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I’ve just received the fol­low­ing request for assis­tance from Chris Vede­lago, the Prop­erty Reporter for The Sun­day Age :

I’m in search of a Mel­bourne first home buyer who pur­chased in 2009 — when the boosted grant was in effect — and is now hav­ing trou­ble mak­ing their mort­gage repay­ments because of the past inter­est rate rises and the increas­ing cost of liv­ing.
If you know any­one that may fit this bill, please let me know…
If you fit this bill (or know some­one who does) and are will­ing to go on the record, please let me know either via a com­ment here or an email to me at debunking@gmail.com.
Chris would pre­fer some­one who is will­ing to have their name and photo used, but he’s OK about keep­ing it anony­mous if that’s what is desired.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • stavros

    Good work Chris V, show them what a mess the First Home VEn­dors Boost has cre­ated…

    Sorry Steve, I cant help…I think I scared all my mates in Mel­bourne for buy­ing prop­er­ties in 2009. They owe me a beer I reckon ; ) and owe you a case of beer at least!

  • Dear Steve,
    I under­stand that you are of the opin­ion that the Aus­tralian real-estate is head­ing for a 40% decline over 10 years. I think per­haps 60%-80% is not out of the ques­tion. May I please ask you if you fore­see this re-adjust­ment occur­ring more grad­u­ally over 20 years, like in Japan or do you see it mov­ing faster, per­haps 5 years? Thank you for your time.
    Kalman.

  • Hi Kalman,

    I can see prices falling some­thing like 20% in the next 2–4 years, then doing the sort of dead-cat bounce we’ve seen in the US, fol­lowed by a longer grind down–as is also now start­ing in the USA. A lot of that will be via a fall in nom­i­nal prices, but it’s also fea­si­ble at some stage that con­sumer price (and wage) infla­tion will play a role in bridg­ing the gap.

    The gap itself–between con­sumer prices and asset prices–is cer­tainly of the order of 60% rather than a mere 40%.

  • TruthIs­ThereIs­NoTruth

    Assum­ing you can build more Aussie land in Chi­nese fac­to­ries.

  • sj

    Well Mr Keen if inter­est rates had been higher from the start before the first home buy­ers grant you would not have peo­ple strug­gling now.
    Because bank would not loan the suck­ers the money because they could not ser­vice the loan.
    Mr Alan Greenspan pol­icy keep inter­est rates below the rate of real infla­tion scream depres­sion and hard­ship if you raise inter­est rates to clean out the sys­tem.
    Now you have more debt and a big­ger bush fire to con­trol thanks to the bleed­ing hearts in this coun­try keep­ing inter­est rates too low.
    First home buy­ers grant is peanuts verses super low inter­est rates that is cash­flow straight to mil­lions of plebe house­holds.
    I will never under­stand how you have ignore very low inter­est rates to fuel more debt?

  • I agree sj: I am not in favour of low rates as a mat­ter of course–as I’ve argued before, low rates can suck peo­ple into addi­tional debt. If you check my 2007 paper for the Cen­tre for Pol­icy Devel­op­ment, you’ll see a chart show­ing that process.

    But when you’ve caused a debt bub­ble, and the econ­omy is tank­ing, then the author­i­ties have no choice but to lower rates. Of course that can risk restart­ing the debt bub­ble… Ulti­mately the solu­tion has to involve elim­i­nat­ing, as best one can, Ponzi finan­cial behav­iour.

  • As I have rec­om­mended Rothbard’s The Mys­tery of Bank­ing,

    I also rec­om­mend the fol­low­ing by Gary North

    http://lewrockwell.com/north/north1012.html

    and it con­tains some other excel­lent mate­r­ial on the reli­gion of eco­nom­ics.

