there will be continued effects for some time as many households and businesses have managed to avoid failure so far, but surviving the slowing demand conditions, potential unemployment and higher interest rates will cause more pain for lenders and borrowers in coming months and years.

This sentiment needs to be understood alongside summaries such as this http://tools.goldcoast.com.au/stories/32928221.php where the Tresury Secretary emphasises the need to continued government intervention in driving economic growth as domestic demand would otherwise have us in recession right now.

Do these two articles get you thinking about the appropriate role of government in markets and managing aggregate demand?

Value: Why does gold continue to appreciate?

Matt Whittaker from the Australian reported through the week some insight into this important investment commodity:

www.theaustralian.news.com.au/business/story/0,28124,26095531-20142,00.html

Understanding: Why is gold so strong at the moment?

Interpretation: Why does Frank Lesh say that 'gold is the new international currency'?

Wider reading: Is there some history to the idea of gold as an international currency or standard?

Signs of recovery in some of this weeks' statistics?

Why does Adam Carr suggest that the message is inconsistent? Is there a good reason for this?
http://business.smh.com.au/business/rba-optimism-grows-20090721-drfi.html
Do you think this article reads as one of pessimism, caution, or optimism?

Time for a pay rise? Why? Why not?

http://www.theaustralian.news.com.au/story/0,,25784272-2702,00.html According to the article Why shouldn't the minimum wage rise as much as is requested? Who are the stakeholders concerned?

http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/men_out_of_work/ This article focusses on a particular demographic hit by unemployment, read the posts below the article and note what some are suggesting about unemployment figures being inaccurate - describe for me why these people aren't yet measured as being unemployed.

http://www.smh.com.au/news/world/british-airways-saves-20m-with-voluntary-pay-cuts/2009/06/26/1245961406184.html Something quite unusual happening to employees at BA. What does the article suggest: Is this reasonable? Is it going to help the company? Could it jeopardize future wages and conditions?