Steve Keen is at it again

[tcocaro]

Have you seen an insane person argue with a sane person on the street? Arguing and screaming at eachother?

To a 3rd person they both look insane.. thats what will occur if we youtube this thread.. we en up all looking like idiots..

someone make a youtube clip out of this thread, please.

 

[Sunfish]

.. thats what will occur if we youtube this thread.. we en up all looking like idiots..

when only half of us are. LOL

 

[WinstonWolfe]

The PC prefers MFP as a measure because it is about 'free' productivity increases which is our aim. Injecting capital or labour is not free, both have costs and both want to skim from the profits, especially if the capital is borrowed, and both could also be productive if deployed anywhere in the economy.

This is where I don't agree with the PC. They do not consider unemployment in a welfare state is less productive than expensive labor....job search allowance adds nil to GDP and under 24yr old unemployment rate is 11%.

As for skimming from profits, value added must be split between capital and labour....even the bit that goes to govt eventually comes back to capital or labour.

When wages are higher, labour just gets a bigger share of value add.
And that's not necessarily bad if labour allocate that money towards nationally productive ends rather than discretionary imports.

Another way to think of it is, if employees decide to have have their wages cut by 25% and instead receive that 25% as a profit sharing arrangement, and production is the same as before, does that change productivity? of course not. But PC calculus may say otherwise.

I admit I don't understand this stuff well, but my view is there's every reason to believe the overwhelming contribution to debt's much greater growth rate than gdp is residential property inflation. But I'll continue to read. And it isn't gdp that matters so much, it is the portion of production that Australians own. We could sell off all our mines to China and they could take home all profits, but it wouldn't effect our GDP significantly; but it would hit heavily our Gross National Income.

 

[tcocaro]

couldnt agree more

when only half of us are. LOL

 

[Sunfish]

Originally Posted by Sunfish
when only half of us are. LOL

couldnt agree more

But just down the road a ways is a fork. THAT's where we will disagree. LOL

 

[.toe]

Another way to think of it is, if employees decide to have have their wages cut by 25% and instead receive that 25% as a profit sharing arrangement, and production is the same as before, does that change productivity? of course not. But PC calculus may say otherwise.

I'd imagine that if this arrangement were more efficient then it would increase productivity to capital and labour (MFP), if it were no more efficient then MFP would not be affected, which makes sense to me.

There's an interesting article about MFP HERE. It actually kind of contrdicts some of my own arguements on infrastructure. It makes sense to me to normalise productivity for increases in capital and labour. In other words if we double capital/labour then real productivity is that which is above double.

MFP is actually calculated by the ABS.

From: Here
ABOUT THIS INDICATOR

A nation's productivity is the volume of goods and services it produces (its output) for a given volume of inputs (such as labour and capital). A nation that achieves productivity growth produces more goods and services from its labour, capital, land, energy and other resources. Much, but not all, of Australia's output growth can be accounted for by increases in the inputs to production. The amount by which output growth exceeds input growth is the productivity improvement. Productivity growth can generate higher income and benefits might also accrue in the form of lower consumer prices.

Productivity can be measured in a variety of ways. The most comprehensive Australian measure available at present is multifactor productivity for the market sector. Multifactor productivity represents that part of the growth in output that cannot be explained by growth in labour and capital inputs. Examples of multifactor productivity growth include improved production techniques, better management practices, and organisational change. Technological change, such as increased computing power, is embodied in the asset, and as such is captured in the capital inputs.

 

[WinstonWolfe]

MFP is actually calculated by the ABS.

Yeah I read the ABS notes last night re its neo classical economic approach to calculating it.

To clarify my criticism, during the USA's last recession, companies let go many f/t workers and during the recovery, they started to tentatively put on new staff primarily as p/t's. Production climbed to 70% of its pre GFC level but employment only regained 7%. So there's still significant short and long term unemployment there. MFP would have USA productivity higher now than pre GFC, but there's no allowance for the cost of the higher unemployment.

