- Money Morning Australia

How the Stimulus Destroyed 77,000 Manufacturing Jobs

Written on 22 February 2010 by Kris Sayce

If it was possible for a market to whistle without a care in the world that’s exactly what it would be doing right now…

Greece on the verge of default – [whistle].

China trying to engineer a soft economic landing – [whistle].

US Federal Reserve increasing interest rates – [whistle].

Australian property bubble bubbling – [whistle].

Millions of your taxpayer dollars wasted on home insulation stimulus – [whistle].

But funnily enough, it’s the mainstream response to the last one that baffles us the most.

After four insulation installers have been killed – and doubtless tens or hundreds of others have been injured – and at least 87 fires have resulted from the installations, Environment Minister Peter Garrett has abandoned the scheme.

Of course, already, billions of taxpayer dollars have been spent on this monumental waste of money.

But here’s the thing we don’t get. At the time all these whacky schemes were announced, the mainstream told you that it was necessary to spend money because spending money was good for the economy.

You remember that don’t you?

Well, if spending money is good for the economy, then surely the disastrous outcome of the housing insulation scheme is an unexpected boost for the economy.

Because if simply spending money is good, then surely spending more money is even better.

The government now has to fork out hundreds of millions of dollars more to arrange for inspectors to make sure the work on at least 48,000 properties has been done properly.

Doubtless it hasn’t – hence the four deaths – so those inspectors will need to arrange for the work to be fixed up. That will cost more money.

Then we’re sure that just to be on the safe side, the government will send inspectors out again to make sure the fix-ups are safe – there’s even more taxpayer dollars spent.

According to the lame thinking of the mainstream that should all equal a boost to the economy, as more taxpayers dollars are spent.

Not surprisingly, the mainstream press haven’t mentioned any of this. Either because they’re too thick to work it out, or because they realise how illogical the idea of stimulus spending is, but they don’t want to admit it. After all, spending other people’s money is fun!

Aside from the wasteful spending, the 6,000 job losses suffered in the home insulation sector is another perfect example of how the misallocation of resources can permanently damage the economy.

As Paul Howes, national secretary of the Australian Workers Union points out, “77,000 jobs went in manufacturing, and the knock-on of that will be felt for years and decades ahead as factories were shut that will never re-open.”

Of course, what Mr. Howes fails to point out is that it’s the unions that help to ensure there are job losses. Their push for higher minimum wages guarantees that Australian businesses will either go bust or have to ship the work offshore.

And he doesn’t mention the millions of other manufacturing jobs that have vanished over the years thanks to the trade union movement.

But here’s the bigger problem. All the excitement about the stimulus programmes ‘creating’ new jobs masks the fact that those jobs which didn’t benefit from direct stimulus spending – such as manufacturing – lost jobs.

Not only that, but once a factory has closed down, as Mr. Howes correctly points out, they “will never re-open.”

If it was uneconomical to maintain a manufacturing business, it will be ten-times more uneconomical to try and re-start one from scratch.

Yet, all those jobs that were ‘created’ by the government to install insulation, what’s happened to them? Oh, that’s right, the programme has been cancelled. So the billions of dollars spent on ‘creating’ jobs have not only destroyed 77,000 manufacturing jobs, but it’s not even benefited the industries that were supposed to gain.

As we wrote a year ago on 4th February 2009:

“The government economic stimulus package will have no positive impact on the broader economy whatsoever. None.”

Yet again we’ve been proved right, and the mainstream press proved wrong.

At the time we also quoted some of the shrill headlines from the mainstream press:

“Rudd throws $42bn at economy” – Australian Financial Review

“Schoolyard blitz to avoid recession” – AFR

“We’re all in this together: except Turnbull” – AFR

“Rudd and the Reserve free up billions to beat recession” – The Age

“Rudd splashes the cash” – The Age

Every last one of them cheering for the government to spend your money to save the economy. Not a single journo was capable of expending one brain cell to figure out what the terrible consequences for the Australian economy would be.

An economy that believes the best solution to national wealth is to build, and then buy and sell houses between each other.

But there’s the consequence for you. One industry gets a bunch of stolen taxpayer money to keep prices sky-high and the credit bubble growing. The other industry gets swamped and ravaged by trade unions and minimum wage legislation which forces it to close down forever.

