Welcome aboard Barg! I remember those times like they were...

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    Welcome aboard Barg! I remember those times like they were yesterday as they are burned into my brain being a young kid back then with a father who was a property developer like his father before him too. The roller coaster of housing market highs and lows, the extremes in emotions, the family stress that ensued after the crash that inevitably followed but which of course no one foresaw. Ahh how times have changed...NOT!

    Today we have a whole generation that haven't even experienced an economic recession yet alone a housing crash (as you'll see reflected in many of the comments on this thread). One thing is a certainty, history may not repeat but it sure does rhyme. Cycles of boom and bust play out throughout history because they merely reflect cycles of human behaviour fueled by greed and fear (extreme optimism leading to manic exuberance which leads to people borrowing too much which leads to asset bubbles which leads to the last fool being enticed into the market at the worst possible time which eventually leads to the inevitable deflationary bust to follow). Given cycles play out at varying degrees of trend, and we haven't experienced a recession nor a property crash for so long in Australia, the next one promises to be one for the ages.

    As we're now seeing with the banking commission, "liar loans" became the norm (so much for prudent lending in Australia!) and record high levels of household debt to both income and GDP, coupled with record high interest only loans, forewarn of the mortgage crisis to come.

    With bond yields rising globally Australian banks cost of offshore funding will rise regardless of what our RBA does or does not do with the OCR. The market is telling us that interest rates are rising and that global debt bubbles have never looked more precarious. Australia may have escaped the GFC relatively unscathed (due largely to China's massive stimulus supporting our exports and the Government's prompt fiscal actions and HBs grant boost) but the resultant complacency and market ignorance, indeed arrogance, the likes of which I've never seen before, is sadly likely to result in a financial, economic and social episode that our grandchildren will be talking about long after we're gone.
 
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