THis is why I think it is more telling to focus on the debt required to attain a certain GDP per capita....and not focus on MFP. MFP can go up when less people are employed.

 

[tcocaro]

long road....

But just down the road a ways is a fork. THAT's where we will disagree. LOL

 

[.toe]

Yeah I read the ABS notes last night re its neo classical economic approach to calculating it.

To clarify my criticism, during the USA's last recession, companies let go many f/t workers and during the recovery, they started to tentatively put on new staff primarily as p/t's. Production climbed to 70% of its pre GFC level but employment only regained 7%. So there's still significant short and long term unemployment there. MFP would have USA productivity higher now than pre GFC, but there's no allowance for the cost of the higher unemployment.

THis is why I think it is more telling to focus on the debt required to attain a certain GDP per capita....and not focus on MFP. MFP can go up when less people are employed.

Ok I understand your point there, I think the page we're on with this is more similar than different.

I think that what MFP points out is accurate, in that situation the efficiancy of production is actually very high. Though as you point out it might distract from employment being low if you looked at MFP alone.

 

[Shadow]

Funny how you take an off the cuff remark made to a reporter and then spout it as what Keen was predicting

Grow up.

Spout? Grow up? You seem to be offended and agitated by my comments...

I'm amazed at the lengths some bears will go to to defend their god's predictions, even though Keen himself has acknowledged that he was hopelessly wrong on house prices.

Are you seriously trying to claim, that in 2008 when Keen was all over the media every week, selling his home, talking about double-digit unemployment, severe recession, ZIRP, and 40% house price crash, that he actually didn't think these things would happen for another 15 years? Nonsense - he thought they were going to happen then, in that cycle, within 'a few years' as he specifically said when selling his home in 2008.

When his predictions failed, he blamed it on the 'unexpected' stimulus. He said the stimulus had postponed his doomsday predictions. Why would he have said that if the predictions still had another 15 years to play out?

Steve Keen - hopelessly wrong. Ask him how.

 

[hobo-jo]

Spout? Grow up? You seem to be offended and agitated by my comments...

I notice how you get under the skins of the bears on other sites, I don't have the years worth of resentment built up that they do. I'm also quite flexible with my views in that I will change my mind on what to expect based on events, policy changes, etc that occur.

You may even remember that as recent as early 2009 (on Global HPC) I was suggesting it was not a bad time for some first home buyers to jump in as long as they locked in their rates for 5 years, I even had a thread for Adelaide examples where one could purchase for around the same cost as renting in some select areas (with a 5 year fixed rate). Unfortunate that so many FHBs decided rather than to lock in at historically low rates they instead went with discount variable rates or honeymoon rates which have now reset to a much higher level.

I'm amazed at the lengths some bears will go to to defend their god's predictions, even though Keen himself has acknowledged that he was hopelessly wrong on house prices.

You won't see me highlighting Keen as a prophet/God, I agree with some of his ideologies, not his general conclusion that we will see 40% falls.

I do look forward to the day that you are hopelessly wrong on Sydney house prices though Shadow. $1m by 2014/2015 pull the other one.

 

[Shadow]

not a bad time for some first home buyers to jump in as long as they locked in their rates for 5 years, I even had a thread for Adelaide examples where one could purchase for around the same as buying in some select areas (with a 5 year fixed rate). Unfortunate that so many FHBs decided rather than to lock in at historically low rates they instead went with discount variable rates or honeymoon rates which have now reset to a much higher level

Anybody who managed to pick the Westpac 4.99% for three years fixed rate (as BearTrap did) would have done well. Apart from that special offer, there has not been a massive advantage in being fixed, given that most lenders offer a 0.7% to 1% discount on the Standard Variable Rate. I stayed on variable, with a 0.95% SVR discount. Variable interest rates might fall soon.

I do look forward to the day that you are hopelessly wrong on Sydney house prices though Shadow. $1m by 2013/2014 pull the other one.

Sydney house prices to approach $1M by 2014-2015 has always been my prediction.

