fuck where did keen get his degree's from, a corn flakes packet? "Bearish economist Steve Keen remains emphatic there is a housing bubble in Australia, but says high debt levels are keeping it from deflating."
our ability to pay back the debt level is obviously not a problem since it's been 10 years that we have been tracking at these levels and there been no crash. it's like he completely ignores the fact we can keep paying off our debts and just focuses on the debt.
Except there isn't a person in the country who does not acknowledge we are in a two speed economy with the non-mining sector absolutely tanking and if it were not for massive stimulus and redistribution of wealth then the market would be worse than Ireland or Spain - soooooooooo, labour has done a great job of keeping the market and non-mining economy on life support, however that is all it is, and will run out soon if something does not happen globally, mean while, with commodities tanking this looks like happening sooner rather than later.
And the guy is head of Economics at University of Western Sydney - considerably smarter than you will ever be.
And the guy is head of Economics at University of Western Sydney - considerably smarter than you will ever be.
He is NOT Head of Economics at UWS - he is an Associate Professor; a lecturer, at UWS, which by anyones measure is hardly the most prestigious economics school in Australia...... He started his academic career quite late in life so don't mistake is age for his professional seniority.
EDIT: I think the "elephant in the room" when it comes to aggregate debt based theories is the modern nature of credit, and likely distortions / mis-representations this creates in the traditional statistics that are collected, like aggregate household mortgage debt numbers. Specifically I am talking about the high prevalence of facilities like mortgage offset accounts, and "Line Of Credit" type loans facilities. Just about every single person I know with a mortgage runs a mortgage offset account, and many who invest in residential property, and other assets (commercial property, shares and so on), run LOC type facilities. 10 years ago these were very rare. 15-20 years ago they were essentially not even available to anyone in Australia.
The impact these things have is that I believe the aggregate household mortgage debt in Australia is overstated - by how much I am not sure, but I believe it could be by as much as 25-50%. The reason is because people with a $300k mortgage, and a $100k offset account, show up in aggregate stats having a $300k debt and a $100k deposit. In the "old days" this would not have been possible, and these people would simply have shown as having a $200k mortgage and a small deposit account most likely (assuming they paid off their mortgage as a priority - which most people did in the "old days"). In my case I have a ~$400k loan facility that is 100% offset - so my loan still shows up in aggregate debt stats (as does my ~$400k deposit), but I pay $0 in interest until such time that I decide to deploy that capital for some other purpose, which I can do WITHOUT needing to go to the bank and apply for a new loan. Likewise I have LOC accounts that are used for specific investment purposes - these count as household residential mortgage debt in the aggregate stats as well, yet the money was used for other investment purposes (business related, shares etc). These are used as a part of a (completely legal) tax minimisation strategy that is a bit complex to explain in a couple of lines here. These are all very common and widely used practices. The other thing with LOC loans is the total APPROVED LOC limit counts in the stats, but only some or even none of the loan capital may have been deployed yet. One of my LOCs only has 50% of the loan amount in use, but the full LOC amount is in the stats as that is what the banks have to report on their books.
These factors also distort any comparisons you might make between the say the household debt / GDP of two countries like AU and the US: This is because the US with its tax deductible PPOR mortgages, predominantly fixed rate based mortgage market, and other differences in taxation related to housing and investment, has very different factors at play which mean they don't have things like offset accounts in widespread usage - ie why use a mortgage offset account when your interest costs are tax deductible anyway? Better to keep the mortgage payments at the minimum and deploy spare capital into the share market or something. Non-recourse mortgages (in those states that have them, which includes CA with 60M people by the way and an economic powerhouse of the USA), mean that you can't easily borrow against your house LOC style for other purposes like business etc, or at least it can be harder for an average person to get such a loan.
So in summary, I think part of the reason Steve's model breaks is because he has failed to account for many practicalities associated with Australia's modern deregulated credit environment, and it';s interaction with Australia's complex tax system, and how these factors might be impacting or distorting his aggregate stats to give him a false picture of the systemic household credit risk and debt burden.
There was a very sensible post from "aus_ed" on Keen's blog last January which suggested that Keen's conclusions about what happens next don't follow from Keen's many graphs. It is especially interesting in the light of what has happened to house prices since the comment was made. Worth reading: http://www.debtdeflation.com/blogs/2012/01/07/australian-house-prices-again/#comment-35537
Quote:
aus_ed January 12, 2012 at 10:50 am | #
Steve,
I would like to provide a brief feedback on your last analysis. It may appear rather direct but is well intended as a constructive criticism.
To the point, the premise of this and many previous analysis regarding the state and future of housing market in Australia is that “high debt must lead to a disaster”. You focus on showing how debt has changed over time then jump to a conclusion that “it is so big we are about to go over the edge”. It is a bit simplistic as it fails to take into account that each country will have a different tipping point (eg. how big is big?). The economic situation is different in every country and that is why scenarios in US, UK, Germany, Ireland, Japan, Australia, etc are playing out so differently. It is not difficult to see what will happen in Australia if the entire world economic system collapses. It is also a common knowledge that if the ability to service debt diminishes, the size of the debt will contribute to how fast the things unwind. Your analysis, in the current format, doesn’t add much to understanding of what is happening because the lack of the evidence of what that tipping point is for Australia and how far to or past this point we really are (comparison of a few measures to US is not the evidence). It could be argued that lack of that evidence makes your conclusion that “One of the world’s last and greatest house price bubbles is thus finally ending” speculative in nature rather than insightful.
