It seems so hard for some people to understand that banks are highly leveraged businesses, a very small percentage of default will make them illiquid, then they have to dump the foreclosures to the market to get liquidity, then prices fall, then more buyers become cautious, stay sidelined, prices fall further, more people underwater, panic sets in, people hold back spending, start paying down debt, retails suffer, building activities slow down, umemployment or underemployment rise, government revenues drop, public sector workers also lose jobs, more foreclosure, banks dump more into the market... All bubbles pop in the same way, booms and busts are all self-reinforcing. Australia is no different with anywhere else. The only thing saved us is the mother of all bubbles-China Bubble which starts to pop now. Be ready to witness one of the most spectacular fall in Australia histry. It is good for the future generation and the overall health of the economy though.
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- the inevitable housing bubble bust
It seems so hard for some people to understand that banks are...
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