It only requires 8-9% per annum growth for the next 4-5 years to get there (median house price is currently about $675K).

 

[WinstonWolfe]

Sydney house prices to approach $1M by 2014-2015 has always been my prediction.

It only requires 8-9% per annum growth for the next 4-5 years to get there (median house price is currently about $675K).

Shadow, where did you get the 675k Sydney median house price?

 

[tcocaro]

Shadow,

There is no point in arguing further given hobo-jo and friends constantly shift the argument around and their faith in their own views are unwavering.

The thread fundamentally revolved around the issue, was Keen right or wrong. If we prove he was wrong the argument then shifts to the validity or not of his ideologies which was never the current discussion.

If we attack his ideologies by logically attacking the predictions that such theories\ideologies produced i.e 40% falls then the argument is shifted to "time-frame" with the usual we-will-see mantra.

If we attack his credibility as an economist on the grounds of his failed predictions and the absurd "excuses" namely the stimulus we are then labled as perma bulls attacking anyone with opposing views. Despite Keens' excuse being as absurd as a doctor claiming that the only reason his unwavering prediction of a patients immenent death didnt eventuate only because he was given the vaccine by another doctor?

Unfortunately time will never tell because if prices dont fall and instead rise can you fathom the day Keen says I was wrong? Can you imagine hobo-jo claiming he was wrong?

Look how much time has been spent arguing a bet between Rory and Keen as to whether or not Keen really lost or not? Perhaps he just wanted a long walk up a mountain while wearing a shirt stating he was wrong for fun?

Im over it... all I can do is continue on with my business and hope that I am not wrong because the last thing I would ever want is to reach my 60s and only have a house in surry hills which I am forced to sell as my only asset of substance....

Anybody who managed to pick the Westpac 4.99% for three years fixed rate (as BearTrap did) would have done well. Apart from that special offer, there has not been a massive advantage in being fixed, given that most lenders offer a 0.7% to 1% discount on the Standard Variable Rate. I stayed on variable, with a 0.95% SVR discount. Variable interest rates might fall soon.



Sydney house prices to approach $1M by 2014-2015 has always been my prediction.

It only requires 8-9% per annum growth for the next 4-5 years to get there (median house price is currently about $675K).

 

[Francesco]

Shadow,

There is no point in arguing further given hobo-jo and friends constantly shift the argument around and their faith in their own views are unwavering.

....

Ha Ha Ha. A new example of a cohort in denial despite being forced to eat humble pie.

 

[WinstonWolfe]

OK Shadow, found your data source.

I am amused by your use of trend lines.
Here's another one to contemplate.

It always pays to look at realistic trend growth in the underlying independent variables like - wage growth, mechanisms for lenders to loosen credit further (rates, spreads, post codes, LVRs, DSRs, term of loan), risk appetite of owners of capital, growth rate of M3 and credit money.

I take it your prediction is that the Sydney median house price as per the Residex index will be $1,000,000 by June 30, 2015....and just in case Residex want to play silly buggers with their conversion to nominal dollars, let's lock in $668,000 = 14.6276 on their index for 31/7/2010.

However, you seemed to deliberately choose the fuzzy and anaemic

"approach $1M by 2014-2015 has always been my prediction"

Does this mean any price under $1m is your prediction? That's not much of a prediction......

Anyway, if I couldn't grow my capital quicker otherwise, I'd bet you $10,000 the index doesn't hit $1M by the above date.

Not to worry. We now have a sort of prediction from Shadow, if we leave out the word "approach".

 

[hobo-jo]

There is no point in arguing further given hobo-jo and friends constantly shift the argument around and their faith in their own views are unwavering.

Not sure what argument is being shifted. I have been saying much the same thing this whole thread, namely that it’s ridiculous to be writing off Keen’s ideologies just because some short term timing was wrong or the bearish target he set isn’t met or because he sold his property in a manner that the you don’t agree with even though it netted him a higher price. This does not mean that he is wrong about Australia’s excessive debt situation and that we will see debt deflation.