The issue of evidence leads to the second point I would like to make. You are so certain of the imminent collapse that you are blind to what your own theory is suggesting (ie. misinterpreting what the graphs show). Take for example Figure 10 in the above analysis (by the way, did you apply shift to one time series? – fit is too perfect comparing to your early work). Mortgage Acceleration is historical in nature (with built in lag due to methodology applied). Yet you are suggesting that it will move further down (based on what evidence? Actually, increase in the number and value of loans since April 2011 points to the contrary). At best you could conclude that the indicator could EITHER continue to move lower OR be at a turning point (ie in comparison to historical turning points and the short leg up in the last period). For all those not familiar with the theory, the fact that Accelerator mere turns up (even in negative territory) is a positive sign (ie deceleration in the rate of deleveraging has been shown to have a positive effect on the growth in GDP). You are also missing the fact that, according to your graph, deleveraging is happening for a good 12 months by now, yet the effect has been only 2% drop in house prices across the board. Where is the evidence that the declines in prices will further accelerate? Again, based on your graphs, they could but equally probable is that house prices could also rise. The bottom line is that you are merely showing where the prices and debt levels had been historically – not where they are heading in the future. Full stop.
I would like to suggest to take a fresh and objective look at your graphs and steer clear from a commentary that has no support in your analysis.
With best intention to help improve the quality of your analysis,
And the guy is head of Economics at University of Western Sydney - considerably smarter than you will ever be.
He is not the "head" and he has demonstrated that he is not "smarter" than Joe Bloggs. His predictions have been damaging to anyone who acted upon them and his own financial management which resulted in him having a personal debt of 3.5 times his gross annual salary at the advanced age of 55 show him to be financially incompetent.
He is NOT Head of Economics at UWS - he is an Associate Professor; a lecturer, at UWS, which by anyones measure is hardly the most prestigious economics school in Australia...... He started his academic career quite late in life so don't mistake is age for his professional seniority.
EDIT: I think the "elephant in the room" when it comes to aggregate debt based theories is the modern nature of credit, and likely distortions / mis-representations this creates in the traditional statistics that are collected, like aggregate household mortgage debt numbers. Specifically I am talking about the high prevalence of facilities like mortgage offset accounts, and "Line Of Credit" type loans facilities. Just about every single person I know with a mortgage runs a mortgage offset account, and many who invest in residential property, and other assets (commercial property, shares and so on), run LOC type facilities. 10 years ago these were very rare. 15-20 years ago they were essentially not even available to anyone in Australia.
The impact these things have is that I believe the aggregate household mortgage debt in Australia is overstated - by how much I am not sure, but I believe it could be by as much as 25-50%. The reason is because people with a $300k mortgage, and a $100k offset account, show up in aggregate stats having a $300k debt and a $100k deposit. In the "old days" this would not have been possible, and these people would simply have shown as having a $200k mortgage and a small deposit account most likely (assuming they paid off their mortgage as a priority - which most people did in the "old days"). In my case I have a ~$400k loan facility that is 100% offset - so my loan still shows up in aggregate debt stats (as does my ~$400k deposit), but I pay $0 in interest until such time that I decide to deploy that capital for some other purpose, which I can do WITHOUT needing to go to the bank and apply for a new loan. Likewise I have LOC accounts that are used for specific investment purposes - these count as household residential mortgage debt in the aggregate stats as well, yet the money was used for other investment purposes (business related, shares etc). These are used as a part of a (completely legal) tax minimisation strategy that is a bit complex to explain in a couple of lines here. These are all very common and widely used practices. The other thing with LOC loans is the total APPROVED LOC limit counts in the stats, but only some or even none of the loan capital may have been deployed yet. One of my LOCs only has 50% of the loan amount in use, but the full LOC amount is in the stats as that is what the banks have to report on their books.
These factors also distort any comparisons you might make between the say the household debt / GDP of two countries like AU and the US: This is because the US with its tax deductible PPOR mortgages, predominantly fixed rate based mortgage market, and other differences in taxation related to housing and investment, has very different factors at play which mean they don't have things like offset accounts in widespread usage - ie why use a mortgage offset account when your interest costs are tax deductible anyway? Better to keep the mortgage payments at the minimum and deploy spare capital into the share market or something. Non-recourse mortgages (in those states that have them, which includes CA with 60M people by the way and an economic powerhouse of the USA), mean that you can't easily borrow against your house LOC style for other purposes like business etc, or at least it can be harder for an average person to get such a loan.
So in summary, I think part of the reason Steve's model breaks is because he has failed to account for many practicalities associated with Australia's modern deregulated credit environment, and it';s interaction with Australia's complex tax system, and how these factors might be impacting or distorting his aggregate stats to give him a false picture of the systemic household credit risk and debt burden.
