There are idiot economists in Australia

ANZ chief economist Warren Hogan does not think there is a housing bubble in Australia.

“I don’t think we’ve got the characteristics of a bubble,” he said.

“I don’t think there is a very strong likelihood of a big price fall for Sydney or Melbourne property let alone Australian property more generally over the next few years.”

And to think that people believe this shit.

Glen Stephens thinks Sydney property prices are ‘crazy’ – one would think that although clueless on international capital flows he would know his own backyard . . then again maybe Warren Hogan is right.

Everyone puhleese refinance at ANZ on 5 year fixed low interest rates – send them bankrupt overnight when interest rates start increasing post September 2015.

The comments were extracted from an article in the ABC on PIMCO’s concerns.

“The world’s biggest bond investor PIMCO says a sharp fall in house prices poses a risk to the economy because mortgaged to the hilt Australians could dramatically reduce their debt levels and cut back spending.”

In a new study, PIMCO said Australian households assume that property prices will continue to rise and mortgage rates will stay low prompting them to take on more debt, unlike US consumers.

Portfolio manager at PIMCO in Australia, Aaditya Thakur, said the hope of getting rich from housing was blinding Australians to the risks of investing in property.

“People are taking on more debt because they are chasing, seeing prior house price increases and assuming those house price increases will continue into the future,” Mr Thakur told PM.

From where I sit – Australia has a huge problem – lower commodity prices, which will lead to higher unemployment – which will lead to financial stress on servicing debt.

China cannot assist – lower demand – as they themselves are running an economic tightrope with huge internal problems and a crashing stock market – all geared against increase in property prices – inevitable total collapse.

Japan’s situation is no better – in fact worse. The one country that will suffer runaway inflation due to their Abeconomics – a recipe for disasters.

The worldwide sovereign debt is exceeding USD 72 trillion dollars – this will collapse – not a matter of if – it is a matter of when.

The U.S. Fed will increase interest rates in September – the obvious effect is increased rates around the world – – – regardless of where Warren Hogan has his head buried – and yes it fits perfectly up his arse – so expect increased rates in Australia too.

Plus a fair few companies and a few banks collapsing – a government panic – and a big bust in housing prices.

No one country is immune.

Europe is teetering on the brink of a collapse now – debt is the killer – yet the European Central Bank continues on its merry way with Quantitative Easing – printing more money…

The U.S. problem is twofold – increasing strength of the USD – investors seeking a safe haven plus an increase in interest rates. This affects exports – imports increase due to the buying power but . . an increase in rates consumes available capital.

This against a backdrop of global investors seeking sanctuary in the USD and U.S. stock markets.

As a side-note . . . One bright spark from Australia (bank Johnny) emailed me that his bank has no problems – they have cross matched fixed funding and immune to any hiccups in the international economy.

I did not bother replying – it will affect all bonds. The collapse is in sovereign debt – unsecured paper issued by Countries and rated AAA – those same bonds that every bank in Australia has invested their Tier 11 capital.

Due to the very nature of these bonds they are also held by central banks and governments around the world. The cross border contagion that no one can control.


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