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Chris Becker of Macrobusiness adds deception to his potentially illegal share spruiking activites; Digging a bigger hole by re-writing history
Topic Started: 7 May 2012, 12:34 PM (4,933 Views)
stinkbug
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genX
8 May 2012, 07:58 PM

Yes! My definition of 'busting' is at least a 15% drop in nominal terms, and same for 'booming'.


Your question was, and I quote "Really? You think pretending to be an economic genius is going to change anything?". That's not the same question as "Is it your assertion that there is no middle ground between property booming and property busting?".

I thought your first question was rhetorical, as it had no subject in it. But to answer it, no, I don't think in general that pretending to be an economic genius changes very much, unless you are a con-artist, and then it might change the success rate of your cons. Did you mean to ask "Do you think that by pretending to be an economic genius you are going to change anything?". Because that is an entirely different question.
And yet we STILL don't have a clear answer on whether you think a middle ground exists.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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genX
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stinkbug
8 May 2012, 08:04 PM
And yet we STILL don't have a clear answer on whether you think a middle ground exists.
Here, let me help.


genX
 
stinkbug
 

Is it your assertion that there is no middle ground between property booming and property busting?

Yes!


Need it again?

genX
 
stinkbug
 

Is it your assertion that there is no middle ground between property booming and property busting?

Yes!


Third time a charm?

genX
 
stinkbug
 

Is it your assertion that there is no middle ground between property booming and property busting?

Yes!
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stinkbug
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Thanks GenX. So what we have, then, is that property can ONLY boom or bust, but never go sideways. Property either goes up 15% or drops 15%.

You're smoking crack.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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genX
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Thanks GenX. So what we have, then, is that property can ONLY boom or bust, but never go sideways. Property either goes up 15% or drops 15%.

At least 15%, sometimes more. Because it's price is a function of debt, and debt, being a function of compound interest, which is a logarithmic function, not a linear one, is inherently unstable. It has no equilibrium condition. And systems that do not have an equilibrium condition overshoot and over-correct.
There is only a single exception to this, and that is if interest rates go to absolute zero, then the interest is no longer a logarithmic function, but a linear one. In that situation, the price does not decline in nominal terms, but in real terms, like we saw in Japan's two lost decades. If you think the RBA will lower interest rates to zero, then you only be going backwards in real terms. I don't think it will happen, but maybe you disagree?

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You're smoking crack.

Your capacity for intellectual riposte never ceases to astound.
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peter fraser
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At least 15%, sometimes more. Because it's price is a function of debt, and debt, being a function of compound interest, which is a logarithmic function, not a linear one, is inherently unstable. It has no equilibrium condition. And systems that do not have an equilibrium condition overshoot and over-correct.
There is only a single exception to this, and that is if interest rates go to absolute zero, then the interest is no longer a logarithmic function, but a linear one. In that situation, the price does not decline in nominal terms, but in real terms, like we saw in Japan's two lost decades. If you think the RBA will lower interest rates to zero, then you only be going backwards in real terms. I don't think it will happen, but maybe you disagree?



Your capacity for intellectual riposte never ceases to astound.
That's interesting information. I don't think anyone is suggesting that house prices will hug the zero line for an extended period of time.

If I can borrow a graph from Steve Keen -

Graph Here.

You can see that in real terms house prices fell by about 9% in 1989 and then stayed very flat until 1998 after interest rates fell from around 17% in 1989 down to around 8% in 1998.

Interest Rates.

So a reasonable flat market in terms of house prices can exist for a significant period of time.

As a separate matter, I note that during this period, we saw a large jump in debt to GDP despite the flat house prices. In fact it doubled in that decade. Possibly due to the change to loan securitisation.

debt to GDP

Edited by peter fraser, 8 May 2012, 11:43 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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genX
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It's getting close to 11PM, so my capacity for research is limited, so just a quick note then return tomorrow evening.

Quote:
 
You can see that in real terms house prices fell by about 9% in 1989 and then stayed very flat until 1998 after interest rates fell from around 17% in 1989 down to around 8% in 1998.

Problem with a single graph is that you don't know what else is going on. If the inflation was high from 89 to 98, then prices could have been increasing in nominal terms but going backwards in real terms. Given constant inflation, nominal prices (IMO) will exhibit the characteristics of non-linear systems. If inflation is highly variable, or interest rates are extreme, such as 17% in your example above, or effective 0% in Japan, then nominal prices can stay flat while real prices decline, or visa-versa.

Quote:
 
So a reasonable flat market in terms of house prices can exist for a significant period of time.