Why would my view waver? It’s my view for a reason, I’ve analysed the data available to me and come to a set of conclusions. I’m actually reasonably flexible with my views, for example if we saw another FHOB introduced then I would be inclined to reduce my bearish outlook for prices short term. For the time being though we have:

- Lending growth falling
- Some FHB stimulus removed
- Listings increasing (in some areas hitting 2008 levels)
- Prices falling (depending on which data you are looking at)
- Auction clearance rates have fallen substantially
- Volume (at least in Melbourne) is much lower than earlier in the year
- Potential independent rate rises on the horzion
- Foreign ownership laws tightened again

This points towards a short term (continued) correction in prices at the very least.

Further to this we have:

- Global debt issues in most western civilisations that are yet to be resolved
- Both Abbott & Gillard talking about reducing immigration inflows
- Risk of the Chinese housing bubble or economy coming unstuck
- A high level of reliance on overseas creditors supplying funds to our banks

As the 2008 house price crisis was averted with a slashing of rates, relaxing of foreign ownership laws and introduction of the FHOB we have no way of knowing how bad this fall was going to be, but my personal opinion at the time (prior to FHOB announcement and rate cuts) was that we would see 15% off prices over a couple of years, however the stimulus trimmed this to 5.5% (national fall from the ABS index) before prices started rising again.

So my question to you tcocaro is what will drive growth over the next 12-18 months (if that is what you expect)? Rather than provide an argument of your own you seem to be happy just picking apart others arguments…what sort of defense is that?

You make it sound like I have changed my argument over time, however if you go back 6 months you will find this has not been the case, e.g. here is a post from early January this year:

January 7th, 2010

Over 2008 at the "crash" site I was normally grouped with the property bulls. I was regularly posting and usually in defense of property prices (as there were still reasonable prices in some Adelaide suburbs). Over 2008 I was of the opinion there were still opportunities for those wanting a PPOR, but thought as an investment it didn't make much sense to buy. To me, in the Adelaide market, property as an investment hasn't made sense (e.g. to purchase now) since early 2007 which is when I stopped looking for my first IP. Over 2008 I was of the opinion we would probably see 15% off nominal prices by around 2011-2012. I was not part of the group claiming qtr 1 2008 was the tipping point and I am no Steven Keen follower when it comes to his house price predictions.

Over 2009 I observed. Watching FHBs continue to flock to property, continue to borrow excessively to purchase, continue to mainly stick with variable rates...watched as prices in many states even started to climb again. It didn't make sense to me that following the greatest financial catastrophe they had ever seen the younger generations were still diving head first into overpriced assets under 1 year later. Not only that but the government was encouraging it with increases in the FHOG. 2009 absolutely reeked of the final stages of a mania/bubble. Hence towards the end of 2009 I became quite bearish and sold the only property I owned (there were other contributing factors), which was purchased as a first home with the intention to subdivide down the track. I now believe we will see at least 15-20% of nominal prices over all capital cities over the next few years and probably another 5+ years stagnation/low growth. It could end up being worse.

My prediction is the tipping point is Qtr 1 2010 (that may just mean relatively flat growth to begin with). Though my expectations are no where near as bearish as some that have been here before. We have already seen a drop off in borrowing from FHBs after the reduction in the FHG and that will only continue as I believe it was reduced again December 31st (?). Investors are picking up the slack for now, but don't believe that will continue.

Increasing interest rates (including non RBA moves from increases in lending costs), credit availability, reduced FHOG, will all be contributing factors which tip property into negative growth starting next year.

I think 5% off most capitals at least is likely in 2010. If we don't see drops and property prices stay flat then I think blaster's scenario with stagflation while property prices don't rise seems likely dropping the real price of them anyway.

Not really fussed if I'm wrong. Overpriced assets with a 5% return (- high costs) are not really of interest to me, so even if house prices don't come down it's likely that I will just continue to find other under priced assets to invest in.

