Hi,
Even our old mate Steve Keen has officially shut the door on the GFC.
http://www.businessspectator.com.au/article/2014/3/10/economy/closing-door-gfc
Well there you have it. The biggest bear on the block is predicting a virtuous cycle of positive economic news feeding more personal debt feeding more asset price growth feeding more positive economic news and so on. Are we at risk of a future bust? According to Dr Keen we are, and if we move into another debt fuelled boom then assets could eventually go bubble. Hence the RBA's current moves to reduce systemic risk in the housing sector by increasing lending hurdle rates. That way they can slow lending for housing without actually raising the cash rate and hurting our economic recovery.
As a contrary investor, when Steve Keen says the boom has begun, does that mean we should all get nervous?
Cheers,
Michael
Even our old mate Steve Keen has officially shut the door on the GFC.
http://www.businessspectator.com.au/article/2014/3/10/economy/closing-door-gfc
Steve Keen said:These are hardly sterling growth rates, but the fact that they are all positive is causing a noticeable change of mood in economic commentary -- and a shift in public expectations as well. Is it enough to call the GFC/Great Recession/North Atlantic Financial Crisis over?
It isn?t. But I?m willing to do so on an entirely different measure: the rate of change of private debt is now strongly positive. The period of private sector deleveraging that caused the crisis appears to be over. Debt is now not merely growing, but growing faster than GDP
With sustained positive growth in credit comes a tendency to positive economic news as well, and out of that a tendency to take on more credit too -- after all, that?s what gave us the previous boom, isn?t it?
Well there you have it. The biggest bear on the block is predicting a virtuous cycle of positive economic news feeding more personal debt feeding more asset price growth feeding more positive economic news and so on. Are we at risk of a future bust? According to Dr Keen we are, and if we move into another debt fuelled boom then assets could eventually go bubble. Hence the RBA's current moves to reduce systemic risk in the housing sector by increasing lending hurdle rates. That way they can slow lending for housing without actually raising the cash rate and hurting our economic recovery.
As a contrary investor, when Steve Keen says the boom has begun, does that mean we should all get nervous?
Cheers,
Michael