In real terms, yes. Because real prices are a function of inflation and interest rates.
Quote:
 
As a separate matter, I note that during this period, we saw a large jump in debt to GDP despite the flat house prices. In fact it doubled in that decade. Possibly due to the change to loan securitisation.

Possibly. Hawke and Keating began a 10 year program of macro and micro economic reform from 1983 to 1996.Howard inherited that economic legacy, and used it to push through a consumption tax which facilitated the drop in sovereign debt, and couple with FHOG, resumed the upward climb of mortgage debt (you can see from your graph that it started to flatten in the Keating years).
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peter fraser
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genX
9 May 2012, 12:01 AM
It's getting close to 11PM, so my capacity for research is limited, so just a quick note then return tomorrow evening.



Problem with a single graph is that you don't know what else is going on. If the inflation was high from 89 to 98, then prices could have been increasing in nominal terms but going backwards in real terms. Given constant inflation, nominal prices (IMO) will exhibit the characteristics of non-linear systems. If inflation is highly variable, or interest rates are extreme, such as 17% in your example above, or effective 0% in Japan, then nominal prices can stay flat while real prices decline, or visa-versa.



In real terms, yes. Because real prices are a function of inflation and interest rates.


Possibly. Hawke and Keating began a 10 year program of macro and micro economic reform from 1983 to 1996.Howard inherited that economic legacy, and used it to push through a consumption tax which facilitated the drop in sovereign debt, and couple with FHOG, resumed the upward climb of mortgage debt (you can see from your graph that it started to flatten in the Keating years).
I haven't checked on the inflation rates, but wasn't that the period when Volker tacklled inflation in the USA which also solved our inflation as the RBA followed suit.

Unemployment was 11% at the start of the nineties. It was a very tough time to be in business, and the problems that the banks had during that period pushed them to be more overweight in housing, they lost heavily in business and commercial lending.

Westpac almost fell over completely in the nineties, when they were our largest bank.

Any expressed market opinion is my own and is not to be taken as financial advice
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peter fraser
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peter fraser
9 May 2012, 12:11 AM
genX
9 May 2012, 12:01 AM
It's getting close to 11PM, so my capacity for research is limited, so just a quick note then return tomorrow evening.



Problem with a single graph is that you don't know what else is going on. If the inflation was high from 89 to 98, then prices could have been increasing in nominal terms but going backwards in real terms. Given constant inflation, nominal prices (IMO) will exhibit the characteristics of non-linear systems. If inflation is highly variable, or interest rates are extreme, such as 17% in your example above, or effective 0% in Japan, then nominal prices can stay flat while real prices decline, or visa-versa.



In real terms, yes. Because real prices are a function of inflation and interest rates.


Possibly. Hawke and Keating began a 10 year program of macro and micro economic reform from 1983 to 1996.Howard inherited that economic legacy, and used it to push through a consumption tax which facilitated the drop in sovereign debt, and couple with FHOG, resumed the upward climb of mortgage debt (you can see from your graph that it started to flatten in the Keating years).
I haven't checked on the inflation rates, but wasn't that the period when Volker tacklled inflation in the USA which also solved our inflation as the RBA followed suit.

Unemployment was 11% at the start of the nineties. It was a very tough time to be in business, and the problems that the banks had during that period pushed them to be more overweight in housing, they lost heavily in business and commercial lending.

Westpac almost fell over completely in the nineties, when they were our largest bank.

This might be an interesting read.

Edna Carew interview

Any expressed market opinion is my own and is not to be taken as financial advice
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Future
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peter fraser
9 May 2012, 12:24 AM
This might be an interesting read.

Edna Carew interview
Perhaps the banks should nationalized based on our super savings. Then, the government can make them direct their efforts towards helping the young. We need a stake in the society and taking over the property market is a start.

It's time for you guys to retire and talk your weird stuff doing what crusties do.
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miw
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peter fraser
9 May 2012, 12:11 AM
I haven't checked on the inflation rates, but wasn't that the period when Volker tacklled inflation in the USA which also solved our inflation as the RBA followed suit.

Unemployment was 11% at the start of the nineties. It was a very tough time to be in business, and the problems that the banks had during that period pushed them to be more overweight in housing, they lost heavily in business and commercial lending.

Westpac almost fell over completely in the nineties, when they were our largest bank.
Correct. Volker nuked US inflation in the 1980s.

the 1990s in Australia started with Keating's "Recession we had to have" which brought inflation in Australia down below 4%, where it has stayed ever since. That recession was a direct result of the scorched earth levels of interest in the late 1980s.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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