Mate, the guy is still a professor at UWS - and judging by that blather, a thousand times smart than you ever will be champ....seriously, try reading his work rather than cherry picking outlying issues to compare to your straw men.
Consider instead the very simple fact that the non-mining sector in Australia which is being absolutely SMASHED is only holding it's head above water due to the worlds largest stimulus by capita and second largest in total of direct stimulus - combined with the largest wealth transfer possible via taxation and super profits and of course the worlds largest direct real estate stimulus via FHO grants and this is all that is holding the market afloat - even then it is in serious decline. Take away those measures and the market and economy would be completely tanked, you would have to be a moron to argue otherwise.
Yep so you were completely wrong - thanks for confirming.
Quote:
.seriously, try reading his work rather than cherry picking outlying issues to compare to your straw men.
There is nothing like "cherry picking" or "outlying issues" addressed in my other comments - they actually get to the very heart / core of a lot of Keen's theory and predictions, which are based on aggregate debt level stats. Do you have constructive comments to make on the actual issues with Keen's work that I raised?
I have read a lot of SKs stuff by the way, and given that most of what he has predicted about the Australian economy and housing market has been completely wrong, what I do is look for the reasons his analysis and conclusions might be wrong, given that this has proven to be the case for over 6 years now. It's called objectivity, an important part of the scientific method - you should try it sometime. Maybe start by actually reading the points I made and having a think about whether they might be a part of the reason why Keen's calls have been wrong?
30 year $500k loan at 6.54% = $3,173.50 per month.
House prices are doable. But certainly a rip off and children have to given far less attention and love than what they deserve whilst mummy works for the banks.
Face it audas, you and Steve's smug PC cultist inspired belief system and the belief that we're going to crash whilst continuing your naive levels mass immigration and singing kumbaya is wrong.
You'll have to vote for:
If you want to see affordable housing in the near future.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
He is NOT Head of Economics at UWS - he is an Associate Professor; a lecturer, at UWS, which by anyones measure is hardly the most prestigious economics school in Australia...... He started his academic career quite late in life so don't mistake is age for his professional seniority.
EDIT: I think the "elephant in the room" when it comes to aggregate debt based theories is the modern nature of credit, and likely distortions / mis-representations this creates in the traditional statistics that are collected, like aggregate household mortgage debt numbers. Specifically I am talking about the high prevalence of facilities like mortgage offset accounts, and "Line Of Credit" type loans facilities. Just about every single person I know with a mortgage runs a mortgage offset account, and many who invest in residential property, and other assets (commercial property, shares and so on), run LOC type facilities. 10 years ago these were very rare. 15-20 years ago they were essentially not even available to anyone in Australia.
The impact these things have is that I believe the aggregate household mortgage debt in Australia is overstated - by how much I am not sure, but I believe it could be by as much as 25-50%. The reason is because people with a $300k mortgage, and a $100k offset account, show up in aggregate stats having a $300k debt and a $100k deposit. In the "old days" this would not have been possible, and these people would simply have shown as having a $200k mortgage and a small deposit account most likely (assuming they paid off their mortgage as a priority - which most people did in the "old days"). In my case I have a ~$400k loan facility that is 100% offset - so my loan still shows up in aggregate debt stats (as does my ~$400k deposit), but I pay $0 in interest until such time that I decide to deploy that capital for some other purpose, which I can do WITHOUT needing to go to the bank and apply for a new loan. Likewise I have LOC accounts that are used for specific investment purposes - these count as household residential mortgage debt in the aggregate stats as well, yet the money was used for other investment purposes (business related, shares etc). These are used as a part of a (completely legal) tax minimisation strategy that is a bit complex to explain in a couple of lines here. These are all very common and widely used practices. The other thing with LOC loans is the total APPROVED LOC limit counts in the stats, but only some or even none of the loan capital may have been deployed yet. One of my LOCs only has 50% of the loan amount in use, but the full LOC amount is in the stats as that is what the banks have to report on their books.
These factors also distort any comparisons you might make between the say the household debt / GDP of two countries like AU and the US: This is because the US with its tax deductible PPOR mortgages, predominantly fixed rate based mortgage market, and other differences in taxation related to housing and investment, has very different factors at play which mean they don't have things like offset accounts in widespread usage - ie why use a mortgage offset account when your interest costs are tax deductible anyway? Better to keep the mortgage payments at the minimum and deploy spare capital into the share market or something. Non-recourse mortgages (in those states that have them, which includes CA with 60M people by the way and an economic powerhouse of the USA), mean that you can't easily borrow against your house LOC style for other purposes like business etc, or at least it can be harder for an average person to get such a loan.
So in summary, I think part of the reason Steve's model breaks is because he has failed to account for many practicalities associated with Australia's modern deregulated credit environment, and it';s interaction with Australia's complex tax system, and how these factors might be impacting or distorting his aggregate stats to give him a false picture of the systemic household credit risk and debt burden.
Ageist and institutionally elitist
I'm going to have to start taking notes!
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
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