RBA Minutes of the Monetary Policy Meeting of the Reserve Bank Board September 2013; Big bet on housing paying off. Rate cut possible, but not imminent.
Its not slavery if, in the process, they are gaining a job they would not have otherwise had.
So synonymous has monetary policy become with property prices, people forget that lowering rates is primarily a tool to combat economic slowdowns.
Of course there is no talk of raising rates, the real economy is still posting poor data, cheap money and investor mania fuelled house prices notwithstanding.
There is no financial constraint in Australia such that for anyone who wants a job can not have one. WE just need the right policies.
So we do not need to export to give people jobs. In fact, much of our recent mining exports have come at a real cost to the economy - imagine all of those engineers used to build better cities, roads, bridges, and public services instead of sending dirt to China.
Its not slavery if, in the process, they are gaining a job they would not have otherwise had.
So synonymous has monetary policy become with property prices, people forget that lowering rates is primarily a tool to combat economic slowdowns.
Of course there is no talk of raising rates, the real economy is still posting poor data, cheap money and investor mania fuelled house prices notwithstanding.
There is no financial constraint in Australia such that for anyone who wants a job can not have one. WE just need the right policies.
So we do not need to export to give people jobs. In fact, much of our recent mining exports have come at a real cost to the economy - imagine all of those engineers used to build better cities, roads, bridges, and public services instead of sending dirt to China.
Imagine if all that surplus capital was invested in companies that employed those engineers instead of bidding up the price of established real estate!
I agree with you, but low IRs is necessary right now to protect jobs.
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
Its not slavery if, in the process, they are gaining a job they would not have otherwise had.
So synonymous has monetary policy become with property prices, people forget that lowering rates is primarily a tool to combat economic slowdowns.
Of course there is no talk of raising rates, the real economy is still posting poor data, cheap money and investor mania fuelled house prices notwithstanding.
There is no financial constraint in Australia such that for anyone who wants a job can not have one. WE just need the right policies.
So we do not need to export to give people jobs. In fact, much of our recent mining exports have come at a real cost to the economy - imagine all of those engineers used to build better cities, roads, bridges, and public services instead of sending dirt to China.
Imagine if all that surplus capital was invested in companies that employed those engineers instead of bidding up the price of established real estate!
I agree with you, but low IRs is necessary right now to protect jobs.
I do not think we need low IR's. We need tax cuts relative to spending, OR spending increases relative to tax receipts (ie: bigger deficits).
We are going to wait to see how much of the easy money starts getting pulled out of global circulation by the US Treasury first. We should have some idea about the pace and amount of that by then. This will tell us whether the AUD is going to drop lower all by itself or not.
We are still getting enough suckers in the housing market at this time so that’s kind of going OK.
If the loans from overseas markets start going up then we will probably look at raising interest rates, however, it is in the public interest not to say too much about that just yet as the beginning of the Taper will cause enough of a scare at this early stage.
Once the public get a taste of that they will likely accept the first of the interest rate rises more readily by around February 2014 having accepted their fate somewhat (ending of easy money) by around December 2013.
The banks by that time would have made enough easy money on the way over-inflated housing market, but they cannot really lose once the values of the homes go down an incredible amount. Those who took the loans still have to pay back the original amounts anyway.
So at this stage we elect to sit tight and first see the effects of the first round of Fed Tapering on the USD then AUD then the cost of borrowing from overseas.
The coast should then be clear around February 2014 to start the interest rate rise shock.
+ 1
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
Imagine if all that surplus capital was invested in companies that employed those engineers instead of bidding up the price of established real estate!
I agree with you, but low IRs is necessary right now to protect jobs.
the idea that housing ties up capital has been debunked so many times on here. why are you so thick that you keep trying to claim otherwise?
I am the love child of Tony Abbott and Pauline Hanson
the idea that housing ties up capital has been debunked so many times on here. why are you so thick that you keep trying to claim otherwise?
Debunked my arse. While it is true that a certain level of investment in the housing market is both productive and desireable, it is also true that a point can be reached where further investment carries with it a high opportunity cost- and some other negative things.
What do you think happened in Ireland and Spain?
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
Debunked my arse. While it is true that a certain level of investment in the housing market is both productive and desireable, it is also true that a point can be reached where further investment carries with it a high opportunity cost- and some other negative things.
What do you think happened in Ireland and Spain?
Pig iron is right. The loan creates the deposit (funding). Any credit worthy project or customer has access to credit. While this is the reason why we can have credit bubbles (Ireland, USA etc), it also means funds are never 'diverted' from one industry at the expense of another. This is a myth.
Pig iron is right. The loan creates the deposit (funding). Any credit worthy project or customer has access to credit. While this is the reason why we can have credit bubbles (Ireland, USA etc), it also means funds are never 'diverted' from one industry at the expense of another. This is a myth.
WTF?
Moving theory back into reality: In both Ireland and Spain a load of bright sparks, on both sides of the deal, thought they were engaged in some sensible profit making venture in relation to housing.
In actuality, all they were doing was blowing a massively damaging property bubble.
And yes, they were diverting funds from one industry to another as those who had surplus capital decided decided to bet it on housing.
Without those conditions, its fair bet that they would have been doing something far more useful with their spare cash.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.
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
Pig iron is right. The loan creates the deposit (funding). Any credit worthy project or customer has access to credit. While this is the reason why we can have credit bubbles (Ireland, USA etc), it also means funds are never 'diverted' from one industry at the expense of another. This is a myth.
Well, if the loan books keep growing, at some stage the banks either have to securitize or they have to raise equity to meet capital adequacy requirements. So maybe credit growth does result in capital being tied up in bank equity.
But it is pretty obvious that if I buy a house then my capital is reduced by the same amount as the vendor's capital is increased so house price rises or falls have no nett impact on the amount of capital tied up in housing. The capital tied up in a house is the amount it cost to build it and subsequently maintain it, and that is independent of market price.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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