"The banks are also taking a more cautious approach to lending, requiring larger deposits, longer savings history and a greater scepticism about the valuations of properties."
"larger deposits"? He doesn't know his arse from his tit. Hot off the press:
They take rent paid now as evidence of savings too.
The question is (and we won't know the answer to it) - what loans are they actually making?
The reason this is important is that they may very well be happy to make a 95% loan to the right customer buying in what they believe to be the right area of sydney, for example. But a customer looking to buy an apartment in Broadbeach may find that 95% loan is not available,a nd neither is a 90%, or and 85%. How sophisticated are their risk models?
And how hawkish are their valuations?
How much of it is just a marketing push to increase applications and their customer databases?
Anyway, it doesnt surprise me that the banks are trying to increase credit and grow their mortgage books. Why wouldnt they, its made them a lot of money. They still reserve the right to refuse loans, and their approval processes must be pretty fixed-cost, so its a no-lose situation for them.
The issue will come when they realise that its not growing prices any further. At that time they will take a different view of their risk and exhibit a different behaviour, IMO.
The question is (and we won't know the answer to it) - what loans are they actually making?
The reason this is important is that they may very well be happy to make a 95% loan to the right customer buying in what they believe to be the right area of sydney, for example. But a customer looking to buy an apartment in Broadbeach may find that 95% loan is not available,a nd neither is a 90%, or and 85%. How sophisticated are their risk models?
And how hawkish are their valuations?
How much of it is just a marketing push to increase applications and their customer databases?
Anyway, it doesnt surprise me that the banks are trying to increase credit and grow their mortgage books. Why wouldnt they, its made them a lot of money. They still reserve the right to refuse loans, and their approval processes must be pretty fixed-cost, so its a no-lose situation for them.
The issue will come when they realise that its not growing prices any further. At that time they will take a different view of their risk and exhibit a different behaviour, IMO.
The average LVR now is below 50%, regardless of what the banks offer.
Nobody here seems to understand how to read time-series data. The overall trend for both OO and Investor is both down. Furthermore, the Total Credit growth trend is especially alarming, about 80% down from peak to now, after a period of stable growth. This is what's important.
Hi Catweasel, in an early post of yours (before you started writing in the made up language) you actually gave an opinion on some data (something that you never do any more). In the updated chart below, you can see that total credit growth has stabilised at a lower level, and business/personal credit growth is looking quite unhealthy. Do you feel the RBA can continue to raise interest rates in this environment, where business credit is still contracting and retailers and small businesses are suffering quite badly? Do you believe further interest rate rises would affect the non-housing sector to a greater degree than the housing sector? Personally I believe the housing sector is generally stronger than the non-housing sector, so further interest rate rises (while they may keep a lid on house price growth) would have a very strong negative impact to the rest of the economy (mining sector excluded).
Nobody here seems to understand how to read time-series data. The overall trend for both OO and Investor is both down. Furthermore, the Total Credit growth trend is especially alarming, about 80% down from peak to now, after a period of stable growth. This is what's important. That is what all you mice should be looking at.
Eek! It's like seeing Kiss without their makeup. How disappointing..........
If only people read and UNDERSTOOD Steve Keen, you would understand that catweasal is spot on. The RATE OF GROWTH FOR OWNER OCCUPIER CREDIT IS FALLING...MASSIVELY!
It is the RATE OF GROWTH and how this corresponds with THE RATE OF GROWTH in previous time periods that is important.
So if mortgage credit was growing at: 15% from 2001-2004 10% from 2005-2010 7% 2011
...then you will see falling house prices. This is why it is a ponzi scheme, it needs more and more people to take on more and more debt.
Keen calls it the debt treadmill...coz you cant stand still on it. If the rate of growth of credit issuance is falling...house prices fall.
"as Professor Steve Keen explained, at this stage of the debt cycle, the aggregate spending in the economy is made up of income plus change in debt. In the absence of income growth, a slowdown in credit growth implies declining aggregate spending by the private sector"
Why wont people read Keen...he is one of the smartest people in the nation, who correctly predicted the GFC and has revealed many falacies with noeclassical and keynesian economics.
Just because the Rudd Government propped up housing and he lost a bet, he has been ridiculed.
The bloke is a national treasurer and until you read and understand Keen, then you are flying blind in any housing debate
So if mortgage credit was growing at: 15% from 2001-2004 10% from 2005-2010 7% 2011
...then you will see falling house prices
Except that's what happened to mortgage credit growth... it fell, and we didn't see any significant falls in house prices during the period when credit growth was falling. In fact, prices generally rose over the period shown on the chart. Go figure.
