I wish there was a way I could better articulate my points of view and join in the debates/arguments of different topics. I share common views with some forum contributors but yet hold different views on other topics with those same contributors.
Just contribute as you see fit. The best and most useful posts don't include personal attacks, and the smarter posters here are happy to debate and idea without resorting to insults.
I have been dismayed recently, after believing that “indicators” and “fundamentals” were everything, and determined timing, to discover quite well-presented evidence that timing is the more predictable thing and the fundamentals merely determine the volatility of the crash when the time comes around.
For example, the Irish were quite lucky in one way, that their crash came when their most unaffordable city median multiple (in Dublin) was 6.5
Several Australian cities are higher than that, and 9 seems to be where Sydney is hovering.
2008 possibly WAS Australia’s last “crash” too, and was mild because of comparatively low debt built up at that time; and the next one is not really due until 2021 – 2025.
I reluctantly accept the arguments that this unsustainable situation can defy gravity for quite a long time yet. Markets can stay irrational longer than you can stay solvent.
Maybe “timing” is more a matter of psychology than economics. One feature of the timing of a crash, seems to be that the bears have been sufficiently ridiculed that young people have given up waiting for the crash, and have mortgaged themselves up to way past the eyeballs for a dog-box first home. MANY tears are the result pretty soon after this point.
Another feature is that when it comes, there is nothing that the central bank can do – all the easing merely creates expectations of inflation, government debt creates expectations of default (leading to no takers for govt bonds), the yield curve inverts and stays inverted, and the banks increase mortgage interest rates against all desperate calls from central bankers and politicians. The rate can be quite low and the interest rate increase can be quite small, but the bubble by this time, requires only a very small “prick”.
Philip I suspect you have been reading rubbish. There is no bubble except maybe a few inflated mining towns and Australia is nothing like Ireland. The Irish would love it to have a tiny portion of this countries natural wealth. Some ignoramuses try to tell gullible people that Australia cannot possibly be different to Ireland. Seriously who would believe this nonsense.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Mining cliff leads to falling export receipts. Worsening CAD lowers AUD. Imported goods, most notably petrol, go through the roof. Increased costs of living lead to mortgage defaults. Banks have trouble servicing offshore debt obligations with the lower AUD. Rating agencies downgrade banks. Banks’ debt servicing burden increases. Capital flights gather pace. RBA hikes interest rates to stem capital flights and dampen imports-led-inflation. More defaults. Businesses aggressively cut costs by laying off workers. Still more defaults. Banking crisis. Commonwealth unwisely attempts to bail out banks that collectively have bigger balance sheets than the GDP. Sovereign financial crisis. IMF steps in and imposes draconian austerity measures. Social unrest reaches levels not seen since 1931. ABS record shows unemployment of 45% and shortening life expectancy. Hardly a day goes by without dozens die from starvation or being killed on the streets but MSM no longer reports these events because they are no longer newsworthy. Future historians look back this era and wonder what the heck has gone wrong.
Um, no. Mining investment cliff is being followed by a massive increase in mineral export volumes. The prices have come off as supply has increased (duh) but the total revenue is still way higher than 5-10 years ago.
Um, no. Said export boom means CAD is below average now. Reduced mining investment reduces the saving-investment gap that is definition ally the same as the CAD. And exchange rate depreciation is stimulatory for industries exposed to trade. More tourists, and the $A value of those mineral exports rises, just for a start.
Um, no. Exchange rate won't fall that much. Excise and local distribution costs mean that an X% depreciation in the dollar doesn't lead to anything like a X% rise in the retail prices of imported goods.
Um, no. Excess repayments and mass fat in discretionary spending say there is plenty of other ways to adjust before defaults go beyond the truly marginal mortgage borrower. People will cut back on iThings and Sunday cafe brunches before defaulting on their mortgages.
Um, no. To be fair, FX hedging is hard to explain so I forgive you for not understanding this, but it won't happen like that.
Well, maybe, but the credit rating agencies have been wrong about most things to date, so who cares.
Um no, for the hedging reason mentioned above.
Um no, the exchange rate would go down. That's stimulatory. Sounds like you don't understand how floating exchange rates work. Are you from the IMF?
Um no, RBA wouldn't do that. They don't have a mandate to target the exchange rate. And the other reasons don't fly as mentioned above.
