Big Leb, i purposely didn't put it into the property thread as IP's are only part of the equation to this whole financial mess.
Admittedly Steve Keen focuses mostly towards property which i believe he has some very valid arguments.
However, reading into some of his thesis and models, it becomes very clear the way we interpret economic data using the current modeling system and omitting Debt as a major factor has lead to the global demise of our current financial system.
It reminds me a lot like RIO.
While Fe was at high prices RIO's debt level was more or less forgotten or put on the side as a non-issue and the focus was more about growth prospects. Now prices have tumbled, the focus has quickly transformed back to the level of debt side of the equation. Can RIO continue to service the debt even though its assets and margins are shrinking?
The above situation is similar with many property investors facing the same dilemma. Can they afford to service the loan with increasing unemployment and assets shrinking in value?
Sharpshooter, i remember my brother years ago went through a similar situation in the 70's to secure a loan for his first home. After being turned down countless times in the Melbourne CBD he eventually got a loan through a Co-op in Geelong.
This appears likely where we are heading. Much much harder to get loans. The biggest difficulty for FH owners will be the risk of losing their jobs with a 30 year loan around their neck and very difficult economic times going forward.
Employment growth is the key to keeping stability in our economy. Governments have a difficult task ahead of them. Sure they need to inject stimulus packages, but it must be very carefully targeted.
Debt is fine as long as its manageable. However, the risk increases exponentially over time especially in uncharted waters.
That is where we are heading IMHO.
I am happy to say i have no outstanding debts apart from owing my two sons pocket money this week.
Like debt collectors, they will continue to remind me until its paid.
