Housing Bubble

http://www.marketoracle.co.uk/Article18733.html

Way back in 1983 Fred Harrison published his book "The Power in the Land" which relied on Homer Hoyt's 18-yr cycle theory to predict a land boom peaking in 1989 and a recession thereafter.

Back in the day we Georgists were amused to see the prediction come true and thought the bubble was a big one too. Anyone could also predict that the next peak would be 2007 or therabouts.

But look at this latest boom! No wonder the Economist called it the "biggest bubble in world history".

It's been Michael Hudson perhaps more than anyone else who has emphasized that a big land boom means huge amounts of money have been lent with land or property as collateral, which means in a bust all the banks are bust. In a financialised economy all available rents or supluses are pledged to banks as interest.

The financial sector is a giant vampire squid, sucking the life out of the economy and the workforce. Here again Hudson has rightly emphasized that 'debts that can't be paid, won't be paid'; that we need a 'Jubilee'.

However, the financial sector owns and controls the world and won't get it's fangs off it until there is some kind of revolution or popular rebellion.

Neo-liberalism will also have to be destroyed. The core of this dogma is to privatize, de-regulate, de-fund, de-tax and de-stroy.

Privatize: hand over land and resources and everthing in the nature of a natural monopoly to the private sector to allow them to privatize the economic surplus.

De-regulate: remove barriers to the raising of profits.

De-fund: the public sector and in particular the essential government role of infrastructure. Infrastructure will be provided by the miracle of market forces! Just like some sort of latter-day cargo cult. All you need to do is set up on some level ground somewhere wooden carvings of Adam Smith and Hayek, and all the good things anyone could desire will come down!

De-tax: lower or remove altogether taxation on wealth, property and capital.

De-stroy: the obvious outcome of it all, although a small class of the very rich have gotten smaller and even richer, which is their objective.

http://www.marketoracle.co.uk/Article18733.html

Way back in 1983 Fred Harrison published his book "The Power in the Land" which relied on Homer Hoyt's 18-yr cycle theory to predict a land boom peaking in 1989 and a recession thereafter.

Back in the day we Georgists were amused to see the prediction come true and thought the bubble was a big one too. Anyone could also predict that the next peak would be 2007 or therabouts.

But look at this latest boom! No wonder the Economist called it the "biggest bubble in world history".

It's been Michael Hudson perhaps more than anyone else who has emphasized that a big land boom means huge amounts of money have been lent with land or property as collateral, which means in a bust all the banks are bust. In a financialised economy all available rents or supluses are pledged to banks as interest.

The financial sector is a giant vampire squid, sucking the life out of the economy and the workforce. Here again Hudson has rightly emphasized that 'debts that can't be paid, won't be paid'; that we need a 'Jubilee'.

However, the financial sector owns and controls the world and won't get it's fangs off it until there is some kind of revolution or popular rebellion.

Neo-liberalism will also have to be destroyed. The core of this dogma is to privatize, de-regulate, de-fund, de-tax and de-stroy.

Privatize: hand over land and resources and everthing in the nature of a natural monopoly to the private sector to allow them to privatize the economic surplus.

De-regulate: remove barriers to the raising of profits.

De-fund: the public sector and in particular the essential government role of infrastructure. Infrastructure will be provided by the miracle of market forces! Just like some sort of latter-day cargo cult. All you need to do is set up on some level ground somewhere wooden carvings of Adam Smith and Hayek, and all the good things anyone could desire will come down!

De-tax: lower or remove altogether taxation on wealth, property and capital.

De-stroy: the obvious outcome of it all, although a small class of the very rich have gotten smaller and even richer, which is their objective.

Housing Bubble

'Aspirational' Voters Hurting

SYDNEY households most vulnerable to higher petrol prices and housing interest rates are concentrated in a large arc running through the city's greater western region, a study has found.

Griffith University researchers have concluded that financial stress in these areas will make it harder for the Liberal Party to retain the marginal seats of Lindsay and Macquarie.

The study also found that the Liberal Party's hold on safer seats like Hughes and Macarthur in the south-west may be jeopardised by the high levels of exposure of households in these areas to higher costs.

Conventional wisdom states rising property prices are good; low interest rates are good; Howard's government has successfully kept interest rates low, thus helping them to stay in office.

All this is questionable. It may be overstating it to say John Howard Has No Control Over Interest Rates in Australia but it is very true that Howard made that promise [Keeping Interest Rates Low] "foreseeing that citizens would focus all their attention on INTEREST RATES, rather than on PRICES. In a credit bubble, it’s a lot easier to keep interest rates low (which is partly what creates the bubble) than it is to lower bubble-prices."

It is doubtful how much control the federal government really has over the basic interest rate regime. It was Alan Greenspan's Federal Reserve that reduced interest rates to an extremely low 1% following the dot.com crash. And such a low interest rate only fuelled the US housing bubble, which is bursting now with even more damaging consequences. Although not as severe as in the US, the bubble burst in Australia is also likely to be quite harmful.

SYDNEY households most vulnerable to higher petrol prices and housing interest rates are concentrated in a large arc running through the city's greater western region, a study has found.

Griffith University researchers have concluded that financial stress in these areas will make it harder for the Liberal Party to retain the marginal seats of Lindsay and Macquarie.

The study also found that the Liberal Party's hold on safer seats like Hughes and Macarthur in the south-west may be jeopardised by the high levels of exposure of households in these areas to higher costs.

Conventional wisdom states rising property prices are good; low interest rates are good; Howard's government has successfully kept interest rates low, thus helping them to stay in office.

All this is questionable. It may be overstating it to say John Howard Has No Control Over Interest Rates in Australia but it is very true that Howard made that promise [Keeping Interest Rates Low] "foreseeing that citizens would focus all their attention on INTEREST RATES, rather than on PRICES. In a credit bubble, it’s a lot easier to keep interest rates low (which is partly what creates the bubble) than it is to lower bubble-prices."

It is doubtful how much control the federal government really has over the basic interest rate regime. It was Alan Greenspan's Federal Reserve that reduced interest rates to an extremely low 1% following the dot.com crash. And such a low interest rate only fuelled the US housing bubble, which is bursting now with even more damaging consequences. Although not as severe as in the US, the bubble burst in Australia is also likely to be quite harmful.

'Aspirational' Voters Hurting