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Another bull becomes a bear: Catherine Cashmore finds god?; Enjoy housing boom while it lasts, it won't end without unpleasant consequences
Topic Started: 30 Sep 2013, 11:32 PM (4,908 Views)
stinkbug
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Dr Watson
1 Oct 2013, 02:41 PM
Surely the inflation-targeting era provides a useful reference period. Rates are extremely low within the inflation-targeting era. Chris Joye thinks they are very low, and he can see the dangers.
Inflation targeted actually seems to have worked reasonably well in Australia, at least for the past 20 years or so anyway.
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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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Dr Watson
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stinkbug
1 Oct 2013, 02:52 PM
Inflation targeted actually seems to have worked reasonably well in Australia, at least for the past 20 years or so anyway.
Yes, but we should heed Chris Joye's warnings. What I like about Joye is he changes his mind when the facts change. He's been right about most things so far. We should listen to him.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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skamy
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herbie
1 Oct 2013, 02:22 PM
Me too Skamy - But only when my aim is bad ... :re:
Thank goodness that is most of the time :lol
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.
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Shadow
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Evil Mouzealot Specufestor

Shadow
1 Oct 2013, 02:43 PM
Interest rates are low, but not unusually low considering the past 160+ years.
Just to expand on this a little...

When bears claim interest rates are at record lows or emergency lows, the insinuation is that current mortgage rates are somehow 'unusual' or 'unprecedented' and are only at this level to 'support the housing bubble'. But the truth is that mortgage rates have been around this level for most of the past 160+ years. Records only go back as far as 1852, but they show that from 1852 to 1970, mortgage rates remained around the 5% level, plus or minus 0.5%.

Do the bears think mortgage rates were kept low for more than a century to support a housing bubble? Seems pretty unlikely.

And even if we ignore most of the past 160+ years and limit the analysis to the past 50-60 years, we can see that even over the past 50-60 years the high-inflation 80s period was an anomaly.

For some reason the bears seem to think the brief high inflation 1-2 decades around the 80s is the norm, and that the other 140+ years should just be dismissed as an anomaly. Strange way of thinking.

By current global standards, current Australian interest rates are high. By Australian historical standards they are low, but not unusually low.

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Edited by Shadow, 1 Oct 2013, 04:43 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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miw
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Sydneyite
1 Oct 2013, 12:53 PM
Veritas - is renting so bad? If house prices are really in a bubble, too high etc, and renting is so much cheaper than buying, with no risk of capital loss etc, aren't those (increasing numbers? Not convinced by the way) of renters doing the "smart" thing in your books? Why does it matter if they choose not to buy? Why does it bother you so much?
To me this is the major contradiction in most of the stuff Veritas posts. He pretends to be advocating the interests of the most vulnerable in society, but when you pull it apart much of what he proposes is very renter-unfriendly. Seriously who cares if the upwardly-mobile have to actually save for a while before they buy a house as long as rents are affordable?
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Veritas
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miw
1 Oct 2013, 04:38 PM
Sydneyite
1 Oct 2013, 12:53 PM
Veritas - is renting so bad? If house prices are really in a bubble, too high etc, and renting is so much cheaper than buying, with no risk of capital loss etc, aren't those (increasing numbers? Not convinced by the way) of renters doing the "smart" thing in your books? Why does it matter if they choose not to buy? Why does it bother you so much?
To me this is the major contradiction in most of the stuff Veritas posts. He pretends to be advocating the interests of the most vulnerable in society, but when you pull it apart much of what he proposes is very renter-unfriendly. Seriously who cares if the upwardly-mobile have to actually save for a while before they buy a house as long as rents are affordable?
Only if you accept that fundamental reform cant produce a more egalitarian outcome.

For example, imagine how much public housing could be built using the increased tax take from the abolition of negative gearing.
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
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Trojan
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Veritas
1 Oct 2013, 04:48 PM
Only if you accept that fundamental reform cant produce a more egalitarian outcome.

For example, imagine how much public housing could be built using the increased tax take from the abolition of negative gearing.
As discussed in previous threads, abolishing NG will means PI defer their tax offset until they sell.
So the answer is very little public housing can be built.
Wake up and read other people's shared knowledge one day instead of looking at everything through rose tinted glasses. :re:
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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Veritas
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Trojan
1 Oct 2013, 04:53 PM
Veritas
1 Oct 2013, 04:48 PM
Only if you accept that fundamental reform cant produce a more egalitarian outcome.

For example, imagine how much public housing could be built using the increased tax take from the abolition of negative gearing.
As discussed in previous threads, abolishing NG will means PI defer their tax offset until they sell.
So the answer is very little public housing can be built.
Wake up and read other people's shared knowledge one day instead of looking at everything through rose tinted glasses. :re:
The arrogance.

You will forgive me if I consider the analysis of people like Saul Eslake and Ken Henry over some internet forum anonymous VIs.

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
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I'll vote for the first party that addresses housing affordability as a serious social and economic issue instead of celebrating inflation of existing housing as some sort of accolade. It is crippling the rest of the Australian economy and pricing a whole generation of people out of housing. No other country would give preference to investors - local and foreign - instead of people that actually just want a house to live in (crazy, I know!).

Here's a few places to start: Remove negative gearing and CGT concessions, introduce a land tax and abolish Stamp Duty, increase supply and remove the amount of red-tape and impediments such as overly sensitive heritage or environmental concerns, restrict foreign ownership, and stop allowing people to gamble on housing with their super (allowing people to leverage into their super contradicts the essence of why super was introduced).

None of these are wild policies - they simply return housing to a level playing field and allow people to buy it for its primary purpose - a place to live and raise a family. Most were suggested and subsequently shelved in the Henry Tax Review because whilst they are good policies, they will make you very unpopular with the lobbyists.
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Trojan
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Veritas
1 Oct 2013, 04:56 PM
The arrogance.

You will forgive me if I consider the analysis of people like Saul Eslake and Ken Henry over some internet forum anonymous VIs.
*yawn*
I don't believe Ken Henry never said total tax take would increase and we could build heaps of public housing if NG was abolished.
You mean you rather believe Macrobusiness because you paid your $100 bucks for their crummy advice :)
Edited by Trojan, 1 Oct 2013, 05:03 PM.
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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