glenn stevens confirms my thoughts

well well well, what a telling line.

First, I think we ought to be wary of the assumption of a mechanical relationship between credit and GDP. Of course a sudden serious impairment in lenders ability to extend credit almost certainly amounts to a negative shock for growth in the short term. But did the steady rise in leverage over many years actually help growth by all that much? Some would argue that its biggest effects were to help asset values rise, and to increase risk in the banking system, without doing all that much for growth and certainly not much for the sustainability of growth in major countries. Some gradual decline in the ratio of credit to GDP over a number of years, relative to some (unobservable) baseline, without large scale losses in output may be difficult to achieve but I dont think we should assume it is impossible.


full speech here

http://www.rba.gov.au/speeches/2010/sp-gov-200710.html

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given the very high correlation between real land prices and debt/gdp growth, this tells the softening of real land prices is the aim !!

Why would you buy an asset in an asset class yielding 2.5%, and where the RBA Governor implicitly GUARANTEES below nominal growth !!