FHB Boost Is Australia's Subprime

FHB Boost is Australia’s “Sub-prime Lite” | Steve Keen's Debtwatch

 

I don't know if many on these forums read much of Steve Keen's stuff, but he paints a very gloomy picture of the influence of the FHB Boost on Australian property. I know many on these forums think I'm and Doom and Gloom merchant, but I sincerely hope Steve is wrong on his projections...

 

Hi Chris,


I read Keen, and I'm sure quite a few others on this forum do too. If you want to enter into "healthy" debate, there are a few threads on Somersoft that are over 12 pages long - with lots of intelligent & passionate arguments for and against Keen's theories.

You should check it out...
Steven Keen may have been right all along... - Somersoft Property Investment Forums

Rgds, Chris

 

Good work Sim - i weight RBA comments 3:1 against run of the mill economic comentators.

 

The same RBA that was jacking up rates last year claiming inflation was the major problem.

The RBA that didn't predict the current crisis and has constantly had to revise down growth forecasts.

The RBA that claims the property boom ended in 2003.

Not sure I would put too much faith in anything they put forward for public consumption.

 

LMAO - you are weighting an independent opinion against an organisation whose charter is that they have to look out for the prosperity of Australia!!!

If they are doing their job they are obligated to LIE!



In the economic system we operate in confidence is everything, and confidence left this world economy a long time ago; the RBA would say anything to hang onto what little delusional hope of confidence is left.

There is a reason why ALL central banks, government, institutions are slowly revising there projections and expectation down... because they want to maintain as much confidence in the market for as long as they can until the point where their influence over markets are being called into question by their inaccurate assessment.

If there is one thing you guarantee, it is that governments and central banks WON'T overstate the severity of the problem... but then again I take a little bit more of a sadistic view of the world.

 

That's not our experience so far.

KRudd and his government are doing a good job at telling us how bad things are when in fact things are nowhere near as bad.

I bet later they'll tell us that it was their good economic management which turned our economy around but we will be left with the usual gov. debt we had to have.......

 

If they were honest they would have told Australia back in early October that our ability to avoid recession was virtually impossible. They refused to even use the word until March, and it's only now that they are saying "it's unlikely we'll be able to avoid it."

Go read some media releases back in August, September, October of last year - KRudd and the RBA were both chirping on about Australia being awesome and different to the rest of the world.

To be completely honest with 0.1% growth in the 3rd quarter you'd have to say that even by mid last year there were A LOT of warning signs. These guys all have way too many resources at their disposal to only just be working out now that it is unlikely we can avoid recession.

Look I'm not here saying that them lying is a bad thing, I'm just saying they are constantly lying, or at least they are not being honest and forth coming about what they know and believe.

 

Swan stating the mildly obvious....

Prosperity to rebound after crisis, Swan predicts

Chris, I agree with you, politicians call it so it will be most advantageous to themselves. Labor blames Liberal and Liberal blames Labor, the reality is that it's the world economy.

Cheers,

Dan

 

I personally think the major difference is that the US Sub-Prime was built on speculation. That is the key difference to our market. Yes, we have people taking out loans at low rates, but i don't hear of too many people loading up on 2nd and 3rd mortgages, using equity and additonal loans as deposits on homes they are told will go up and give them everything they ever dreamed of. We don't have loans being granted to people who are unemployed and have no ability to repay the debt. Compounding these problems by packaging them up, selling them as AAA rated assets with them then becoming CDO squared, cubed and even further is what *really* got them into trouble. I don't believe we have the same level of leverage here.

I do agree that the FHOB is causing an artificial increase in house/unit prices under 500k but i believe that the vast majority of the public are naive to that fact. I sometimes forget that a very large chunk of our society do not take interest in the economy yet it dictates just about everything that happens on Main Street! I don't think people care either (even if they did know) because all they see is additional money being shoved in their face for buying what they wanted anyway! I admit i have been sucked in to it as well, but when prices have been inflated more than the FHOB has effectively lowered them, i'm inclined to sit out and wait. It's created a bubble that the government clearly didn't see coming because RE is their saving grace. They now have no choice but to extend it, so as to avoid thousands of people slipping into negative equity.

Everything governments are trying to do to "stimulate the economy" seem to centre around debt. Using and encouraging people to take on debt to get ourselves out of a situation that debt got us into it, especially when these people are the least able to service it, is surely short sighted.

I have read alot of what you've said Chris, and my first paragraph is why i don't see your worst case senario of 50% loss in RE values. I do however agree, as has been stated many times, we live in one of the most expensive places on the planet relative to income and it's not sustainable in this enviroment. I don't care what anyone including the government does to "stimulate" under-educated, under-researched and ill-prepared naive individuals into spending their hard earned cash, and more to the point future hard earned cash (because that is really what we are surrendering to own the great australian dream!), our market is like a line of domino's waiting to go...

What i wish would happen is for a "debt reset", for people to realise that debt is not a necessary evil. To live below their means. Instead of trying to stimulate people to spend, for the government to educate people and show them how to save. Yes, it will force businesses to the wall. It will lose some jobs. But these jobs are created by people living in a world that can't be sustained. The USA is a prime example. "Keeping up with the Joneses" by having the better car, the bigger house, a more expensive holiday. We need to reset our appetite for debt and build a sustainable economy, not try and stimulate it back to what is was before...