Quote:
Why wont people read Keen...he is one of the smartest people in the nation, who correctly predicted the GFC
No - he incorrectly predicted the GFC. He predicted the GFC in Australia would be characterised by a severe recession, double digit unemployment, ZIRP, and house prices falling by 40% within a few years. That seems like an incorrect prediction of the GFC, since none of those things happened.
What aspect of the GFC in Australia do you believe he predicted correctly?
I used those (MADE UP!) numbers to illustrate a point that you guys seemed unable to grasp...THE RATE OF GROWTH IS FALLING RAPIDLY
But they were made upnumbers...so you claiming that is just hillarious. The data you provided only goes back to 2005...my fake numbers were from 2001.
So look at the graph YOU provided.
If I wanted to accurately translate the line graph to numbers so you guys can finally understand Keen, then it would have looked like this:
2005- mid 2007 - Credit Growrth was between 13-15%
2007-2008 - GFC kicks in, Credit Growth falls to between 7-10%
AT THIS POINT...HOUSE PRICES WERE FALLING...REMEMBER!!! THAT IS WHY THEY BOOSTED THE FHB GRANT!
2009-early2010 - Ultra low rates and FHBG to gullible young people means Credit Growth resumes growing again to about 9%
AT THIS POINT...HOUSE PRICES STOPPED FALLING TICKED UP AGAIN
2010-present - Credit Growth falls again and this time it is lowest in a decade...
So - the point I am making is perfectly proven by the data.
Everything I have explained above is from the teaching of Steve Keen. So that should answer the second part of your question.
But if you want to know why he is so important then you have to read 'Debunking Economics' and his new book out soon. I can spend all my time explaining this to naive bulls.
Why wont people read Keen...he is one of the smartest people in the nation, who correctly predicted the GFC and has revealed many falacies with noeclassical and keynesian economics.
Blind Freddy and his dog could see the GFC coming. It was simply the vast majority chose not to see it because the truth was inconvenient.
Even a local twerp like Wulfgar could see it coming. Notice he picked Ben dropping rates as the trigger. The GFC was the pure product of cry baby capitalists.
Post by wulfgar on Sun Mar 25, 2007 3:48 pm It appears we are on the verge of the greatest deflation in world history. So far in this decade world liquidity has been on an inflationary bent. The mechanics of this are quite simple. Prior, the greenback was the only world reserve currency. Then the Euro showed, the first currency large enough to challenge the greenback since the demise of the pound sterling as world reserve in the 1920's and 30's. So the world's Central Banks are moving to a "mixed basket". Primarily this means a Euro set of monopoly money has been thrown into the world money basket with the already existent greenback monopoly money. So when in the past, there was a greenback dollar competing for goods on the world market. There is now a Euro dollar as well. The results are seen in world trade prices as they are bid up on scarce goods like oil. This is all fine and well. Governments seldom complain about a bout of inflation. But what happens if the greenback snuffs out? That is the greenback falls out of the world trade basket? Then the world is chasing the Euro alone. We then have the classic dollar shortage of deflation. The only way the greenback could survive is if the plan started in mid 2004 was continued. That is raise the cash rate on the greenback 2% per annum until early next decade. Of course this would a dramatic curtailing of the easy life for the US, which has proved politcaly unpaletable. So "helicopter Ben" halted the program early in 2006 and Fed is talking about lowering rates. The greenback is toast! It seems the Americans are so unwise as to think a bout of high interest rates are worse than their loss of the world printing press. They are very mistaken! At some point in the near future the world will panic out of the greenback. The only thing that keeps the greenback going, is China and Opec buying excessive amounts of US T-bonds. They can't keep this up forever. And post Chinese olympics will see the practice come to an end. Japan formerly the great backer of US T-bonds, ceased net purchases in mid 2004. Now the Japanese market is beginning to rid itself of the oversupply of T-bonds. This will be replicated everywhere else. Post 2008 will see the greenback burn for a few years, until it is no more. Until the greenback is purely the domestic currency of the US, only kept alive internally by exchange controlls. This thing has happened before. The 1920's saw the inflation created by the pound and the greenback together. Then beginning in early 1929 months before the Wall street crash, the pound began to wink out. The greenback almost collapsed once before, in August 1979. Then the competitor was gold. Europe and Japan rescued the greenback back then. Otherwise we would have had the depression of the 1980's, rather than the recession! One can conceive of the printing press staving off deflation. But what happens is one day the inflated product is rejected and ceases to be liquidity. Then you get the deflation!
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