The world is giving a big vote of no confidence in the Aussie dollar. Why would that be, i'm wondering, if our banks are so strong? What do they know that we don't?

Now I can afford to change my pounds, suddenly I'm scared.... At least in the UK deposits are guaranteed, up to a point. Not so here. If I change my pounds, how safe will they be?

Gulp. What to do...!

Profit takers as most people have now moved into cash I would say exchange rates will move around with the swish of the money as its swished around to get the best return for the investors. Everyone moving into cash has certainly not helped the share market but unfortunately some of us live on our investments so we have to go to cash.

Also we are affected by the commodities and if China cannot sell we cannot export as much raw material and the markets react to these things, in fact the markets react.

This is the time we find out that those multi millionaire investment bankers are no better at predicting things than us lowly mortals.

Never have I been so pleased to have very little savings and very little credit...

Bet the Icelandics wish that too.

2 things .5% rate cut later today plus Aussie dollar is a "commodities" currency and commodities are crashing at the mo.

This is a good explanation of what's happening to the Aussie...

http://business.theage.com.au/busine...1006-4ug5.html

This is spot on but another factor is that we have very high interest rates at the moment and as such we have a large margin to play with in terms of further rates cuts. The main concern for the RBA now is not inflation but avoiding a recession. I read or heard a report today (been doing a lot of research) which suggests that our rates will be cut by a further 150 basis points over the next few months which is great for mortgage holders and those wishing to transfer pounds (provided the BoE doesn't follow suit) but bad news for Australian importers therefore the price of imported goods and for foreign investors who are pulling their money out of the Aussie dollar and putting it where they are betting on getting a the high interest rate in the long term.

God damn it - maybe I do wish I had more savings (in England anyway) after all!

Or maybe we should all just revert to sticking notes under our mattresses...

The dollar has been strong for some time because of (1) high Australian interest rates and (2) the country is digging up WA and selling it to the Chinese.

With interest rates going down towards other countries' and Chinese growth dropping there's nothing much to hold the dollar up - so down it goes.

The other gorilla on the netball court is the fact that housing is dramatically overvalued still. Immigration demand helps to keep prices up, as does the tax break on "investment" property - but one unintended consequence if the government allows lots of new builds is that as soon as the demand for rentals decreases there are going to be a lot of very ordinary people with empty properties they can't rent or sell and mortgages they can't service. Everyone will see the gorilla then <g>.

Blimey! I've just about got my head round short selling, and now i've got carry trades to worry about. My poor brain! I had been wondering why the Japanese yen would be so high when their interest rate is 0.5%, who would invest in it? The carry trade explains why. No wonder the whole financial system is now collapsing like a card castle. It's such a devious, convoluted business.

Meanwhile, I'm wondering if I should pay off my UK mortgage and cop a $5k fine for early repayment, just to be on the safe side. What would you do, guys?

Well they can't avoid inflation because they're already up to their necks in it - in fact it's at a 17 year high and will now get considerably worse. Then they'll need a rate increase, so you see their dilemma.

Yeah... and it also explains why the Aussie got dumped big time...

Yes absolutely, inflation may still be a big problem but at the moment it is on the back burner as they have bigger fish to fry. The short term forcast is more towards a recession or wide spread softening of the economy which in itself should curb inflation.

We were thinking of trying to sell our house but I can say this whole banks going bust thing means I strangely would rather being paying a mortgage now to. First for everything hey.

Wish someone could explain the whole thing. Hubby and I were talking about the exchange rate last night and started disagreeing about whether it was a positive thing for Australia or negative. With a bit of googling there didn't seem a definitive answer as to whether it was good or bad so if someone could explain it in an idiots guide I would love to understand it more.