The problem with making probabilistic future predictions is that as long as I include the true outcome in my predictions then I’m right. So probability of recession this year: 10%, 30%, 50%, 90% they’re all the same. It will either happen or it wont. Long run it does matter but the quote is true “in the long run, we’re all dead”.

“Linear economics”…. have you read Nassim Nicholas Taleb’s book, The Black Swan: The Impact of the Highly Improbable?

For your amusement see http://www.smh.com.au/multimedia/2008/national/sydney-units/index.html The photography is really nice.

My feeling is that probably these economists understand the fallacy of their own argument i.e. deep down in their hearts, they know they are wrong. But there’re too many vested interests who will lose a lot if the word gets out that the emperor has no clothes.

I’ll echo the main point as well. The way I look at it is that buying property at the moment is giving money away, the difference between the real and paid price. This has the nice effect of keeping people in jobs as the money I’ve given away is spent. Of course if I don’t buy a property someone will lose their job, but I’ll live with that rather han 30 years of excessive mortgage. I suppose when lots of people decide not to borrow and $100 billion or so disappears from the economy it will be a bit unpleasant. 15% unemployment this recession ? Things could be worse, NZ for example.

Your blog’s comment on Oliver is excellent. If I can make the time, I’ll have a go myself at some of Oliver’s argument too. I’ll obviously echo your key point: that the value of assets is illusory, while the value (read burden) of debt is real.

Recently, Chief Economist Shane Oliver of AMP Capital Investors had released a new ‘insight’ note about the state of Australia’s debt situation. While he acknowledge the risk of rising debt, he reckons that Australia’s debt is not “as bad” as it seems. We’ve posted an article refuting his view at Aussie household debt not as bad as it seems?.

You may want to do a follow-up on Shane Oliver’s view on Australia’s debt (our article links to his ‘insight’ note if you want to take a read for yourself).

Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.

The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse.

Some other alternative theories believe that China (and the emerging markets) will still not be able to decouple from a severe US recession (see Can China really ‘de-couple’ from a US recession?). If this theory is right, then the implication for Australia is dire.