The upshot is the Australian economy hasn’t benefited one jot from the billions spent in the stimulus programme. All it’s done is allocated resources to prevent a bubble from popping – for now – and ensure thousands of people have received training for an industry that can’t possibly sustain them without the presence of taxpayer money.

Because if it could, then they wouldn’t need the stimulus to begin with – it’s not rocket science.

Despite the complete failure of stimulus spending we’ve little doubt the spin doctors will continue to call for more taxpayer dollars to be thrown at the economy – especially the housing sector.

And as long as that happens then we’ll continue to see headlines such as this:

“Housing debt in overdrive”News Ltd

According to journalist Anthony Keane, “Total housing debt is set to reach $1 trillion within a year. The figure itself is not a worry, but there is concern the pace of borrowing is exceeding household income growth.”

“Not a worry”! Is he mad?

Nearly $1 trillion isn’t a worry? Oh Lordy. We’ve heard it all now.

But anyway, we’ll end today on that note. As we’ll get stuck into housing again tomorrow.


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53 Comments For This Post

  1. Dave Kidd Says:

    Seems Port Phillip Publishing’s idea of “free speech and frank and open conversation” doesn’t extend to publishing my posts anymore. 2 posts I made yesterday never appeared. No apology, no explanation. I’m fortunate that there are other places that still seem able to publish my stuff without problem. Bye!

  2. Nick Says:

    Dave…let me know the other site/s you post.

  3. Peter Fraser Says:

    So what is the master plan here.

    I think I can see where we are going. Damn those unions.

    We get rid of the minimum wage so that workers wages can be reduced to maybe $10,000 pa, the we delete any pension schemes, unemployment benefits, and all government support so thet we can scrap all of those departments to save money, and bingo we have a very flexible economy that can react to the market forces, and we provide competitive labour that will ensure the viability of our industry.

    Hmmm – can I think about this for a while. I want to ask grandma if she is ok with losing her pension.

  4. Rod Says:

    “How the Stimulus destroyed 77,000 manufacturing jobs.”

    This infuriating newsletter has now gone beyond a joke! I believe that title is completely mischievous. The Stimulus? What about the GFC?

    Please show me which unions have been militantly trying to drive up wages in the last two years.
    It’s more like Paul Howes said and which you conveniently overlooked – “The GFC was a major exercise in damage control. By and large, Australian industry and workers cooperated in retaining rather than shedding jobs often at the expense of reduced shifts and hours and switching from full time to part time work.” (GM-Holden for example.)
    “This was complemented in its effect by the Unions, and the workforce, and our constructive engagement with employers in agreeing to reduce work hours to save jobs. And although some jobs were lost, the number was always less than forecast.”

    Trying to maintain an acceptable standard of living for employees is surely the right of unions. If employer’s believe it is moral to exploit the cheaper labour of overseas countries, whose worker’s certainly do not enjoy the same standard of living as those same employers do in Australia, then I hope they can live with their conscience!

    Bugger the stimulus! As you wrote some time back, let the economy find it’s own way through the GFC without government interference – well, it has and 77,000 jobs was the answer. Now, your’re blaming the stimulus and the unions!
    I’m confused!

  5. Mike Says:

    I honestly do not believe Sayce is saying that at all and there is merit in his words and further the minimum wage is probably not our enemy but more so wages relative to productivity. Political correctness, tolerance of apathy and the dictum of “fair go” have been distorted wildly beyond what is reasonable. It’s not just government as they are only a reflection of their constituents. More so than ever now is the time to “Ask not what your country can do for you but what you can do for your country!” Self servitude and ego can only flourish for so long and the backlash must be harsh as it is the natural order of things.

    Relax, I’m an atheist and always have been.

