This time it is different

[Francesco]

The approach to the property market depends on the view one takes of the economy. Those who were leaning D&G like a certain high profile academic, a few months ago have been proven wrong so far as govt fiscal and monetary policies, plus immigration and demand/supply all propped up the property market.

Below is summary by Ross Gittins of the govt's approach as presented by Dr David Gruen of Treasury

http://www.smh.com.au/business/learning-from-the-great-depression-20091113-iens.html

This time it's different from the great depression as Australia avoided 3 big mistakes:

- liquidity not constrained by the gold standard with the floating exchange rate and access to credit facilitated by Government

- no ''tragically tight'' monetary policy in the defence of the gold standard and with prompt interest rate cuts

- under conducive exchange rate policy and terms of trade, expansionary fiscal was effective in stimulating the economy, unlike pre Keynesian approaches.

So, under the above policies I think the property and share markets will tend to move up, especially in the era of Asian growth.

 

[topcropper]

So, under the above policies I think the property and share markets will tend to move up, especially in the era of Asian growth.

Thanks for that.

A good summery from Gittens. I agree.


See ya's.

 

[Hooray]

This time it's different from the great depression as Australia avoided 3 big mistakes:

- liquidity not constrained by the gold standard with the floating exchange rate and access to credit facilitated by Government

- no ''tragically tight'' monetary policy in the defence of the gold standard and with prompt interest rate cuts

- under conducive exchange rate policy and terms of trade, expansionary fiscal was effective in stimulating the economy, unlike pre Keynesian approaches.

So, under the above policies I think the property and share markets will tend to move up, especially in the era of Asian growth.

Big leap from the reasons to the conclusions. The US isn't on the gold standard, had very loose monetary policy, has a floating exchange rate and used massive stimulus. It still crashed. The reasoning says that we're a lot less likely to have a 30's type depression. It's a big jump from 'we won't have a repeat of the Depression' to 'property and sharemarkets will go up even without a downturn'.

 

[Ausprop]

hard to compare to other western countries tho as they were insolvent before starting the huge spending spree. to dig themselves out now will be very interesting.

 

[Francesco]

Big leap from the reasons to the conclusions. The US isn't on the gold standard, had very loose monetary policy, has a floating exchange rate and used massive stimulus. It still crashed. The reasoning says that we're a lot less likely to have a 30's type depression. It's a big jump from 'we won't have a repeat of the Depression' to 'property and sharemarkets will go up even without a downturn'.

Try to read the context from my POV. It's about Australia as mentioned in the post and the likely (probable, tending) growth in the markets is propped up by the era of 'Asian growth'. There are lots of other analyses relating to the era of Asian growth supporting the conclusion and which I have not listed in the post. For example, Kohler has written about Australian investments being a proxy for the Asian growth stories (evident in the strength of the Aussie dollar). Feel free to disagree but this is my POV.