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Steve Keen: Australian house prices to fall 20% "peak to trough" by end of 2013; House price hit yet to come
Topic Started: 20 Oct 2011, 12:43 PM (18,387 Views)
Shadow
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Evil Mouzealot Specufestor

I can't find data on mortgage rates prior to 1950, but according to here, mortgage rates from 1950 to 1960 were as follows...

1950 3.88
1951 3.88
1952 3.88
1953 4.50
1954 4.50
1955 4.50
1956 5.00
1957 5.00
1958 5.00
1959 5.00
1960 5.00
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Strindberg
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Ex BP Golly
13 Sep 2012, 12:19 PM
Piss in the wind!

What was the average over that last 15 years then?

And the last century?
What the fuck has that got to do with your original assertion?

This is what you wrote:

Quote:
 
Average interest rates in Australia have run at about 8.5% over a century, yet since 1992 have averaged 6%.


1992 was 20 years ago - not 15 years ago.

All of the long term studies compare interest rates over time by looking at the government bond rates because it's the only available data. There was no RBA rate before the RBA existed - ie before 1990.
Stapledon takes his 10 year Government bond interest rates from Butlin (1977), updated by RBA 10 year rates in RBA table F2.
Stapledon rationalises his choice as follows:

Quote:
 
For interest rates I use estimates of the long-term bond rate from Appendix B.11
and Table B.6. This is the only series which spans this period. While mortgage rates in
Australia have historically been variable rate, a fixed term series has the advantage that it
incorporates expectations about the future course of variable rates. Being a government
instrument the bond yield is a risk free rate so an implicit assumption is that the risk
premium attached to housing is roughly constant over the time horizon.

That seems fair.
If you do the calculations on the figures in Stapledon's table B.6 and RBA table F2 (using the June rate for each year) you get the following (the averages are arithmetic averages), remember it was you who chose the 1992 date.

Average 1992-2012 inclusive = 134.7/21 = 6.41%

Average 1913-2012 = 640.52/100 = 6.40%

So, the average interest rate for the last 21 years is about the same as it has been for the last 100 years.

But the last 100 years included the high interest period of 1974-91 and the figure of 6.40% is heavily weighted by that high rate period.

The average for the 1974-1991 inclusive period = 217.5/18 = 12.08%

But the average before 1974 was much lower

Average 1913-1973 = 288.32/61 = 4.72%

Conclusion

Average interest rates for the last 21 years (6.41%) have been much higher than the period 1913-73 (4.72%) and earlier.

Edited by Strindberg, 13 Sep 2012, 03:37 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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Catweasel
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Catweasel say crikey. Not quite a sure what a interest rate history have to do with a current reality. Perhaps mouse and mouzealot so well drummed in its historical indoctrination, it need to cling to for its survival.

Sooner it do a learn that a interest rate not natural phenomenon, the more free its mind will be.
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Shadow
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Evil Mouzealot Specufestor

Catweasel
13 Sep 2012, 03:41 PM
Not quite a sure what a interest rate history have to do with a current reality.
We're having a discussion about whether or not current interest rates are high by historical standards.

Quote:
 
Perhaps mouse and mouzealot so well drummed in its historical indoctrination, it need to cling to for its survival.
Perhaps Catweasel still has nothing constructive to offer and will just post irrelevant mumbo-jumbo.

Quote:
 
Sooner it do a learn that a interest rate not natural phenomenon, the more free its mind will be.
Nobody said interest rates are a 'natural phenomenon'.
Edited by Shadow, 13 Sep 2012, 03:52 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Pig Iron
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Bogan scum

Strindy you should start a mahamed style thread called "Let's bust another myth - the boom was fueled by historic low interest rates"

then we can sit back and watch the angry bears hurl abuse and post links to demographia and debtdeflation
I am the love child of Tony Abbott and Pauline Hanson
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Ex BP Golly
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Strindberg
13 Sep 2012, 03:34 PM
What the fuck has that got to do with your original assertion?

This is what you wrote:




1992 was 20 years ago - not 15 years ago.

All of the long term studies compare interest rates over time by looking at the government bond rates because it's the only available data. There was no RBA rate before the RBA existed - ie before 1990.
Stapledon takes his 10 year Government bond interest rates from Butlin (1977), updated by RBA 10 year rates in RBA table F2.
Stapledon rationalises his choice as follows:



That seems fair.
If you do the calculations on the figures in Stapledon's table B.6 and RBA table F2 (using the June rate for each year) you get the following (the averages are arithmetic averages), remember it was you who chose the 1992 date.

Average 1992-2012 inclusive = 134.7/21 = 6.41%

Average 1913-2012 = 640.52/100 = 6.40%

So, the average interest rate for the last 21 years is about the same as it has been for the last 100 years.

But the last 100 years included the high interest period of 1974-91 and the figure of 6.40% is heavily weighted by that high rate period.

The average for the 1974-1991 inclusive period = 217.5/18 = 12.08%

But the average before 1974 was much lower

Average 1913-1973 = 288.32/61 = 4.72%

Conclusion

Average interest rates for the last 21 years (6.41%) have been much higher than the period 1913-73 (4.72%) and earlier.
Your calculations seem premised on the assumption that banks are charities?
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Strindberg
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timmy
13 Sep 2012, 03:50 PM
Strindy you should start a mahamed style thread called "Let's bust another myth - the boom was fueled by historic low interest rates"

then we can sit back and watch the angry bears hurl abuse and post links to demographia and debtdeflation
The charts posted by Shadow reveal the fact that interest rates have been lowish for most of the time since 1900 but there was a spell from ~1974-1992 when they were much higher. It's that period which is unusual - not the period since 1992.

It seems that we have moved back to the pre-1974 times of low interest rates.

The actual 10 year gov bond rates are below (taken from Stapledon table B6)

Posted ImagePosted ImagePosted Image
Edited by Strindberg, 13 Sep 2012, 04:18 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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Ex BP Golly
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Why do bulls have a natural preference to downplay the costs?

Bears know what their cash in deposit accounts will return, we are use to your derision upon that score, so why do you pretend a mortgage costs the same?

This is getting interesting!
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Catweasel
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Shadow
13 Sep 2012, 03:48 PM
We're having a discussion about whether or not current interest rates are high by historical standards.


Perhaps Catweasel still has nothing constructive to offer and will just post irrelevant mumbo-jumbo.


Nobody said interest rates are a 'natural phenomenon'.
Catweasel laugh at a nuttiness of it a all. But there a behavioral insight into skull of protagonist. So it of great interest to a Catweasel.
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miw
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earthsta
13 Sep 2012, 01:34 PM
What concerted effort?

All it required was to import Chinese made goods and remove key items from the CPI (fuel, housing)

Ummm... the inflation dragon was slain well before China came on the scene as any kind of manufacturing power. In the US undeer Paul Volcker's time in the Fed, they put interest rates up to 20% in the early 80s. In Australia we had 18% mortgage rates at the end of the 80s and then the "recession we had to have" in 90-91 followed by "the budget that brought home the bacon" in 1992 or 1993. Interest rates and inflation have been low since then.

Arguably deflation in the price of lots of manufactured goods, driven by cheap and efficient manufacturing in Japan and then China have been a strong downward force on inflation for the last 30 years though.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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