  6. etch Says:

    ‘the fianancial wheel has over-run its self ,to the point of affecting even by-standers”

    if or this frenzied pace continues of this BS BOOM .
    austerity will be introduced which will affect more than just grand-parents
    everyones on the bandwagon

    as they say

    “when the bellboy starts talking shares or property,thats the time to GET OUT”

    its totally amazing pet dogs havent “talking” woofing ,about the value of their KENNELS going up in value also .

    this madness of JUST PURE GREED , will phuccc over & hurt everyone in australia ,involved or not.
    people have forgotten 1990 recession..i havnt,,

    banks will be putting up interest rates & CRASHIO IT WILL GOOOOOOOOOOOOOOO((((((((((((((((((((((((((((((((((((((((((((((((((((((

  7. etch Says:


  8. Mike Says:

    Right you are….. its greed pure and primal. Me, me, me, me and what about me and the greediest are those who want a fair go for the “people”, and if you’re one of those people you don’t give a $hit what the next blokes getting so long and you get your chunk.

    I was around in the last recession and I took out a mortgage a couple of weeks to late. IDIOT!!! Everyone before me got capped while I took the UP escalator then the DOWN escalator. Barely got out with the shirt on my back.

    Anyways 20 odd years later some fool sends me $900.00….. all squared away now.

  9. Sandra Says:

    Just tuned in to ABC1 on tv – Q&A…
    They’re talking about ‘climate change’…

    the absolute rubbish being spoken! it’s sickening!

  10. Mike Says:

    Well they’ve gotta come up with something cos we’re running out of mexicans.

  11. cb Says:

    Yes, I was watching Q&A as well. It was sickening to see all those supposedly educated heads still firmly planted in the sand. I also had the distinct impression that the ABC is probably selective in the composition of the audience. The ABC is a disgrace. It has debased itself into being little more than the propaganda arm of the government. I would say that they are largely running Intelligence Light as an operating system. Pfew … I am getting to a point where I will just stop watching their political programs and commentaries.

  12. cb Says:

    Nevertheless, there are more and more reasons to be optimistic to believe that glogal warming scaremongering, too, will, one day, go by the way of the New Zealand Moa. See, for example:
    Global warming meltdown – by Richard

  13. Sandra Says:

    And they say you can’t explain everything using science!!
    A new element has been discovered in Australia to be included on the Periodic Table:

    The Department of Nuclear Physics at the Australian National University has discovered the heaviest element yet known to science. The new element, Governmentium (Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons, giving it an atomic mass of 312.
    These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.

    Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete.

    Governmentium has a normal half-life of 2 – 6 years.
    It does not decay, but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places.
    In fact, Governmentium’s mass will actually increase over time, since each re-organization will cause more morons to become neutrons, forming isodopes.

    This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass. When catalyzed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

  14. Drew Says:

    Hi Guys,
    I’m not sure if it’s been disucssed already but what do you make of the news that ANZ is “selectively easing” lending criteria? I was expecting the banks to follow Westpac and start tightening.

  15. Nick Says:

    sandra #12.. that’s classic!!

  16. Nick Says:

    as I have mentioned before, Greece is only the tip of the iceberg. When the tide goes out, we’ll see just how many are swimming naked.

  17. Nick Says:

    Drew this may help you get an idea of what they may be preparing for.

  18. Nick Says:

    sandra…here is a link on building 7

  19. Sandra Says:

    Nick & CB-
    I had a bit of a look last night at a few clips on 9/11 highlighting evidence which supports a conspiracy.

    I’d be the first one to condemn such stories as utter BS. however, what does bother me about this is that if it is indeed BS, why is the government NOT coming out in full force to quell these arguments with the facts??
    Why are they ignoring it?? Do they think it will just go away?

    Certainly leaves a lot of doubt in my mind now.

    Come on you guys – STOP showing me this stuff!!! if you carry on this way, i may end up voting Labor …


  20. Sandra Says:

    Just off the point a fair bit, but here’s a little ‘titbit’ of info about the country labelled as “Australia’s Great Hope” for the future…


  21. PuntPal Says:

    Kris – what a brilliant point you have today. If the initial stimulus spending was good because it created jobs, then surely the money spent on re-checking the safety of the installation of the bats is money well spent too…this is perfectly sound reasoning, because the mainstream press have never once questioned whether the stimulus spending was productive, just whether it produced jobs.

    So when stimulus payments drive up the price of existing houses, when they pay for people to do dodgy insulation jobs, when they give us $900 each to spend at JB HiFi…not one single journalist had the guts or foresight to talk about how this was only going to provide a short-term sugar hit and it will actually cause long term economic problems due to the distortion and misallocation of resources caused by such a policy.

