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Forecasts of $20/t iron ore. The response? IO now $48/t.; Iron ore recovery offers budget boon hopes
Topic Started: 21 Feb 2016, 07:58 PM (42,864 Views)
Rufus
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Veritas
5 Mar 2016, 09:28 PM
They did when they see prices escalating out of their reach or when they see a great investment opportunity.
And in that case prices are escalating out of reach because demand exceeds supply.

Quote:
 
the bit that comes first, however, is a mass stimulus of the demand side caused by looser lending and cheaper credit in the face of a supply side that hasnt a hope of keeping up.


We have some common ground there, that can happen but it's still a lack of supply pushing prices up. That's why I don't like seeing large changes in credit policies. Policies should remain fairly constant. If regulators interfered less supply would match demand and the market would reach an equilibrium. Once that happened
Jimbo
5 Mar 2016, 09:48 PM
If two people want the same house and one can access 600k and the other 700k, the house will sell for north of 600k to the person with access to 700k.

If a third person joins the battle with access to 800k, the house will sell for north of 700k.

And so on.

Do you not agree?


1+1+1=132

or something like that.
Edited by Rufus, 5 Mar 2016, 09:56 PM.
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skamy
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Veritas
5 Mar 2016, 08:27 PM
That is an entirely separate argument which I am happy to have once we are finished with this one.

But there is no denying that restricting credit through MP lowers demand.

And if that is true then the reverse must also be true.

That's my point and its as clear as day that its correct.
NO for goodness sakes Veritas - people know how much debt they can afford and most people are not stupid enough to take on more than that and most banks are not stupid enough to lend more than that.

Credit restrictions can only facilitate buying eg by allowing lower deposits they cannot inflate a market without competition and excess demand look at Japan, look at country towns who have declining populations.




Sydneyite
5 Mar 2016, 08:58 PM
You are missing an important bit - it wasn't allowing more people to buy due credit liberalization - that is actually a good thing, as your own thought experiment demonstrates (people who can afford to buy and who can afford the loan payments locked out of the market artificially due to government intervention). The problem was lending that occurred to people who could NOT afford to pay the loan. no income, no job, no problem! Gift a short term honeymoon rate and hope to f*** they can all refinance when it ends into another sweet deal with another NINJA loan provider. :re: Shit like that wasn't and isn't going on in Australia.
The fact remains that the demand for property in Ireland increased because of the returning diaspora, this long term price inflation then caused people to engage in riskier banking because they had got away with it. High risk lending changed from being a specialised sector of the market to beoming a risk to the market because everyone wanted a chunk of the high interest rates.



Veritas has no understanding of this whatsover.

The crisis was also a large part due to completely irresponsible bank lending to developers.
Edited by skamy, 5 Mar 2016, 10:06 PM.
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.
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Andrew Judd
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skamy
5 Mar 2016, 09:59 PM
NO for goodness sakes Veritas - people know how much debt they can afford and most people are not stupid enough to take on more than that and most banks are not stupid enough to lend more than that.

Credit restrictions can only facilitate buying eg by allowing lower deposits they cannot inflate a market without competition and excess demand look at Japan, look at country towns who have declining populations.


The banks seems quite happy to lend on 'stupid' prices if they have 'stupid' ideas on the likely employment prospects of the areas in question.

Edited by Andrew Judd, 5 Mar 2016, 10:09 PM.
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Jimbo
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Rufus
5 Mar 2016, 09:55 PM
1+1+1=132
It does (according to you).

But here is a sum you can't argue with.

Price = (Supply/Demand)*Access to funds

I would like to live in a 10 million dollar mansion in Peppermint Grove.

I am the demand on that mansion.

Apart from the fact that I don't have access to 10 million to buy the mansion.

So maybe I am not the demand on the mansion.

But if someone offered me a line of credit allowing me to buy the mansion and I believed that the mansion would be worth 20 million in five years time, I'd take the line of credit and buy the mansion. And if someone else was offered a higher line of credit, maybe the mansion would sell for 20 million today.

You should know this.

It is your business model.









Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Terry
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Rufus
5 Mar 2016, 07:54 PM
I don't have any hopes or aspirations for mining or China, I'm merely noting what seems to be happening. If it doesn't work out that way then I will probably be better off. I don't live in a city affected by the iron ore price nor do I invest in them.

Fiscal stimulus is government spending, although other non-spending measures can be stimulate the economy. That's not "fiscal stimulus" though so your definition seems rubbery.

BTW I'm not sure that a change in lending regulations is technically government market manipulation, when a market without manipulation would be completely unregulated, so a change in regulations is just a manipulation change by degrees, although I know this is not part of our initial discussion, but you did mention a flock of swallows.
No you're guessing what is happening. You don't know just because our media gives you a reach around.

The definition of fiscal stimulus is an increase in public spending or a reduction in the level of taxation. Refer to Paul Samuelson's texts. Nothing "rubbery" about it all. If you're going to talk about economics, it's a good idea to get the basics right.

Point still remains: Speculation in China might be good for Australia in the short term, but potentially disastrous for Australia in the long run.
Edited by Terry, 5 Mar 2016, 10:33 PM.
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Loki
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skamy
5 Mar 2016, 09:53 PM
There is no such thing as a clear indicator.
So when Trollie stated above that there was no indication of a coming house price crash, he was essentially stating exactly nothing. Because there is no such thing. Right?

Sounds much like his understanding. Exactly nothing.


“Talk sense to a fool and he calls you foolish.” - Euripides
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Rufus
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Terry
5 Mar 2016, 10:32 PM
The definition of fiscal stimulus is an increase in public spending or a reduction in the level of taxation. Refer to Paul Samuelson's texts. Nothing "rubbery" about it all. If you're going to talk about economics, it's a good idea to get the basics right.

So is a regulator loosening bank credit public spending or a reduction in taxation.

Which one is it?
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Jimbo
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Rufus
5 Mar 2016, 10:53 PM
So is a regulator loosening bank credit public spending or a reduction in taxation.
One bottle too many Peter?

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Terry
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Rufus
5 Mar 2016, 10:53 PM
So is a regulator loosening bank credit public spending or a reduction in taxation.

Which one is it?
Neither. The Chinese government has not implemented any "special" fiscal stimulus, despite what you say.
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Rufus
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Terry
5 Mar 2016, 11:29 PM
Neither. The Chinese government has not implemented any "special" fiscal stimulus, despite what you say.
I never used the term "fiscal"

You added that because that's what you thought I said.

But they have allowed lending to increase, which is stimulative.

Are you finished yet or are you going to argue your strawman forever?
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