But less than 10% of the population is employed in construction, and less again on residential construction specifically.
So you don't really have a point...
I have a point when housing construction is being touted as the saviour of the local economy.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
I have a point when housing construction is being touted as the saviour of the local economy.
Of course you do.
Housing is infrastructure.
It is ordinarily a function of economic activity, not the other way around.
Perhaps the only exception to this would be construction as stimulus, paid for by Government, during a recession.
Even then the stimulus is only intended to prevent the rest of the productive economy from atrophying.
Houses is just infrastructure, like roads and schools not matter how much the raging bulls protest otherwise.
Pity the greedy bastards don't see it that way.
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
Veritas Jimbo is claiming that house sales in Warnbro are a ponzi scheme even you must see that this is silly.
House prices there are up to 40% below what they sold for in 2007. If you buy there today how on earth can you imagine a ponzi scheme going on, it is just ridiculous in the extreme.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
As badly as our banking system operated in recent years, the housing bubble was not a Ponzi scheme. In some respects, however, it was even worse than a Ponzi scheme!
A Ponzi scheme is based on fraud. The operators of the scheme deceive the participants, telling them that their money is being used to make real or financial investments that have a high return. In fact, no such investments are made, and the operators of the scheme are simply paying high returns to the early participants with the funds put in by the later participants. A Ponzi scheme has to grow—and grow rapidly—in order to stay viable. When its growth slows, the early participants can no longer be paid the returns they expect. At this point, the operators disappear with what’s left of the participants’ funds—unless the authorities step in and arrest them, which is what happened with Charles Ponzi in 1920 and Bernard Madoff this year.
Fraud certainly was very important in the housing bubble of recent years. But the housing bubble—like bubbles generally—did not depend on fraud, and most of its development was there for everyone to see. With the principal problems out in the open and with the authorities not only ignoring those problems but contributing to their development, one might say that the situation with the housing bubble was worse than a Ponzi scheme. And Madoff bilked his marks out of only $50 billion, while trillions were lost in the housing bubble.
Bubbles involve actual investments in real or financial assets—housing in the years since 2000, high-tech stocks in the 1990s, and Dutch tulips in the 17th century. People invest believing that the price of the assets will continue to rise; as long as people keep investing, the price does rise. While some early speculators can make out very well, this speculation will not last indefinitely. Once prices start to fall, panic sets in and the later investors lose.
A bubble is similar to a Ponzi scheme: early participants can do well while later ones incur losses; it is based on false expectations; and it ultimately falls apart. But there need be no fraudulent operator at the center of a bubble. Also, while a Ponzi scheme depends on people giving their money to someone else to invest (e.g., Madoff), people made their own housing investments—though mortgage companies and banks made large fees for handling these investments.
Often, government plays a role in bubbles. The housing bubble was in part generated by the Federal Reserve maintaining low interest rates. Easy money meant readily obtainable loans and, at least in the short run, low monthly payments. Also, Fed Chairman Alan Greenspan denied the housing bubble’s existence—not fraud exactly, but deception that kept the bubble going. (Greenspan, whose view was ideologically driven, got support in his bubble denial from the academic work of the man who was to be his successor, Ben Bernanke.)
In addition, government regulatory agencies turned a blind eye to the highly risky practices of financial firms, practices that both encouraged the development of the bubble and made the impact all the worse when it burst. Moreover, the private rating agencies (e.g., Moody’s and Standard and Poor’s) were complicit. Dependent on the financial institutions for their fees, they gave excessively good ratings to these risky investments. Perhaps not fraud in the legal sense, but certainly misleading.
During the 1990s, the government made tax law changes that contributed to the emergence of the housing bubble. With the Taxpayer Relief Act of 1997, a couple could gain up to $500,000 selling their home without any capital gains tax liability (half that for a single person). Previously, capital gains taxes could be avoided only if the proceeds were used to buy another home or if the seller was over 55 (and a couple could then avoid taxes only on the first $250,000). So buying and then selling houses became a more profitable operation.
And, yes, substantial fraud was involved. For example, mortgage companies and banks used deceit to get people to take on mortgages when there was no possibility that the borrowers would be able to meet the payments. Not only was this fraud, but this fraud depended on government authorities ignoring their regulatory responsibilities.