  22. Sandra Says:

    Kris – I’ve been jabbering on about all sorts of other things, but by the way –

    brilliant article! spot on the money …

  23. cb Says:

    Sandra – What is being described, clearly, is an insidious form of cancer blighting society.

  24. cb Says:

    Sandra @ 18 – I do not quite see why such doubts should incline you to support either of the main political parties in the elections. ???

  25. cb Says:

    Drew & Nick – good links. Yes, well, the ANZ, not unlike Steven Keen, miscalculated the speed with which we would be hit by the GFC. They were extremely frustrating to deal with and lost a fair bit of business. Now it seems that they are playing catch up, and it is their turn to gorge themselves on mortgage loans. Only time will tell whether they are miscalculating again or not. While someone or other remains a willing lender, enough liquidity will be generated into the system to keep the party going. When all lending stops, there will be a lull, and after that, who knows?

    But all these negative news stories about the Eurozone, while they might be true, their timing is suspicious. Certain powerful money interests are massively short of the Euro and they are giving it more and more blows to take it down. Sooner or later they will succeed.

  26. Nick Says:

    cb….”But all these negative news stories about the Eurozone, while they might be true, their timing is suspicious. Certain powerful money interests are massively short of the Euro and they are giving it more and more blows to take it down. Sooner or later they will succeed.”….
    you’ve hit it on the head. Rule of thumb..if its public, search behind the scenes for ulterior motives.

  27. Nick Says:

    sandra #19…..remember the discussion we had recently about Russia, China alliances etc? This just shows you that they will do what suites them.

  28. Nick Says:

    Here is a good chart covering the distribution of wealth since the depression. And we think our money has not been stolen??

  29. Nick Says:

    sorry, omitted to mention that it relates to the US…but we get the drift. If someone has similar for Australia please post.

  30. cb Says:

    Nick, that is one legendary picture that tells more than a thousand words. Holy c!ap !!!!

  31. cb Says:

    Hooray!!!! In this morning’s MMA (yet to be posted), Sayce has risen to the challenge of providing us with graphs that plot house price appreciation relative to money printing and the official inflation figures, as represented by the CPI. So, on that score, congratulations and thanks are in order.

    This is a very welcome and long overdue contribution to the housing market question that tends to generate the most interest in this forum. It addresses aspects of the property gloom and doom prognostication which has been sorely lacking up to this point. With those remarks out of the way, I would like to make a few observations:

    1. It is a welcome sight to see Sayce toning down his dooming – glooming rhetoric from the hard line position that property is not an inflation hedge at all, to a more reasonable and credible position that it is not a perfect hedge against inflation. To this, I can only say: Welcome to the club, Kris. That is all we have been trying to tell you from this side of the great divide, that house prices losely reflect excess money printing relative to the goods and services created in a growing economy.

    2. The article, uncortunately, fails to account for the growth of the economy, i.e., the increase in goods and services generated over time, which is a weakness. It only deals with the doctored CPI figures, which understates real inflation, and with M3 money supply, which by itself is wrongly assumed to reflect the degree to which inflation is gutting the purchasing power of our money. Ergo: we still do not have a measure of real inflation, because while the CPI’s doctored and tortured numbers understate it, M3 overstates it.

    The net result, unfortunately, is that we still do not know how property prices have been behaving relative to inflation, where inflation is being defined as the amount of money and credit being created IN EXCESS of the goods and services created in the economy.

    3. One possible way of addressing this problem would be to deduct the official GDP numbers from the M3 figures, and that would get us probably as close to the real inflation figures as we can hope to get, even though this will once again be imprecise, because GDP figures are just as much subject to torture by the number crunchers as the CPI, only that it tends to be overstated.

    Nevertheless, a comparison of housing prices relative to a GDP adjusted M3 would be a more useful way to make the argument than it is by reference to the unadjusted M3. The upshot of this is that the gaps claimed by Sayce between housing price increases and a faster increasing M3 would be reduced, which in turn would mean that house price increases are not falling behind real inflation by as much as Sayce’s comparison to an unadjusted M3 growth would suggest.