My view hasn’t changed much from the above, although the start of the price correction took a little longer than I expected following the removal of the FHOB, I guess I should have accounted for the money flow from this boost to take a couple of months to ease out of the system as well as a couple of months for listing to increase putting pressure on sellers to start dropping their prices.

Unfortunately time will never tell because if prices dont fall and instead rise can you fathom the day Keen says I was wrong? Can you imagine hobo-jo claiming he was wrong?

I think it’s fair to say that Keen was wrong on the short term prediction; he clearly did not predict the effects that the FHOB along with heavy rate cuts would have on house prices. For the record I also think his prediction of 40% falls in nominal terms will also be wrong. As I’ve said before I’m not a die hard fan of the way Keen went about preaching his conclusion, example:

9th January, 2010

Keen was always shooting too high, in my opinion he was just trying to grab headlines with his bearish predictions, though do think he has done some great research.

Look how much time has been spent arguing a bet between Rory and Keen as to whether or not Keen really lost or not? Perhaps he just wanted a long walk up a mountain while wearing a shirt stating he was wrong for fun?

There is no such argument. I completely agree that Keen got the first part of the bet wrong; however you were saying that Keen predicted a 40% drop in 12 months which was absolute baloney. I suspect he will be wrong on the longer term prediction also, but I see that as no reason to dismiss the reasoning behind it, it’s also very short sighted to claim he was wrong before we’ve had time to see what the next couple of years might bring.

Ha Ha Ha. A new example of a cohort in denial despite being forced to eat humble pie.

Not sure what you mean here Francesco, care to elaborate?

http://users.on.net/%7Ethefirstbruce/Sydney%20House%20Price%20Trend.gif

Great chart as per usual WW.

It does not surprise me that Shadow is cherry picking how he presents his data.

 

[Francesco]

Not sure what argument is being shifted. I have been saying much the same thing this whole thread, namely that it’s ridiculous to be writing off Keen’s ideologies just because some short term timing was wrong or the bearish target he set isn’t met or because he sold his property in a manner that the you don’t agree with even though it netted him a higher price. This does not mean that he is wrong about Australia’s excessive debt situation and that we will see debt deflation.

Why would my view waiver? It’s my view for a reason, I’ve analysed the data available to me and come to a set of conclusions. I’m actually reasonably flexible with my views, for example if we saw another FHOB introduced then I would be inclined to reduce my bearish outlook for prices short term. For the time being though we have:

- Lending growth falling
- Some FHB stimulus removed
- Listings increasing (in some areas hitting 2008 levels)
- Prices falling (depending on which data you are looking at)
- Auction clearance rates have fallen substantially
- Volume (at least in Melbourne) is much lower than earlier in the year
- Potential independent rate rises on the horzion
- Foreign ownership laws tightened again

This points towards a short term (continued) correction in prices at the very least.

Further to this we have:

- Global debt issues in most western civilisations that are yet to be resolved
- Both Abbott & Gillard talking about reducing immigration inflows
- Risk of the Chinese housing bubble or economy coming unstuck
- A high level of reliance on overseas creditors supplying funds to our banks

As the 2008 house price crisis was averted with a slashing of rates, relaxing of foreign ownership laws and introduction of the FHOB we have no way of knowing how bad this fall was going to be, but my personal opinion at the time (prior to FHOB announcement and rate cuts) was that we would see 15% off prices over a couple of years, however the stimulus trimmed this to 5.5% (national fall from the ABS index) before prices started rising again.

So my question to you tcocaro is what will drive growth over the next 12-18 months (if that is what you expect)? Rather than provide an argument of your own you seem to be happy just picking apart others arguments…what sort of defense is that?

You make it sound like I have changed my argument over time, however if you go back 6 months you will find this has not been the case, e.g. here is a post from early January this year:

January 7th, 2010


My view hasn’t changed much from the above, although the start of the price correction took a little longer than I expected following the removal of the FHOB, I guess I should have accounted for the money flow from this boost to take a couple of months to ease out of the system as well as a couple of months for listing to increase putting pressure on sellers to start dropping their prices.

