My point was in response to your point. Land does not JUST revert back to growing veggies.
Quote:
When the financial markets were deregulated and Australia took part in the great neoliberal experiment of turning our banking system into mortgage lenders above all else. I dunno ask Leith. I suspect he will concede, like I do, that increases in the value of established properties does stimulate new supply. Amongst other things: sentiment, the price of money, economic fundamentals, Government policy....
I can't really ask him. He banned me for being a "dissenter" on this very issue. Perhaps I could get my ban reversed by promising sycophantic agreement with him on every issue and agree to post weekly racist and ageist rants to keep the other posters happy.
Quote:
Yes, presiding over a situation where our banking system is highly exposed to one asset class and a household sector which is highly leveraged into that same asset class is very dodgy indeed.
Different argument. This is about supply.
But yes - we are reaching a tipping point on private debt capacity. And if house prices can not fall sustainably below replacement cost (which is high and rising), it means we are unlikely to get a permanent reduction in house prices. So what happens then?
IMO, it means an acceleration of our nation into a camp of have, and have-nots.
The reason there is a supply response to rising prices is because the cost of land has increased compared to the house sitting on it . This makes subdivision and higher density development more attractive.
IMO, it means an acceleration of our nation into a camp of have, and have-nots.
This particular train of thought is becoming a bit of a wet dream for many on this site of late… No longer content with some passive income, the infallible property owners are coming to rule the world and leave everyone else in their wake it seems…
My point was in response to your point. Land does not JUST revert back to growing veggies.
I can't really ask him. He banned me for being a "dissenter" on this very issue. Perhaps I could get my ban reversed by promising sycophantic agreement with him on every issue and agree to post weekly racist and ageist rants to keep the other posters happy.
Different argument. This is about supply.
But yes - we are reaching a tipping point on private debt capacity. And if house prices can not fall sustainably below replacement cost (which is high and rising), it means we are unlikely to get a permanent reduction in house prices. So what happens then?
IMO, it means an acceleration of our nation into a camp of have, and have-nots.
Its called the Transmutation. Once again Black Panthers predictions are coming to pass.
The reason there is a supply response to rising prices is because the cost of land has increased compared to the house sitting on it . This makes subdivision and higher density development more attractive.
That's why the crappiest house in prime location is very exciting to buy... Land value is important to benefit from this.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
This particular train of thought is becoming a bit of a wet dream for many on this site of late… No longer content with some passive income, the infallible property owners are coming to rule the world and leave everyone else in their wake it seems…
FWIW, I do not think this is a good thing.
But the sad reality is, so long as our government continues to think it has to balance budgets, the cost of land development will be passed onto the marginal buyer - inflating the price of established stock.
Help government understand that can not run out of fiat, and we are on the road to solving for inequality.
This particular train of thought is becoming a bit of a wet dream for many on this site of late… No longer content with some passive income, the infallible property owners are coming to rule the world and leave everyone else in their wake it seems…
FWIW, I do not think this is a good thing.
But the sad reality is, so long as our government continues to think it has to balance budgets, the cost of land development will be passed onto the marginal buyer - inflating the price of established stock.
Help government understand that can not run out of fiat, and we are on the road to solving for inequality.
Here is a question for you b_b. Who do you think should be buying government bonds to fund these ongoing deficits of which you speak? Or do you think the government should literally print the money? Or should the reserve bank buy the government bonds like the US arrangement?
We have established that government deficits do not create any extra money in the financial system as per our previous conversation they only create extra financial assets i.e bonds. Unless the government debt is purchased by the Reserve bank. There is no need for governments to be running ongoing deficits. It just takes money that is sitting in a savings account and spends it back out into the economy where it goes back into a savings account. A temporary boost to the economy. It also makes the government liable for interest payments on their debt.
Here is a question for you b_b. Who do you think should be buying government bonds to fund these ongoing deficits of which you speak? Or do you think the government should literally print the money? Or should the reserve bank buy the government bonds like the US arrangement?
We have established that government deficits do not create any extra money in the financial system as per our previous conversation they only create extra financial assets i.e bonds. Unless the government debt is purchased by the Reserve bank. There is no need for governments to be running ongoing deficits. It just takes money that is sitting in a savings account and spends it back out into the economy where it goes back into a savings account. A temporary boost to the economy. It also makes the government liable for interest payments on their debt.
If the notion that Government can, consequence free, just magic money into existence sounds like fanciful bollox, its because it is.
Quote:
In a way, I really should not spend time debating the Modern Monetary Theory guys. They’re on my side in current policy debates, and it’s unlikely that they’ll ever have the kind of real — and really bad — influence that the Austrians have lately acquired. But I really don’t feel like getting right back to textbook revision, so here’s another shot.
First of all, yes, I have read various MMT manifestos — this one is fairly clear as they go. I do dislike the style — the claims that fundamental principles of logic lead to a worldview that only fools would fail to understand has a sort of eerie resemblance to John Galt’s speech in Atlas Shrugged — but that shouldn’t matter.
But I do get the premise that modern governments able to issue fiat money can’t go bankrupt, never mind whether investors are willing to buy their bonds. And it sounds right if you look at it from a certain angle. But it isn’t.