    4. Even so, even as the argument stands, Sayce has succeeded to demonstrate his earlier claim that there is no logical reason why house prices should continue rising, and that if there should be such a reason furnished by the spruikers, he would listen. I charged him with not listening to the argument from inflation and challenged him to produce an article with graphs such as these. It is good to see that he has, but he has done so with great reluctance to actually concede defeat. How so?

    5. While he concedes that there is a correlation between house prices and inflation, in addition to arguing that housing hasn’t been as good an inflation hedge as one would have thought (although we don’t know that because he fails to adjust M3 by the GDP), he refuses to deal with the question whether house price increases were due to money printing/inflation, or not.

    6. Following on from 5, Sayce acknowledges a sort of correlation between the two, but seems reluctant to admit that house price increases have been driven by inflation. I am puzzled why this should be, and the question arises whether there is a more likely cause we should identify. I, for one, am not aware of any. Are you?

  32. cb Says:

    7. By Sayce’s own arguments, if money printing has been running so far ahead of house price increases, then if you believe that excess money printing is likely to show up in inflating real asset prices, then we have at least a prima-facie argument to the conclusion that the march of the great Austrlian housing price is likely to continue. All other things being equal (caution: they rarely are), unless we have good reasons to believe that the excess money being printed (in excess of underlying economic growth in terms of goods and services), is going to be disproportionately diverted into other investments and assets (such as the new NBN and goodness knows what not), you would have to assume that house prices will continue to benefit from excess flows of money into the economy.

    Sayce, for reasons I cannot quite fathom, seems to assume otherwise. It might be because he believes that the printing presses are going to seize up, but I am not quite sure.

  33. cb Says:

    Kevin Rudd must not be mocked

  34. cb Says:

    A welcome sign of the times, I would say, but the hackers should have added: … and so does Wong.

  35. cb Says:

    I am only posting this quote to stir up the bears a little, but the video report on the site is the one that really got me thinking afresh about what would appear to be a renewed insanity. But, mind you, in light of the rampant money printing that can be seen in the M3 line in Sayce’s graphs, this is what I suggested just above, that could well be expected:

    “House prices on average now are 10% or so higher than in late 2008 when Dr Keen famously sold his home.

    “Betting the house on an economist’s forecast typically is not a smart move. Unfortunately, Dr Keen recklessly encouraged everyday Australians to sell their homes at what turned out to be the peak of the global financial crisis and the trough in local house prices.”

    Robertson says he has no strong view on the outlook for house prices, seeing both positives and negatives, but believes that extremists will continue to be wrong.

    “Those with the strongest views that the price of Australian houses “must” fall typically either don’t own one, don’t really know what they are talking about, or both.”

  36. cb Says:

    Wedded to their lies Posted by Richard Tuesday, February 23, 2010

  37. SV Says:

    My take is that Sayce’s case for housing price collapse is based on his understanding of risks to the world economy, which are basically continuing reliance of the western world on debt, government welfare and living beyond one’s means – from Greece to US to Australia.

    There is already so much debt in Australia that should our main customer – China – skip a beat – we will default. Our continuing solvency depends on our continuous employment on China’s behalf.

    Another risk is rise and rise of the interest rate, irrespective of the RBA. If the banks are offering 8% for term deposit, and operate on 2% margin, how much would they charge for a loan – 10%? How many borrowers can withstand 10% interest rate? And if deposits only form half of their funding, the other half is from overseas market. This market seized up once and it could do it again.

    And if Oz will start printing money, it will easily lose all other sources funding – who wants to be paid back in worthless dollars.

  38. SV Says:

    12-18 months ago, everyone was running scared. Both PM and RBA said that although we are in the best shape of the western, we can be insulated from the world economy. We quickly forgot how it was…

  39. Drew Says:

    CB –

    Re post 35, successful stirring :)

    But surely it’s a bit unfair for Robertson to say “Dr Keen recklessly encouraged everyday Australians to sell their homes at what turned out to be the peak of the global financial crisis and the trough in local house prices.”

    Firstly, because it’s premature to call the trough in prices. And secondly, if anyone, it is the spruikers who are being reckless – by encouraging people with virtually no savings to buy overpriced houses when interest rates are near record lows.