I think it’s fair to say that Keen was wrong on the short term prediction; he clearly did not predict the effects that the FHOB along with heavy rate cuts would have on house prices. For the record I also think his prediction of 40% falls in nominal terms will also be wrong. As I’ve said before I’m not a die hard fan of the way Keen went about preaching his conclusion, example:

9th January, 2010



There is no such argument. I completely agree that Keen got the first part of the bet wrong; however you were saying that Keen predicted a 40% drop in 12 months which was absolute baloney. I suspect he will be wrong on the longer term prediction also, but I see that as no reason to dismiss the reasoning behind it, it’s also very short sighted to claim he was wrong before we’ve had time to see what the next couple of years might bring.


Not sure what you mean here Francesco, care to elaborate?


...

Hobo-jo, my comments probably does not apply to you. My apology if it gives that impression. In fact, my thoughts are not too different from yours, except for my disregard of D&G gurus, who rushed out sensational stories of impending doom but failed to incorporate the economic basics of impact from Australian politics.

 

[oracle]

As the 2008 house price crisis was averted with a slashing of rates, relaxing of foreign ownership laws and introduction of the FHOB we have no way of knowing how bad this fall was going to be, but my personal opinion at the time (prior to FHOB announcement and rate cuts) was that we would see 15% off prices over a couple of years, however the stimulus trimmed this to 5.5% (national fall from the ABS index) before prices started rising again.

Hobo, what's going to stop the government and the RBA to repeat the same measures once again if prices started to fall? The banks could also relax foreclosure rules since it's not in their best interest to foreclose if they can avoid it somehow. I am sure there are other measures as well that can be introduced to prevent a freefall in house prices. I am fairly confident the people will slash all but the very basic spending to ensure they hold on to their properties. I know I would be doing that.

So my question to you tcocaro is what will drive growth over the next 12-18 months (if that is what you expect)?

Hobo, this can happen from several different scenarios and may take more thant 12-18 months. These things are near impossible to predict with accuracy.

1) Australia's unemployment rate is around the lowest levels it has ever been with both the Treasury and economists predicting it will fall further. This means we will experience significant skills shortage which will automatically put pressure on wage increases. I am not saying this will happen for sure..just a possiblity out of the many.

2) The US economy is at a very critical point at the moment. The problem over there is businesses and consumer are all saving and paying off their debts. No one is spending, which is needed to drive economic growth and thereby triggering employment. I read somewhere the US consumer credit rating on average has been the highest it's been in a decade. This means they will qualify for a lot more credit if they choose to. All this to me is telling that US situation is bad no doubt but can also change rapidly if the Fed's or the Government introduce policies that will get both the companies and consumers to start hiring/spending respectively. And we all know if US starts to grow the rest of the world will follow. Remember, nothing lasts forever. We are already in 3rd year of economic downtrend. There are over 6 Billion people and growing everyday on this planet working / researching to improve their quality of life, by improving productivity. Do you honestly believe we won't find the next driver for economic growth soon?. It could could be happening now in Healthcare, IT/Telecommunications or Renewable energy sector. Remember, these things are only obvious in hindsight.

3) China and other Asian economies will no doubt have impact on Australia's economic growth. So far nothing indicates China's ecnomic growth faltering. Yes, few bumps but nothing significant so far that will impact their above average economic growth in future. Again, Australia's economy will be shielded even if other western countries stuggle.

I am sure by now you probably thinking I am way to optimistic and like to view the glass half full. I am by no means predicting housing boom anytime soon. Just don't see massive house price crash unless

1) US officially enters into a double dip recession and/or
2) China's economic growth falters

The above two will impact Australia's economy and unemployment rate which will make it harder for people to continue paying their mortgages and thus cause significant drop in prices.

Cheers,
Oracle.

 

[tcocaro]

hobo-jo

First, let me apologise for what will be a very brief response to your more detailed post.

If you beleive (to whatever degree) that Keens predictions both short term and long term are wrong but beleive he happens to touch on some points you feel are worthy of discussion then I am happy to discuss those points in isolation i.e. excluding totally Keen as an economist or "Keens" theories.