Let’s have a more or less concrete example. Suppose that at some future date — a date at which private demand for funds has revived, so that there are lending opportunities — the US government has committed itself to spending equal to 27 percent of GDP, while the tax laws only lead to 17 percent of GDP in revenues. And consider what happens in that case under two scenarios. In the first, investors believe that the government will eventually raise revenue and/or cut spending, and are willing to lend enough to cover the deficit. In the second, for whatever reason, investors refuse to buy US bonds.
The second case poses no problem, say the MMTers, or at least no worse problem than the first: the US government can simply issue money, crediting it to banks, to pay its bills.
But what happens next?
We’re assuming that there are lending opportunities out there, so the banks won’t leave their newly acquired reserves sitting idle; they’ll convert them into currency, which they lend to individuals. So the government indeed ends up financing itself by printing money, getting the private sector to accept pieces of green paper in return for goods and services. And I think the MMTers agree that this would lead to inflation; I’m not clear on whether they realize that a deficit financed by money issue is more inflationary than a deficit financed by bond issue.
For it is. And in my hypothetical example, it would be quite likely that the money-financed deficit would lead to hyperinflation.
The point is that there are limits to the amount of real resources that you can extract through seigniorage. When people expect inflation, they become reluctant to hold cash, which drive prices up and means that the government has to print more money to extract a given amount of real resources, which means higher inflation, etc.. Do the math, and it becomes clear that any attempt to extract too much from seigniorage — more than a few percent of GDP, probably — leads to an infinite upward spiral in inflation. In effect, the currency is destroyed. This would not happen, even with the same deficit, if the government can still sell bonds.
The point is that under normal, non-liquidity-trap conditions, the direct effects of the deficit on aggregate demand are by no means the whole story; it matters whether the government can issue bonds or has to rely on the printing press. And while it may literally be true that a government with its own currency can’t go bankrupt, it can destroy that currency if it loses fiscal credibility.
Now, I am not predicting hyperinflation for the US — I am not Peter Schiff! Most of our current deficit is cyclical, and even in the long run a modest return of political rationality would make the budget issue eminently solvable. But the MMT people are just wrong in believing that the only question you need to ask about the budget deficit is whether it supplies the right amount of aggregate demand; financeability matters too, even with fiat money.
OK, I have no illusions that this will convince anyone in this area. (Can you imagine John Galt admitting that he was wrong?) But I thought I should put it down.
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
Here is a question for you b_b. Who do you think should be buying government bonds to fund these ongoing deficits of which you speak? Or do you think the government should literally print the money? Or should the reserve bank buy the government bonds like the US arrangement?
We have established that government deficits do not create any extra money in the financial system as per our previous conversation they only create extra financial assets i.e bonds. Unless the government debt is purchased by the Reserve bank. There is no need for governments to be running ongoing deficits. It just takes money that is sitting in a savings account and spends it back out into the economy where it goes back into a savings account. A temporary boost to the economy. It also makes the government liable for interest payments on their debt.
We have been over this Ad nauseam - i really do not have the energy to go through it again in detail. But despite all of my efforts your knowledge on deficit spending is woefully incorrect.
In summary - Printing is done by the treasury in concert with the CB - it is not done the CB alone. And it has been going on for decades. - the CB buys government bonds pretty much every day in Australia to manage the cash rate. It is not printing, its a swap. - We have established government deficits add to net finacial assets to the private sector. I have shown this several times now. And since households do not buy bonds generally, it significantly adds to household deposits - A bond is no different to a term savings account. When you move your money from a day account to one year fixed, you net financial position is unchanged. Buying a bond for cash is no different. So, again we have established deficit spending adds to the net financial assets to the private sector.
And finally... - Running surpluses is unsustainable - how can a ticket collector collect more tickets than they issue? Conversely running deficits are far more sustainable. Want proof? Based on the above chart, are you suggesting in 1930 the private sector had $16T in cash sitting behind the sofa ready to fund the US government for the next 80 years?
We have been over this Ad nauseam - i really do not have the energy to go through it again in detail. But despite all of my efforts your knowledge on deficit spending is woefully incorrect.
In summary - Printing is done by the treasury in concert with the CB - it is not done the CB alone. And it has been going on for decades. - the CB buys government bonds pretty much every day in Australia to manage the cash rate. It is not printing, its a swap. - We have established government deficits add to net finacial assets to the private sector. I have shown this several times now. And since households do not buy bonds generally, it significantly adds to household deposits - A bond is no different to a term savings account. When you move your money from a day account to one year fixed, you net financial position is unchanged. Buying a bond for cash is no different. So, again we have established deficit spending adds to the net financial assets to the private sector.
And finally... - Running surpluses is unsustainable - how can a ticket collector collect more tickets than they issue? Conversely running deficits are far more sustainable. Want proof? Based on the above chart, are you suggesting in 1930 the private sector had $16T in cash sitting behind the sofa ready to fund the US government for the next 80 years?
Deficit spending does create extra money.
But deficits have to be funded.
Its not free money.
The debts racked up by the US in the 1940 were eroded by growth which enabled debt to be paid down.
Run deficits- pay interest on the debt.
Bigger the deficit, bigger the debt, the more current expenditure has to be spent servicing that debt.
The bond vigilantes might be over blown but they are real.
Greece, Ireland and Portugal would all have defaulted in 2010 were it not for the bailout they received from the Troika.
Similarly, if the bond markets believed that the ECB could no longer make good on its debts it would hike the interest rate too.
Hard to see, but arguing that deficits don't matter at all is nonsense.
And if deficits matter, so too does balancing the budget.
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
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy