In a previous post, Labor and the Credit Cycle, I discussed the political cul-de-sac of labors re-election chances amongst a credit collapse in Australia’s banking sector. and it seems to be right on track, give or take a Chinese politburo stimulus package:
Frankly, it is Tony Abbott’s luck that he was in government while Howard and the RBA induced a credit bubble in housing. Of course, in bubbles everyman and his dog is making good money on the silliest of economic pretenses. It’s a case of, Everyone wins, especially a government looking for re-election. Labor came into power on the tail end of this paradigm. A brief look at the debt level of Australia shows a private debt that overshadows its public debt. A majority of this debt is mortgages, usually by tradies negative gearing and hoping to flip the house to their neighbor. See Steve Keen for more gory Australian debt metrics.
America’s now popped credit bubble was also indirectly contributing, the money ultimately flowed through China’s factories. In a sense Australia is a derivative of Chinese industry and American consumption. Lax monetary policy on the part of both China and America has contributed greatly to the already pumped Australian Housing sector.
Now the economic crunch is setting in with large mining investment projects either failing or being scaled back. Of course all the bullish talk over the last several years was nothing more than existential hope, as The fellows at the economic blog MacroBusiness observe.
Peruse the Reserve Bank governor’s recent remarks to the senate or listen to the commentariat on talkback radio and it would seem that Australia’s economy has become victim of nothing more than an insidious rogue gloom-and-doomerism that threatens to hurt the nation, or worse…
And while Australians – led by our politicians and business elite – boast of world-class industries, seer-like policy making and a currency that clearly demonstrates we’re number one, as data from the Australian Treasury and the McKinsey Global Institute can attest, around half of the growth in average incomes between 2000 and 2010 was down to terms of trade and around 90% of growth in incomes between 2005 and 2012 was down to the resources industry…
Why have I been the last scribe to jump on the media’s “bubble-mania” bandwagon concerning Canada’s housing market? Because there has been little to report here other than soaring debt-levels, which also exist throughout the Canadian economy; and, indeed, throughout all Western economies. The building bubble itself has not been even slightly newsworthy.
Lost in the mainstream media’s disjointed reporting on individual markets is a simple truth. As long as the West’s psychopathic banking cabal continues their policy of insane, destructive, near-zero interest rates; every housing market of every Western economy will be in a perpetual cycle of building bubbles or bursting bubbles. Period. Thus reporting that a “Canadian housing bubble” had formed had all the “news value” of announcing that the Sun had risen again in the morning.
What has finally caused me to jump into this topic are two factors. First of all we have very strong evidence that “the end is near.” Secondly, there is the entirely suicidal manner in which Canada’s current government has (deliberately) constructed this housing-bubble.
Regarding the former point, almost always an asset-bubble will telegraph to the market when it is about to burst with an unequivocal signal: falling sales. To understand why this is such an obvious warning-sign requires at least a rudimentary understanding of the mania which fuels such asset-bubbles.