Dec

18

Australia, from Alston Mabry

December 18, 2018 |

India, Australia, Canada, Italy and France (and their banks) are coming off their rails:

"Australian House Prices Fall Most Since Global Financial Crisis"

Sydney's property downturn accelerated in November, propelling nationwide house prices to the biggest monthly drop since the global financial crisis, as credit curbs and buyer nerves continue to bite.

Nationwide home values fell 0.7 percent last month, led by a 1.4 percent drop in Sydney and 1 percent in Melbourne, according to CoreLogic Inc. data released Monday.

The drop takes the total decline in Sydney since the July 2017 peak to
9.5 percent, on the cusp of overtaking the 9.6 percent top-to-bottom decline recorded during the last recession 27 years ago. This decline is even steeper than the 1989-91 fall, showing how quickly sentiment has flipped.

Stefan Jovanovich comments:

The declines in the gold currency prices of wheat, coal, rail and water-born freight and lumber that were the "deflation" of the growth explosion of the 19th century came to be seen as "normal". They became so obviously the way things are that rising prices seemed not only the exception but also the product of conspiracy. How can urban land prices keep increasing–despite their recurring temporary panics–if it is not some kind of manipulation, asked Henry George. Even the prices of luxuries like diamonds (thank you, Mr. Rhodes) keep falling.

We are in an age in which credit has seen the same explosion of volumes that the steel industry saw with Carnegie and Krupp. The presumption has been that these loans were prudent for the same reason expansions in industrial capacity were willingly financed at fixed rates for as much as half a century. What called those industrial loans into question was the collapse in foreign exchange that was the financial carnage of WW 1. My presumption is that this crisis is not about the collapse in FX; Germans and Chinese will be able to pay for imports in 2019 in a way neither was able to do in 1919. But, what will collapse are the expected incomes of the civil service and other government pensioners (other than Social Security recipients) and their ability to borrow against their houses. It will be like the farming crisis of the industrial age–a devastation to the small holders that was unable to be softened because the political majorities would not pay for the bailout.


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