Misnamed article. Title only refers to the lead-in.
Another Sign That The Huge Aussie Housing Bubble Is Popping
I differ with the 20 who predicted positive price growth for one simple reason: I focus on the role of debt in driving house prices. Having argued that debt drove prices up over the last 15 years, I now expect debt to drive them down again.
The mechanism is simple—but it’s not part of conventional “Neoclassical” economics, which is why Chris and his surveyed market economists don’t consider it. Aggregate demand is the sum of income plus the change in debt, and this is spent on both goods and services and assets. There is thus a link between the change in debt and the level of asset prices (and the fraction sold, and the quantity produced, but I’ll focus just on just house prices for now).
Hat tip: Aussie Roy commenting at greaterfool.ca
3 comments:
Neoclassical Accounting 101 pop quiz: How do you book the value of an asset?
Why underwrite with houses when you can underwrite with copper?
A new development in China’s copper collateral trade
Looks like that horse is still twitching...
Nice catch on the link. Thanks.
China is the wild wild west of finance and we only ever see the surface of it.
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