USA Reality Bubbles and Falling Australian Home Prices
Warning: Don’t Get Trapped in Your Own Reality!
Housing Prices in Australia had gone up pretty much continuously without significant drops/corrections for about 35 years. So many people in Australia (also New Zealand and Canada for that matter), never saw a major pullback even during the last Global Financial Crisis (GFC 2008). So many younger people in Australia have only witnessed rising housing prices (that is their total reality).
A similar reality bubble could easily be said for Americans in their belief that the US dollar will forever be the world’s reserve currency, or remain strong, despite the facts that the USD and most other sovereign currencies are no longer backed by gold (thanks to Nixon) and that there would be no consequences after the USA weaponized the USD via the swift banking system by putting strong economic sanctions against other countries that were perceived as threats to the US and/or US based business opportunities abroad.
Confession: I’ve been saying that Australian housing prices were going to start falling for years-and I’ve been super surprised that it took this long for a price correction to start happening and that prices could resist typical/historical market cycles for such an extended period.
In retrospect I didn’t expect Australia’s exports to China (iron ore and coal) to remain so strong for so long. Reasons: Mostly due to overwhelming scientific evidence in support of human fueled climate change caused in a big part by the burning of carbon (which includes coal), but that was/is my own reality bubble. However, for whatever reason you pick: climate change facts, big city air pollution caused by coal fired electric plants in China, or general economic slow down in China. Coal exports from Australia to China have dropped off considerably and mostly only iron ore exports remain. FYI: There is even more pain coming soon as iron ore exports are also likely to start dropping as China’s economy continues to slow and iron ore revenue drops due to new competition from other countries joining the world iron ore export market since 2014: China itself up 4000%, Malaysia +101%, Oman +72%, Bahrain +62% and India +42%.
Current Big Questions: Will house prices and other assets, stocks, bonds fine art in Australia (and elsewhere) continue to fall – yes, very likely IMHO.
Why: Look no farther than the recently inverted or lower sovereign bond yields around the world. Inverted bond yields alone have 100% preceded the last EIGHT financial recessions in the USA.
As bad as falling home/asset prices is bad news for the Aussies, the Biggest Reality Bubble I currently see is in the USA-as way too many of my friends (and family) currently believe that the USA economy is doing well (as their particular tech stocks have gone up continuously for ten years since the last GFC) and the unemployment & economic numbers reported by their favorite big corporate owned news source and current President paint such a rosy picture. They fail to fact check: They aren’t looking at the Russel 2000 index in the USA for instance, or what is happening elsewhere, which they really should since the “stock market” and how they should feel about the economy is way bigger than just the stocks they happen to hold or the city in which they currently live. I understand it is easy to pay the most attention to or be distracted by whatever the President tweets or whatever the business news talks about: Facebook, Google, Apple, Netflix and Amazon etc., but important things are happening. They need to start paying even more attention to such things as to when the economic & employment numbers have been revised significantly down, which has been happening or a regular basis for quite some time now.
This reality bubble of course sets them up for having a serious case of tunnel vision and to be very surprised when the stock market and/or real estate market crashes. Those looking to sell on the real estate market while avoiding a crash-period may want to learn how selling real estate notes works and the ways in which they can approach this for themselves.
Editor’s Note: Less than one week later after this post:
Exposing Australia’s housing crisis
60 Minutes Australia
Published on Aug 15, 2019
Disclaimer: This post is for informational and entertainment purposes only- it is not financial advice or is in anyway intended to provide any financial recommendation.
“Green-Eco-EV News Reporting by Ken Burridge”
Independent journalist, blockchain and sustainability activist, EV of the Year Judge, photographer, and author that has published over 1500 articles. Mr Burridge’s travels have taken him to over 40 countries and 300+ major cities. He is originally from the USA, but has been residing in Australia for the last eight years. Connect to Ken Burridge on: Twitter, steemit, facebook, minds, Linked in, Uptrennd or website
