Dear Ronald,
Making dire and what appear to be apocalyptic predictions on the future of Australia contrasts with my normal optimistic disposition.
However, after a decade of research and analysis, the reality is what it is.
There’s no point trying to gloss over the overwhelming evidence that we are in the midst of the greatest debt crisis in history by saying ‘she’ll be right mate’.
Of course, this would be a far more comforting message, but one that would be highly irresponsible.
Government, institutional economists, real estate agents, share brokers and financial planners are not going to tell you anything other than ‘she’ll be right’. Why?
For two reasons.
Firstly, I think the majority have absolutely no idea how we have arrived at this point of no return.
They think going deeper and deeper into debt is normal. After all this is the way it has been for all their adult lives. They point to the world’s recovery since 2008 and genuinely think central bankers have figured out how to save the world with printed dollars. Why worry? The Fed has our backs. In simple terms, they are clueless.
Secondly, and I think far more immoral, are the minority that realise the system is a giant Ponzi scheme but have no intention of revealing the economic fraud and endangering their capacity to milk this sham for all its worth. The insiders have their parachute strategy in place and will have taken the necessary precautions to protect their wealth while the masses (as usual) suffer the horrific financial consequences.
The Australia of my childhood is a world away from the Australia I see today. We have embraced the great Australian dream of property ownership (plus a few more rental prop¬erties thrown in for good measure) irrespective of the level of indebtedness this ‘dream’ requires. More credit is used to furnish the ‘dream’ with the latest mod cons, pool and land¬scaped yard. Gone are the backyard ‘test matches’ and rugby league ‘grand finals’.
The bank managers of yesteryear were prudent and not afraid to say ‘no’ to those they considered less than credit worthy.
Since the 1980s the banking industry has prospered more than any other sector of the economy. The simple formula for the banks’ success has been fractional banking — the ability to charge interest on money that does not exist.
The more money central banks conjure up out of thin air,
the more profit banks make…
The proliferation of ‘funny money’ has been a game changer for the banking industry. That’s why the big four banks occupy the top five places in the All Ordinaries Index. The once honourable profession of banking has been reduced to an industry of ‘product floggers’.
The bank managers of old who failed to adapt to this new aggressive approach of meeting sales targets, were shown the door. This new age banking model may be highly profitable, but it has also made the financial system highly vulnerable.
When the next crisis hits and banks buckle, questions are going to be asked as to how we let this sector become so dominant. Sorry, but this will be too little, too late. The bank execs who oversaw this flawed business model have taken their bonuses and run.
With three adult children of my own, I often reflect on the differ¬ence in my starting position at their age. Housing was far more affordable based on a multiple of household income, there was an abundance of employment opportunities, and we didn’t have student loans. By comparison, life seemed a little easier.
Ironically I feel the coming collapse will, in the fullness of time, be seen as a positive for the younger generation…the ones who are not overly indebted with loans for overpriced houses.
Hitting the reset button on the global economy may, in the longer run, produce a couple of obvious positives.
Property becomes more affordable. And a culture of prudence and respect for money is restored to society (much like my parents had from their experiences during The Great Depression and the Second World War).
The continued accumulation of debt over many decades has influenced government entitlement policy, financial markets, economic growth and our attitude toward money. Nearly every aspect of our lives has in some way been directly or indirectly impacted by a multi-decade long credit-fuelled consumption binge.
For example, would we have so many factories in China pouring out tonnes of pollutants if we in the western world had acted with restraint in our purchasing habits? Probably not. Indirectly, climate change is a result of our love affair with debt.
To combat climate change, governments are all now thinking of implementing various (costly) carbon reduction schemes. Perhaps when the next crisis hits, these schemes won’t be neces¬sary, as a good number of the factories will cease to operate.
The views I have expressed in this book have been ones I have held for a number years.
The risk with publicly stating your views well in advance of a potential crisis is you invite calls of the boy who cried wolf.
The more time that passes and nothing happens, the louder the calls become.
The one thing I have learnt over the years is that you cannot time markets. Vested interests, powerful media messages and momentum can delay the inevitable outcome for much longer than you might think possible. This is when patience is required.
Sir Isaac Newton, to his great cost, learnt this lesson in 1720. Newton invested in the South Sea Company in early 1720 and sold out several months later for a handsome profit. Rather than take his profit and wait for the South Sea bubble to burst, he could not resist the lure of a market that continued to rise. Impatience got the better of him. A few months later he bought back in — at three times his original buy-in price — and the rest as the say ‘is history’. The bubble burst and Newton lost his life savings of 20,000 pounds (about $3 million in today’s dollars).
With plenty of time to think about his losses, Newton mused, ‘I can calculate the movement of the stars, but not the madness of men.’
The GFC was warning us of the madness of continued debt accumulation. The central bankers drowned out this message with printed dollars and suppressed interest rates.
The madness continued…the world is US$60 trillion
further in debt than it was in 2008
Once again the market will call time on this madness. Next time the message will be so loud and so clear central bankers will be rendered impotent to stop the market from doing what it should have done in 2008.
Yes, I have been early on my forecasts. So be it. The Fed has paid an extremely high price to buy seven years of ‘calm’. I did not anticipate this level of intervention…it has been, like a lot of things since 2008, without precedent.
Investing in cash is the equivalent of Noah’s Ark. When the markets wash away all in front of them, your Ark of cash will float above the flood that rages below. But you must build your ark before it rains. They mocked Noah, but he had the last laugh. Take the time now to get your house in order. Follow some simple rules.
If you have debt, make a determined effort to pay it down more quickly than you otherwise would have.
Do your budget, and learn to live within your income.
If you have investments and/or superannuation, move at least some, if not all, into cash. Take profits voluntarily now rather than be forced to realise losses later.
Above all, be patient. These things can and do take a long time to play out. Above all, be patient. These things can and do take a long time to play out.
Finally, I hope this book has been of assistance to you in formulating your strategy to not only survive but eventually prosper from The End of Australia.
As dire as the current situation is, I believe the end will pave the way for a new beginning. An Australia that’s not addicted to debt. A nation where our children and grandchildren no longer have to bear the burden of our over indulgences.

VERN, YOU NEED TO UNDERSTAND, THAT UNLESS THIS NATION REPENTS AND RECOGNIZES GOD’S SOVEREIGNTY, JUDGEMENT WILL COME.