  • fox­bat101

    Hi guys,
    I am con­sid­er­ing buy­ing a house in the U.S..
    I can bor­row 30 year fixed money at less than 5%.
    (Thats if the A$ does not do a swal­low dive in the next month or so.)
    I am look­ing at a 25% deposit 75% loan and repay­ments fixed for 30 years.
    Here in Aus­tralia i have to pay 8.2% to fix inter­est rates for 15 years.
    So lets say i buy a house for $4m U.S.
    It will cost me $3,336,933 in inter­est over that time.
    In Aus­tralia it will cost $5,075,952 in inter­est.
    Note this is for the same thing a house.
    Now with the sav­ing of $1,739,019 in inter­est i have $57,967.30 a year to live on and my house paid for fully over the 30 year period.
    Thats a $1,000 per week towards my cost of liv­ing.
    Any thoughts?
    Thanks
    Peter

  • bret­t123

    If you have a spare mil­lion lay­ing around I per­son­ally would not be putting it into an invest­ment prop­erty not mat­ter what coun­try.

  • @ Bret­t123 August 4, 2011 at 11:20 pm | #
    “If you have a spare mil­lion lay­ing around I per­son­ally would not be putting it into an invest­ment prop­erty not mat­ter what coun­try”.

    I agree, buy Gold and Sil­ver hard — and secure/ store it pri­vately.

    Too soon to buy real estate. And, every­thing else sucks — in Aus­tralia unless
    you are a Bank or Insur­ance Crony.

  • @ http://www.globalresearch.ca/index.php?context=va&aid=12517

    There is no hope in believ­ing in the fluff and great pre­tender Obama, its too late and he is bought and paid for; just as oth­ers of note.

    on/quote

    Finan­cial Dis­ar­ma­ment

    There are no solu­tions under the pre­vail­ing global finan­cial archi­tec­ture. Mean­ing­ful poli­cies can­not be achieved with­out rad­i­cally reform­ing the work­ings of the inter­na­tional bank­ing sys­tem.

    What is required is an over­haul of the mon­e­tary sys­tem includ­ing the func­tions and own­er­ship of the cen­tral bank, the arrest and pros­e­cu­tion of those involved in finan­cial fraud both in the finan­cial sys­tem and in gov­ern­men­tal agen­cies, the freeze of all accounts where fraud­u­lent trans­fers have been deposited, the can­cel­la­tion of debts result­ing from fraud­u­lent trade and/or mar­ket manip­u­la­tion.

    Peo­ple across the land, nation­ally and inter­na­tion­ally, must mobi­lize. This strug­gle to democ­ra­tise the finan­cial and fis­cal appa­ra­tus must be broad-based and demo­c­ra­tic encom­pass­ing all sec­tors of soci­ety at all lev­els, in all coun­tries. What is ulti­mately required is to dis­arm the finan­cial estab­lish­ment:

    –con­fis­cate those assets which were obtained through fraud and finan­cial manip­u­la­tion.

    –restore the sav­ings of house­holds through reverse trans­fers

    –return the bailout money to the Trea­sury, freeze the activ­i­ties of the hedge funds. . 

    - freeze the gamut of spec­u­la­tive trans­ac­tions includ­ing short-sell­ing and deriv­a­tive trade.

    off/quote

    http://www.globalresearch.ca/index.php?context=va&aid=12517

    Try, aspir­ing Eco­nom­ics from a Reli­gion to a Sci­ence; a phys­i­cal sci­ence which it is.

  • mighty­cats

    Hi all

    At least a year since I made a post but given it is all about to get ugly, I thought it was time to come back. Hope this is a thread that is ok to post to.

    Any­way Michael West wrote a very good arti­cle on smh this evening. Here is the link:

    http://www.smh.com.au/business/debt-wrangling-your-guide-to-economic-chaos-20110804-1icr9.html

    A small pas­sage that I am sure read­ers of this blog would agree:

    If 2008 was the Global Finan­cial Cri­sis, 2011 is the Great Delever­ag­ing. The stim­u­lus by world gov­ern­ments seems now to have been a bit of a band-aid solu­tion. The real­ity is dawn­ing that finan­cial mar­ket val­ues had been pushed arti­fi­cially high by extra debt, or “lever­age”.”