    On another note, property prices are supposed to be a function of rental returns – just like share prices are supposed to be a function of dividends. At the moment, people don’t care about rental returns because they think someone else will buy their over-valued property for an even higher amount. Very similar to the situation when P/E ratios were no longer considered important during the tech boom. Obviously , the tech boom ended in tears. The housing boom is bursting around the world. I find it staggering that most Australians still can’t see what’s coming.

    It’s good to see Americans can laugh at themselves and their misguided belief that house prices always go up – see first 4 mins of: http://www.youtube.com/watch?v=N9nm1keg1cU&feature=player_embedded#

  40. cb Says:

    I would agree with all of that, Drew. The mounting debt burden better be stabilised, overtaken by wage growth, or we are going to see an increase in defaults. But, having said that, at least to my mind, the uncertainty remains, given especially the that latest report on the ANZ being ready to gorge itself on mortgages.

    While there is a willing lender into this market, and especially that we are coming up to a rather shaky election for the incumbent federal government, I would not be surprised to see the puch bowl being toped up with yet more debt on offer, enabling the revellers to rage on. But the harder we party, mind you, the higher the chances of a hangover. Alas, who is game to predict exactly when that is going to happen? Not even Sayce, it seems.

  41. Sandra Says:

    Nick @ 17:
    Thanks to you and CB for the links wrt 9/11.
    Must admit that there are definately issues raised which require further investigation/explanation – which the authorities have not bothered to do…

    I guess my view on this matter has been influenced somewhat!!

  42. cb Says:

    Drew – Schiff is a very good public speaker, and he teaches some excent economic lessons in that most entertaining talk. I would highly recommend it for anyone who hasn’t seen it before. In fact, with your prompt, I am going to watch the whole thing again. It is an excellent antidote to the madness of the market and the MSM propaganda we are bombarded with day in, day out. For those interested to start from the beginning, here is the link again, starting with Part 1/8.

  43. Drew Says:

    I agree CB. I’d actually never heard of him when I stumbled across those clips the other day. It’s long but I couldn’t stop watching – I was hanging off every word. You can also find it here – where it’s a bit easier to find each part.

  44. Sandra Says:

    Drew @ 39-
    lol – yeh, but I guess Ozzies are a little ‘slower’ than others?
    We’re somehow ‘different’. what a croc!

  45. Nick Says:

    I have been speaking with my friendly local butcher. He has informed me that meat will be imported as of March. We are told on TV adds to go vegetarian so as to reduce the amount of cattle in Australia that contribute to “global warming”. So where is this meat imported from? They must have a new breed of cattle that only sucks air in and nothing goes out!!
    I also heard on the news that 1500 jobs will be lost if the govt goes ahead with allowing imported toilet paper ( funny how it all revolves around “scatology”…another Greek word) into Aust from Indonesia at half the price.
    Builders I know have long been complaining of Chinese owned development companies bringing in shoddy Chinese workers, who by the way live on the construction sites and work for a pittance, making it virtually impossible to compete against.
    These are just a small amount of examples of standard jobs being replaced by cheap labour, whether directly or via imported goods. How can we expect wages to have a remote chance of increasing when the trend is to reduce wages? How can this then flow over to house prices increasing? Am I to believe that as wages at best stay put and at worse fall, house prices and rents will increase? If wages increase then more jobs will go overseas, hence, wages fall to zero as people lose their jobs. Am I still to believe that house prices will rise under this scenario?
    I have recently returned from abroad (UK, Europe & US). What I have seen there, what I have seen from the “ordinary folk” and businesses here in Aust and what I been hearing of late about Aust real estate clearly defies logic, to put it mildly.

  46. etch Says:

    ‘the fianancial wheel has over-run its self ,to the point of affecting even by-standers”

    if or this frenzied pace continues of this BS BOOM .
    austerity will be introduced which will affect more than just grand-parents
    everyones on the bandwagon

    as they say

    “when the bellboy starts talking shares or property,thats the time to GET OUT”

    its totally amazing pet dogs havent “talking” woofing ,about the value of their KENNELS going up in value also .

    this madness of JUST PURE GREED , will phuccc over & hurt everyone in australia ,involved or not.
    people have forgotten 1990 recession..i havnt,,

    banks will be putting up interest rates & CRASHIO IT WILL GOOOOOOOOOOOOOOO((((((((((((((((((((((((((((((((((((((((((((((((((((((

  47. Sandra Says:

    CB @ 42:
    This series of videos is indeed enlightening.
    Also makes you wonder how anybody here could possible question the fact that property here in Australia is not in an unsustainable bubble??!!

