If hosue prices do continue to slide, as seems to be the case by continuing poor auction results, then Keen's theory is bullet proof and we are headed for a massive correction over the coming years.
Gibberish.
1. Tautological. It's like saying "if house prices fall then house prices will be lower."
2. Illogical. How can something which is dependant on an "If" be "bullet proof"?
Income can support house prices if credit growth slows..
But anyone that claims income growth has supported our house bubble is kidding themsleves.
We have mountains of private debt that has been piled on at record rates until 2006...it slowed down leading to GFC and we had falling house prices (even though incomes were rising). This is because the change in debt was the primary driver of house prices - not increasing incomes.
Assume Keen's theory is correct.
Let's do simple calculation. From ABS : May 2004 FT adult ordinary time earning $953.20pw Nov 2010 FT adult ordinary time earning $1272.50pw
The change (income) roughly = +33.5%
From credit growth graph (Shadow), the falling of credit growth is roughly 15% (April 2004 - Dec 2010). The change (income) > change (falling credit growth), no price fall.
If the change (income) constant then the credit growth needs to fall to NEGATIVE 11.5% to stagnant house price (not crash). Will it be possible ?
So Keen's time is now totally supports Keen's theory Keen's theory is bullet proof
Oh my, I haven't seen a fanboy this in love with keen since his last lot of fanboys vanished when his theory was proven so very wrong.
And you do know what theory means dont you?
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
Income can support house prices if credit growth slows..
Strindberg:
ah..so you agree with me - you wrote bollocks
"Remember, back in Australia’s credit growth is still falling, we wrote that
… for an economy that is addicted to debt, all it needs to tip it into a recession is for credit growth to slow down- no contraction of credit is required. Also, 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.
To understand why, consider this highly simplified hypothetical situation in the economy:
Income goes up, but people decide to borrow less. Note that when there’s less borrowing, it does not mean that the total amount of credit in the economy has declined. Instead, it means that credit is still growing, but it is growing at a slower pace."
Here is a longer time series for housing credit, from Macrobusiness.
With housing credit so low historically you wonder why prices haven't fallen more.
Catweasel clap its paws and say it a good way to use a time-series data. It can easily identify the macro event and give it a more perspective. Depend a what a spin that white shoe want to put on it. For the example: "It can only go the up so better the buy before miss out" (mouse easily recognize the up/down pattern and make a own meaning in its head while the "fear factor" the good close for a white shoe).
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