Says Prosper Australia’s David Collyer today:-
WHAT A PARTY; WHAT A HANGOVER!
The RBA said yesterday assets have fallen by $40,000 per household in the last year.
No wonder everyone is now saving over ten percent of their incomes and slashing mortgage balances with grim determination.
The economy, which usually steers like an oil tanker, has turned on a dime.
We were spending about 103 per cent of incomes, pinching off some of the strong rises in home prices and balancing this with borrowings.
What happened? Falling land prices.
The ABS says house prices are down nationwide by a mere 4.8 per cent (ABS). This is the result.
We all have a personal balance sheet. It might exist only in our heads, but it exists nonetheless. Asset price falls come straight off our personal equity, our savings, while liabilities – mainly the home mortgage – are payable in full with interest from after-tax incomes.
Returning to – overshooting – the long-term average land price is going to be quite an experience for anyone with big borrowings. The impersonal forces that provided ‘Free Deposits’ for housing upgrades are now issuing ‘Underwater Coupons’ to anyone foolish enough to be long and geared into the Australian real estate market. Boomer balance sheets suddenly look quite different, and they simply do not have enough working years left to restore their finances.
The unshakable determination of the MSM and politico-housing complex to maintain citizen ‘confidence’ with deliberately misleading anecdotal narratives has given people false hope. They should be jailed for the tremendous economic damage they have done.
This unfolding financial catastrophe need never have happened. Perhaps it takes a crisis to remind citizens what really matters in a modern and dynamic economy: social justice and economic efficiency. Change the tax system to remove the incentives to speculate and structure it to encourage labor and business enterprise instead. We have the blueprint – the Henry Review. All we need is a government with the political will to carry it out.
3 thoughts on “WHAT A PARTY; WHAT A HANGOVER!”
I’m no economist but I get the feeling that without a strong ongoing increase in the money supply depression results it seems to be that wether your private sector or government almost any hair brain scheme has a positive outcome as there is literally more money in the economy then when the project started but if growth is reduced when it hits he fan. So when the private sector does not increase debt if the government does not pick up the slack then depression results . Crazy system almost as if we are doomed to have an ever increasing role of the state in our lives.
Yes, Steve, it’s all arse-backwards, isn’t it? From Scott Baker in the US, here’s the record of government austerity at times like this:-
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929
1998-2001: U. S. Federal Debt reduced 9%. Recession began 2001
2004-2008: Deficit Growth reduced 40%. Recession began 2008
Despite all their rhetoric, government are NOT like households: households can’t print money.
I have to say I have held back buying a house all these years and it would seem the collapse is upon us now with so many being laid off. Trouble is I will be one of them so end result is still no home.
This has barely started and yet I know of so many people who are in the shit already.
with the ALP about to engage in a massive austerity drive the bust is going to be a social catastrophe like we have not seen since the land boom turned sour.