So, no, a bubble and a Ponzi scheme are not the same. But they have elements in common. Usually, however, the losers in a Ponzi scheme are simply the direct investors, the schemer’s marks. A bubble like the housing bubble can wreak havoc on all of us.
Veritas Jimbo is claiming that house sales in Warnbro are a ponzi scheme even you must see that this is silly.
House prices there are up to 40% below what they sold for in 2007. If you buy there today how on earth can you imagine a ponzi scheme going on, it is just ridiculous in the extreme.
If people who make a living building houses and selling those houses to other people who make a living building houses, then you have a multiplier accelerator effect on your hands. The MA effect has Ponzi characteristics.
The MA effect was central to the Irish housing bubble which was very definitely a Ponzi scheme.
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
Tell me, before Ponzi schemes were made illegal, where were Ponzi schemes?
The term 'Ponzi Scheme' didn't exist until Charles Ponzi used the technique in 1920. The term has a specific meaning, it means fraud, where investors believe in the success of some enterprise that doesn't actually exist, and where returns for early investors come solely from money invested by later investors.
It's has quite a specific meaning. There needs to be fraud, there needs to be no real underlying enterprise, and the returns from investors need to come from subsequent investors only.
Clearly this does not apply to any housing market, even a housing bubble, because buying and selling homes is not fraudulent, there are real underlying assets being traded, and return for investors comes from rent - i.e. it is a real and legal investment that provides an ongoing yield. Also, the majority of homes are not even bought by investors.
To describe the housing market as a Ponzi scheme demonstrates a total lack of understanding of what a Ponzi scheme actually is.
Jimbo
29 Aug 2014, 06:32 PM
I have a point when housing construction is being touted as the saviour of the local economy.
No, simply 'touting' something doesn't make it a Ponzi scheme.
The term 'Ponzi Scheme' didn't exist until Charles Ponzi used the technique in 1920. The term has a specific meaning, it means fraud, where investors believe in the success of some enterprise that doesn't actually exist, and where returns for early investors come solely from money invested by later investors.
It's has quite a specific meaning. There needs to be fraud, there needs to be no real underlying enterprise, and the returns from investors need to come from subsequent investors only.
Clearly this does not apply to any housing market, even a housing bubble, because buying and selling homes is not fraudulent, there are real underlying assets being traded, and return for investors comes from rent - i.e. it is a real and legal investment that provides an ongoing yield.
Do describe it as a Ponzi scheme demonstrates a total lack of understanding of what a Ponzi scheme actually is.
No, I know exactly what a Ponzi scheme is.
The truth of that matter is, however, that before and after Charles Ponzi markets have taken on "Ponzi" like characteristics.
I have already posting what those characteristics are.
Quote:
That describes every housing market in the world. And just about every market outside housing too. All markets require new entrants in order to grow and be sustainable.
This is dead wrong. When I buy a new jacket or a meal or a haircut, I have no intention of selling this product on once I am done with it. The housing market however, is entirely different in that most people buy in the expectation of selling and trading up. The "property ladder and all that"
Just like in Ponzi scheme, existing players in the housing market are paid out by new entrants. The ladder doesn't exist without them. Bernie Madoff paid his existing investors with the money he received from new investors. People who sell houses derive their profit only when a new entrant to the market materialises.
And just like Ponzi schemes, high rates of return beget high rates of return as new investors are attracted by the lure of the capital gain that existing investors received ( either through taking profit or on paper) Until, of course, something happens to cause existing players to take profit and or the well of new entrants dries up. This is exactly the dynamic that occurs in housing bubbles.
So you're pedantic insistence that its your definition or description or nothing is redundant. Sorry.
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
Veritas Jimbo is claiming that house sales in Warnbro are a ponzi scheme even you must see that this is silly.
I never said that house prices in Warnbro are a Ponzi scheme?
The idea that building houses can build an economy is Ponzi economics however and that is what you are clinging onto.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
To describe the housing market as a Ponzi scheme demonstrates a total lack of understanding of what a Ponzi scheme actually is.
Only full retard bears having a whinge would describe the housing as a Ponzi scheme. It if often used with the term "infester" or "specufester" It might make them feel better after that outburst but as always, it just a whinge.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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