the reason the bubble won't burst, page-20

1nvstor:
A bearish scenario:

* Foreign funds continue to be expensive for the big 4 into 2012 because the euro crisis isnt fixed.
* The banks bleat about it - the Oz government guarantee is re-established so banks can get access to cheaper capital again.
* Meanwhile, the chinese stick to their masterplan to take the heat out of their housing market. Base metal prices continue to fall in 2012 because of it.
* Consequently, the tax take of the Oz gov't from our miners falls. The deficit increases. Consequently gov't borrowing costs go up & so do the funding costs of our banks - they are now wedded together because of the gov 't guarantee.
* S&P downgrades both banks & Oz gov't debt because of rising aussie govt deficit. Funding costs rise more.
*The banks are finally forced to decouple their rates from RBA rates. This puts the housing market in a spin. Interest rates inch up - not by much, say 0.5% - and investor sentiment takes another hit.
*House prices fall a few percent more, taking the total fall to ~10-12% over 2 years. Those who got in last see they have no equity at all. Nervousness mounts, more houses go up for sale, etc, etc, etc.

And so it goes, just as it has in Ireland, Spain, UK, USA. Ive lived in all of them in the past 6 years & seen it 1st hand. The pattern is the same - a tightening of credit. Dont ever, ever believe it cant happen here.