Better than money in the bank !

There have been drastic changes in the way Australians handle their money, and recent events in the Euro zone countries are about to launch an even bigger rethink !   The option of having a healthy bank balance has lost favour in contrast to rapidly lowering the mortgage still owing on the family home.

There was panic when the GFC hit in 2008.   Many people were in the habit of using the draw down facilities of their mortgage to use the money to take holidays or buy luxury items.   The GFC quickly caused doubt on the actual value of properties and attitudes changed.   Any extra money was channelled into lowering the mortgage and this has completely altered traditional debt ratios.

Australians owe $ 114 trillion on home mortgages and we are now a whopping $ 160 billion ahead of the scheduled rate of repayments.   This is showing up in cries of anguish from the retail sector.   The days of being a spendthrift nation are over.   The primary objective has become securing our most valued asset against unexpected world finance events that may put it at risk - and the only way to do that is to completely eliminate any debt owing.

Events in the Cyprus banking sector have delivered a heavy blow to the safety reputation of the banking industry.   While there can be no comparison here between the banks of cash strapped southern Euro countries in Europe, the principle that has been applied to save a little country from bankruptcy is draconian.   For the first time, a government has decreed that it has the right to confiscate money from customer bank accounts - and limit the amount people may withdraw from their savings.    The people of Cyprus no longer have control over their own money.

The implication has not been lost on Australians.   This was not an option in the days of the " Great Depression "of the 1930's - because the average person simply did not have that sort of money in the banks.  Since then, our way of life has expanded greatly, most people have a superannuation nest egg and the numbers who own shares or similar investments have grown sharply.   The citizens of every world country are now navel gazing - wondering if what happened to people's savings in Cyprus could possibly happen in other parts of the world ?

It seems inevitable that there will be an outflow of money from banks in the Euro zone as depositors hedge their bets.  The wise will wonder what effect will pass on to the stability of the Euro if the worst happens - and one of the debtor Euro countries becomes insolvent.   The prudent would see value in at least having some funds invested in non Euro zone banking systems.

It seems that the world trade and finance regimen that we have known has entered a new and rather shaky era.  Globalization has changed the rules that used to apply and we are now all tied together in a consortium of mutual dependency.   The one factor that has emerged is that we need consensus to make this new system work - and consensus is totally lacking at the body that is supposed to regulate relations between nations.

It is this lack of confidence in the United Nations that is spurring the trend to guarantee a roof over our heads -  and seek protection from whatever the future is destined to deliver !