House prices shoot towards a ceiling

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The bulls are roar­ing, house prices are ris­ing, and all’s well with the world.

Or maybe not. Cer­tain­ly house prices have risen — and con­trary to pop­u­lar opin­ion, I expect­ed price ris­es this year, since mort­gage debt has been accel­er­at­ing since the begin­ning of 2012 (see Fig­ure 1). One of my many eco­nom­ic here­sies is the argu­ment that asset prices are dri­ven by ris­ing debt. Ris­ing asset prices — in this case, hous­es — require accel­er­at­ing debt (in this case, mort­gage debt), and that’s indeed what we’ve had since the begin­ning of 2012.

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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.