Next few points followed from the ones above and thus don't fly. But the idea that there would be a sovereign crisis suggests you really don't understand the difference between a country with its own currency that borrows in that currency, and one where that isn't true.
Um no, even the IMF learned the lessons of Indonesia. They were the first international agency to call bull dust on European austerity.
Um no, even in Greece the riots didn't last forever and the unemployment didn't reach 45%. Why would you expect a country with its own currency and functional tax collection system to suffer a worse fate?
I can understand that people find the current situation perplexing but your chain of events makes no sense.
2008 possibly WAS Australia’s last “crash” too, and was mild because of comparatively low debt built up at that time; and the next one is not really due until 2021 – 2025.
A 5% fall was a "crash"? You say "comparatively low debt built up at that time". Well, current household debt/income is now about the same as in 2008, even a little lower and it has been pretty stable since 2006. Column D of the following: http://www.rba.gov.au/statistics/tables/xls/e02hist.xls So on your reckoning we presently have "comparatively low debt".
Um, no. Mining investment cliff is being followed by a massive increase in mineral export volumes. The prices have come off as supply has increased (duh) but the total revenue is still way higher than 5-10 years ago.
Um, no. Said export boom means CAD is below average now. Reduced mining investment reduces the saving-investment gap that is definition ally the same as the CAD. And exchange rate depreciation is stimulatory for industries exposed to trade. More tourists, and the $A value of those mineral exports rises, just for a start.
Um, no. Exchange rate won't fall that much. Excise and local distribution costs mean that an X% depreciation in the dollar doesn't lead to anything like a X% rise in the retail prices of imported goods.
Um, no. Excess repayments and mass fat in discretionary spending say there is plenty of other ways to adjust before defaults go beyond the truly marginal mortgage borrower. People will cut back on iThings and Sunday cafe brunches before defaulting on their mortgages.
Um, no. To be fair, FX hedging is hard to explain so I forgive you for not understanding this, but it won't happen like that.
Well, maybe, but the credit rating agencies have been wrong about most things to date, so who cares.
Um no, for the hedging reason mentioned above.
Um no, the exchange rate would go down. That's stimulatory. Sounds like you don't understand how floating exchange rates work. Are you from the IMF?
Um no, RBA wouldn't do that. They don't have a mandate to target the exchange rate. And the other reasons don't fly as mentioned above.
Next few points followed from the ones above and thus don't fly. But the idea that there would be a sovereign crisis suggests you really don't understand the difference between a country with its own currency that borrows in that currency, and one where that isn't true.
Um no, even the IMF learned the lessons of Indonesia. They were the first international agency to call bull dust on European austerity.
Um no, even in Greece the riots didn't last forever and the unemployment didn't reach 45%. Why would you expect a country with its own currency and functional tax collection system to suffer a worse fate?
I can understand that people find the current situation perplexing but your chain of events makes no sense.
It would make a good plot for a movie though; when the gangs take over the highways...
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
I love the way you post the reiwa chart and say there is no bubble skamy. Amazing.
Of course there is no bubble, hardly anyone is even making these claims anymore.
Any city that is growing will display this behaviour shown in the REIWA chart. Ireland boomed for almost 10 years, Perth had a three year boom followed by several years of stagnation and small overall price drops. Much larger drops were suffered in some locations eg MaduraH, Yanchep, Nedlands, City Beach.
If a city is growing house prices rise most of the time, even if supply keeps up there is increased competition for the best locations and as the population grows there are more high waged people to but these homes.
Do you really believe we are at the peak of a boom cycle ?
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Of course there is no bubble, hardly anyone is even making these claims anymore.
Any city that is growing will display this behaviour shown in the REIWA chart. Ireland boomed for almost 10 years, Perth had a three year boom followed by several years of stagnation and small overall price drops. Much larger drops were suffered in some locations eg MaduraH, Yanchep, Nedlands, City Beach.
If a city is growing house prices rise most of the time, even if supply keeps up there is increased competition for the best locations and as the population grows there are more high waged people to but these homes.
Do you really believe we are at the peak of a boom cycle ?
Yes. Doesn't mean prices will crash. But this stagnant period could continue until 2020 or beyond. As long as property investors don't get sick of subsidizing rents.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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