You have to love this: The title of Albert Edwards’ latest note is: The biggest bubble in recent history is heading for the mother of all hard landings.
So what’s that bubble?
Edwards’ post is building off the work of his colleague Dylan Grice, who wrote about an Australian bubble built on the back of a China bubble in his recent note.
So what’s Edwards’ big complaint with Australia?
- Because Australia has gone so long without a recession, everyone has been convinced that it’s managed by geniuses, and that the economy there is solved. This is classic bubble thinking.
- But Australia has telltale signs of a bubble.
- 5 of the world’s most expensive cities are now in Australia (Sydney, Melbourne, Adelaide, Brisbane, and Perth).
- Not one Australian city falls into traditional measures of “affordability.”
- The entire Australian economy is premised on the wheels not coming off China.
Our own more Minskyan interpretation of events is that the lack of volatility in the Australian economic cycle and the absence of any recession since 1991 has led Australians to have an excessive appetite for debt in the belief the future will reflect the past. But for us, suppressed volatility is merely storing up an even bigger crash further down the road.