Correct. The RBA believes entrepreneurs can use the equity in their homes to start a small business. That's where they're coming from when they talk about house prices and entrepreneurs in the same sentence.
I am of the opinion that the RBA is more happy with rising home prices (or at least not falling) as it makes owners feel richer and encourages the use of the equity not for business purposes but for increased consumer spending by drawing on the equity for cars, extensions, holidays etc.....
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
I am of the opinion that the RBA is more happy with rising home prices (or at least not falling) as it makes owners feel richer and encourages the use of the equity not for business purposes but for increased consumer spending by drawing on the equity for cars, extensions, holidays etc.....
And where does that consumer spending go if not to small business? It gets spent in the small stores, retailers and service providers and returned to the general economy to create more jobs, etc etc etc.
Your spending is another persons income.
Any expressed market opinion is my own and is not to be taken as financial advice
In six years you can — and should — learn a lot. The biggest lesson (for me) was the difference between the cycle and the supercycle. I knew about cycles but got my first lesson in the supercycle in 2008. I've learnt that asset prices and the economy are two different things: we see the DJIA booming but the US economy still languishing and stuck on emergency settings. I've learnt that Australian residential property can be stimulated and proofed against economic downturns. I've learnt that the RBA values high house prices because this fosters an "entrepreneurial culture" and this means the RBA will act to support house prices. I've learnt about the power of mass immigration and once-in-a-century terms-of-trade booms and how they can make your country immune from the ups and downs suffered by mere mortals like the USA. I've learnt about the power of Chinese investment in our residential housing stock. I've learnt that policymakers are not quickly spent and can conjure up new tricks for much longer than you might imagine.
Yes, I have learned that the bulls believe that property is a virtually risk free investment given the lengths that our elected and non elected elites will go to to shore up their investments.
I have also learned that they are unperturbed about the fact this removes, completely, moral hazard.
I have also learned that for some reason, the elimination of moral hazard does not matter when it comes to Australian real estate.
Real estate is different. Or perhaps Australia is different?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
It's housing equity that finances small business, and it's the lack of housing equity in the USA that is stalling growth in small business there. As the level of equity slowly increases then growth in the USA will accelerate.
1+1=2
Peter Is is housing equity that finances some small business. You posted yesterday franchise opportunities that did not require property collateral. I note others as well that do not necessary require property equity.. Licensed Post Office Newsagent Tatts Agency Hotels & Motels Taxi Licence
Also note sure where you are getting your US numbers?
"Despite significant funding challenges, including depressed home prices and a tight overall credit market, entrepreneurship rates have risen from 2006 through 2010, according to the Ewing Marion Kauffman Foundation, a small-business research group in Kansas City, Mo." http://online.wsj.com/news/articles/SB10001424052970204555904577169332055128036
I am of the opinion that the RBA is more happy with rising home prices (or at least not falling) as it makes owners feel richer and encourages the use of the equity not for business purposes but for increased consumer spending by drawing on the equity for cars, extensions, holidays etc.....
Well they are kind of stuck with the model now aren't they?
Its hard wired into the economy.
Bit like the Euro; once we went down the road of letting the banks rip on real estate there is not way to reverse it.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
And where does that consumer spending go if not to small business? It gets spent in the small stores, retailers and service providers and returned to the general economy to create more jobs, etc etc etc.
Your spending is another persons income.
Without trying to appear rude Peter... Did you read the quote I was responding too?
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
To get a different outcome there had to have been a different ingredient, and the ingredient that the USA had that we didn't was a high number of high risk loans written to people who couldn't afford to pay them back.
We had some, but not sufficient to cause systemic risk.
Well our friend Murray is still concerned:
Quote:
The Murray Inquiry has warned that housing is a potential source of systemic risk for the financial system and the economy, and could erode bank balance sheets and impact new lending.
Released today, the Financial System Inquiry interim report has called for further information about what measures can be taken to mitigate the effects of developments in the housing market on the financial system and the economy.
Is it any wonder?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Also note sure where you are getting your US numbers?
"Despite significant funding challenges, including depressed home prices and a tight overall credit market, entrepreneurship rates have risen from 2006 through 2010, according to the Ewing Marion Kauffman Foundation, a small-business research group in Kansas City, Mo." http://online.wsj.com/news/articles/SB10001424052970204555904577169332055128036
Some banks in the will fund an entrepreneur if the business plan looks sound and marketable for a percentage of the business/profits if it gets of the ground.
There are also private avenues for an entrepreneur to get funding in the US on similiar terms.. percentage of business/profits
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
Peter Is is housing equity that finances some small business. You posted yesterday franchise opportunities that did not require property collateral. I note others as well that do not necessary require property equity.. Licensed Post Office Newsagent Tatts Agency Hotels & Motels Taxi Licence
Also note sure where you are getting your US numbers?
"Despite significant funding challenges, including depressed home prices and a tight overall credit market, entrepreneurship rates have risen from 2006 through 2010, according to the Ewing Marion Kauffman Foundation, a small-business research group in Kansas City, Mo." http://online.wsj.com/news/articles/SB10001424052970204555904577169332055128036
I doubt that a bank will lend against a newsagency anymore but yes they will lend against the other businesses - the problem is they are expensive and few have enough cash to fund the purchase of a pub or a taxi licence, and finance against the business alone is difficult to get and expensive.
I work in business finance and it's a hrad road for most people wanting business finance, much harder than it is for employed people. That's why Low Doc lending became so popular pre GFC - but that avenue of funding has become much more restricted for most SME borrowers.
Poontang
17 Jul 2014, 12:15 PM
Without trying to appear rude Peter... Did you read the quote I was responding too?
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