I am completely opposed to discussing any issues so long as they are framed around Keen particularly as this thread was about "Keen is at it again". My stance is not because I refuse to listen to D&G but solely because I dont give him (specifically Keen!) any credibility . To me he is nothing more than a self serving ignoramus caring more about TV time than any real acadamic contribution. Can you even imagine some of the countries foremost economists entering into a live bet? - really..

Therefore if you are prepared to commence a new thread, outline those points you feel are legitimate I am happy to give you a proper reply without all my usually "snappiness".

I just wont discuss Keen any further in anyway shape or form.

PS: When I say your argument changes I dont mean your ideoligy or theories on the economy just your argument regarding Keen (which you did again in this post e.g. I attack Keens credibility and then you shift to talk about his views on debt or any other issue I didnt even touch on).

Not sure what argument is being shifted. I have been saying much the same thing this whole thread, namely that it’s ridiculous to be writing off Keen’s ideologies just because some short term timing was wrong or the bearish target he set isn’t met or because he sold his property in a manner that the you don’t agree with even though it netted him a higher price. This does not mean that he is wrong about Australia’s excessive debt situation and that we will see debt deflation.

Why would my view waver? It’s my view for a reason, I’ve analysed the data available to me and come to a set of conclusions. I’m actually reasonably flexible with my views, for example if we saw another FHOB introduced then I would be inclined to reduce my bearish outlook for prices short term. For the time being though we have:

- Lending growth falling
- Some FHB stimulus removed
- Listings increasing (in some areas hitting 2008 levels)
- Prices falling (depending on which data you are looking at)
- Auction clearance rates have fallen substantially
- Volume (at least in Melbourne) is much lower than earlier in the year
- Potential independent rate rises on the horzion
- Foreign ownership laws tightened again

This points towards a short term (continued) correction in prices at the very least.

Further to this we have:

- Global debt issues in most western civilisations that are yet to be resolved
- Both Abbott & Gillard talking about reducing immigration inflows
- Risk of the Chinese housing bubble or economy coming unstuck
- A high level of reliance on overseas creditors supplying funds to our banks

As the 2008 house price crisis was averted with a slashing of rates, relaxing of foreign ownership laws and introduction of the FHOB we have no way of knowing how bad this fall was going to be, but my personal opinion at the time (prior to FHOB announcement and rate cuts) was that we would see 15% off prices over a couple of years, however the stimulus trimmed this to 5.5% (national fall from the ABS index) before prices started rising again.

So my question to you tcocaro is what will drive growth over the next 12-18 months (if that is what you expect)? Rather than provide an argument of your own you seem to be happy just picking apart others arguments…what sort of defense is that?

You make it sound like I have changed my argument over time, however if you go back 6 months you will find this has not been the case, e.g. here is a post from early January this year:

January 7th, 2010


My view hasn’t changed much from the above, although the start of the price correction took a little longer than I expected following the removal of the FHOB, I guess I should have accounted for the money flow from this boost to take a couple of months to ease out of the system as well as a couple of months for listing to increase putting pressure on sellers to start dropping their prices.

I think it’s fair to say that Keen was wrong on the short term prediction; he clearly did not predict the effects that the FHOB along with heavy rate cuts would have on house prices. For the record I also think his prediction of 40% falls in nominal terms will also be wrong. As I’ve said before I’m not a die hard fan of the way Keen went about preaching his conclusion, example:

9th January, 2010



There is no such argument. I completely agree that Keen got the first part of the bet wrong; however you were saying that Keen predicted a 40% drop in 12 months which was absolute baloney. I suspect he will be wrong on the longer term prediction also, but I see that as no reason to dismiss the reasoning behind it, it’s also very short sighted to claim he was wrong before we’ve had time to see what the next couple of years might bring.


Not sure what you mean here Francesco, care to elaborate?


Great chart as per usual WW.

It does not surprise me that Shadow is cherry picking how he presents his data.