The Definitive Guide To The Australian Housing Bubble And Coming Financial Crisis

steve keen

Economist Steve Keen has warned for years of an Australian housing crash comparable to the U.S. subprime crisis.

Today Keen published a must-read essay full of charts on the housing bubble and how it propped up bank stocks.

He concludes: “It’s great fun while it lasts, but all Ponzi Schemes end for the simple reason that they must: they aren’t ‘making money’, but simply shuffling it—and growing debt. When new entrants can’t be enticed to join the game, the shuffling stops and the Scheme collapses under the weight of accumulated debt. There are very good odds that, when this Ponzi Scheme collapses and house prices fall, bank shares will go down with them.

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title=”Real house prices have more than doubled since 1997. Bank shares have doubled too, beating the rest of the market”
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title=”Since 1987, banks have moved more and more into real estate loans”
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title=”Mortgages account for a record 57 per cent of banks’ loan books”
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title=”They account for a record 37% of bank assets”
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permalink=”compared-to-america-real-estate-loans-are-a-higher-share-of-bank-assets-and-they-increased-in-significance-more-quickly-5″
title=”Compared to America, real estate loans are a higher share of bank assets, and they increased in significance more quickly”
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[slide
permalink=”the-bust-begins-impaired-assets-have-surged-to-25-of-tier-1-capital-even-while-home-prices-increase-6″
title=”THE BUST BEGINS: Impaired assets have surged to 25% of Tier 1 capital, even while home prices increase”
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[slide
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title=”Real estate loans are worth 700% of Tier 1 capital. An increase in non-performing loans would cause grave damage”
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title=”DEBT PRESSURE: Australians already pay 50% more than the U.S. in mortgage interest”
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permalink=”history-high-debt-to-gdp-led-to-a-deleverage-driven-slump-in-the-1890s-1930s-and-briefly-in-the-70s-and-80s-9″
title=”HISTORY: High debt to GDP led to a deleverage-driven slump in the 1890s, 1930s and briefly in the 70s and 80s”
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title=”Pre-WW2 credit growth was highly volatile and slightly positive”
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title=”Post-WW2 credit growth was less volatile but significantly more positive”
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title=”WARNING: This time the housing crash is oc curing in a period of low inflation, which resembles the severe pre-WW2 crashes”
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title=”Bank shares tracked home prices in the 1890s crash”
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title=”Bank shares tracked home prices in the 1930s”
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title=”Bank shares tracked home prices in the 1970s”
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title=”The 1987 stock crash marked the end of an era”
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title=”Banks weathered a real estate crash in the early 90s and have been rising ever since”
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title=”Mortgage debt exploded to almost 90% of GDP”
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title=”The latest bubble started with the highest debt level and has lasted longest”
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title=”Only the 1920s bubble is comparable in debt growth”
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title=”The rise in house prices has been unprecedented”
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title=”Banks have soared like never before — and have a long ways to fall”
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permalink=”according-to-the-economist-australia-has-the-most-overpriced-housing-market-anywhere-23″
title=”According to the Economist, Australia has the most overpriced housing market anywhere”
content=”Check Out The 12 Most Overpriced Housing Markets In The World >
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