    No wonder Sayce proclaims that he is dead certain that the real estate market is going to suffer a major downward price correction. It’s kinda like predicting that if you throw a cup out of your 10th story apartment window that it WILL drop down to the street. it’s a no brainer! DUH!

  48. cb Says:

    Sandra – I do sympathise with that view. To be sure, on the face of it, it sounds right and incontrovertible in theory. Alas, in the real world you can lost your shirt by acting on the financial advice of cock sure prognosticators, no matter how compelling you may find their views. The markets can defy logic, and can be manipulated for much longer than any of us can stay solvent. I have learned that lesson many times over, and mostly the hard way, and I have the scars on my balance sheet to prove it.

    Consequently, I find prognosticators like Bonner, Danning and Sayce, whose prognostications can be out by a decade or more, to be useless for most practical purposes. Sayce, for example, refuses to put a date by which property prices are going to crash, or a percentage figure by which they are going to crash. And even if his predictions of a major meltdown, of say 40% or 50% come true ten years or even five or six years down the track from the top, which could be 20 – 30 percent higher than where we are at the moment, then BiG DeaL.

    We are already up more than 10% over the past 12 months or so, so we would have to have at least a 30% correction from here to make his glooming alarmism proved by a 20% drop from a year ago. There is so much uncertainty in the market, and so much meddling and manipulating, that nobody really knows what is going to happen and within what time frame. Those who pretend otherwise are fooling themselves and everyone who listens to them and take their words as written gospel.

    Alas, by nature, we seem programmed to have, and live by, and sometimes even die by, our convictions. I am at a point where I consider mine to be as good and as useless as anybody else’s, so I might as well stick to my own. And one of those convictions I have is that, unless you are a privileged insider, you gotta take your chance. It is only the house, and those in cahoots with the house that will always win, and worse, they win at your expense.

  49. PuntPal Says:

    I think you will find cb that Sayce said the crash is very very soon. He obviously is not going to say Feb-April 2010 or something like that, because he has seen the way the spruikers have tried to use Keen’s wrong bet to discredit him.

    Sayce is smart enough to lock himself in to a date and specific %.

    Lets be honest, if by end or 2010 there is crash or correction of signigance (-20% or more) then Sayce is proven right.

    If this hasnt occured by the end of 2010, then Sayce would be struggling to argue he is still right on this matter.

  50. cb Says:

    Okay, PuntPal. Ten more months to go. But a 20% drop from current level will represent less than 10% drop from the level at which Sayce started glooming and dooming. And I do not think that a 10% pullback should qualify him for having been proven right. I would say that we would need a 30% pullback from current levels to give him the honours.

    Also, we should agree that there should be no excuses for miscalculating this or that. Manipulation and boondoogles and election bribes are the orders of the day, and any prognosticator who cannot factor them in, should just cop it sweet.

    Do we agree?

  51. etch Says:

    chinnees r buying all props up with their cheap money 1% loan

    people in oz saying “r those suckers working for 50 cents an hour”
    we got it so good here ”

    now the they r snapping 1.5mill$ houses up,

    its gone full circle

  52. etch Says:

    When a chinese sells an asset they buy a more expensive asset.
    ALSO We sell china heaps of raw commodoties as well as services such as tourism / education. we use the proceeds of this to buy t.v’s /toys / and junk that is made in china.
    When China sells finished goods to us, they use the money to buy aus assets e.g. YOUR HOUSE. they do not buy aus junk.
    Have a look at that before you complain. oh and buy more junk please, the chinese want more of your assets

  53. cb Says:

    etch – but if we are going to have a housing crash, then they are going to be burned and will lose their shirts to us, who will buy our houses back from them, right? Sounds like a way to make money: Sell high, Buy low. But I wonder how many of the bears here believe enough in this story to take that gamble.


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