    I find it astound­ing that the major­ity of Aus­tralians appear bliss­fully unaware of the cur­rent eco­nomic sit­u­a­tion the world finds itself in. Most have not come to the under­stand­ing that their houses have dropped in value and they are head­ing fur­ther South. 

    I also strug­gle to under­stand fore­casts of a 20–30 % chance of reces­sion here and in US. The Amer­i­can econ­omy is already show­ing weak­ness, and with the nec­es­sary bud­get cuts hurt­ing the mid­dle and lower classes pri­mar­ily where the veloc­ity of money is greater, and the recent debt ceil­ing debate sap­ping what­ever con­fi­dence remains over there, reces­sion is a 99% bet. I read some­where recently that 4 mil­lion peo­ple will lose their unem­ploy­ment ben­e­fits by Christ­mas. Most unpleas­ant.

    In Aus­tralia, clearly we are shielded some­what by the China story but as the China bears like Jim Chanos would tell you- this is not guar­an­teed to con­tinue with­out at least the odd blip. The date­line story below is scary for those who are rely­ing on China.

    http://www.sbs.com.au/dateline/story/watch/id/601007/n/China-s-Ghost-Cities

    We still have over­priced prop­erty and high house­hold debt which hang over us, and a “lost decade” like in Japan seems inevitable. A China prob­lem or a “GFC PHASE 2” would result in a sharper and quicker decline.

    Euro­pean Debt is a tick­ing time­bomb wait­ing to explode and could cause a “GFC PHASE 2“‘ Per­son­ally if I was a cred­i­tor of an Ital­ian or Span­ish bank or the gov­ern­ment for that mat­ter, I would be get­ting my cash back asap, so in my opin­ion the per­ceived issues that they or the other PIIGS may have will in time become real liq­uid­ity prob­lems. Self Ful­fill­ing.

    It is not a pretty pic­ture. 2012 will be inter­est­ing. Expect Aussie inter­est rates to be 200 basis points lower than today by Christ­mas next year.

    Enough of my rant.

    Cheers

  • Lyon­wiss

    Peter­jbolton August 4, 2011 at 11:47 pm

    Doing God’s work” means that if peo­ple can­not see fraud and accept fraud with­out com­plaint, then they deserve to be defrauded, because money should only go to those who can make it and keep it — the logic of extreme cap­i­tal­ism. Hence fraud is doing God’s work — the fraud­sters are saints, rewarded with multi-mil­lion dol­lar bonuses. The only jail they go to are their gilded man­sions.

  • A good rant Might­Cats,

    I might post a sim­i­lar blog entry today too.

  • @ Lyon­wiss August 5, 2011 at 12:47 am | #

    @ Mighty­cats August 5, 2011 at 12:01 am | #

    I believe that Adolph Hitler once said which I para­phrase” Lead­er­ship are most for­tu­nate that their peo­ple don’t think.

    And this is the argu­ment why “Lead­er­ship” car­ries the heavy bur­den of respon­si­bil­ity as in “Pub­lic Ser­vice” and the ety­mo­log­i­cal def­i­n­i­tion of “elite” is ‘com­pe­tence’, where­upon the exact oppo­site is our a pri­ori def­i­n­i­tion of those elected and unelected to pub­lic office in our name.

  • fox­bat101

    Thanks for the feed back.
    Peter

  • alain­ton

    Inter­est­ing digram at Yanis Varo­ufakis show­ing how one coun­try in euro­zone default­ing will spin oth­ers to default because of ris­ing debt to gdp ratios
    http://yanisvaroufakis.eu/2011/08/04/why-italy-why-spain-and-why-the-efsfs-size-does-not-matter/#more-952

  • Dave The Elder

    If your flex­i­ble, per­haps con­sider inter­view­ing the Gold Coast cou­ple who fea­tured on sixty min­utes; I fear their sit­u­a­tion will be repli­cated over the next cou­ple of years on a national scale.