An ivy league university study that followed 300 economists for 20 years, found that their accuracy or predictive ability, were on average, no better than a dart throwing monkey; and the higher the public profile, the poorer the predictive ability or outcomes?
Yes, there is a housing bubble and not just for the reasons cited?
Patently, govts of all political persuasions have acted to create excessive demand, by rationing the release of rezoned urban land?
Arguably, to quite deliberately inflate valuations, accompanying stamp duties, rates, and the cascading GST, which effects new housing more than just about any other asset class.
Developers and their cashed up lobbyists are also probably implicated, with inner city urban development, being amongst the most profitable and largely risk free?
Always providing, there is not a massive exodus from this market, by cashed up foreign investors?
Like that which occurred following the Japanese tsunami.
One notes that various relators, property developers, and industry spokespersons have of late, been talking a quite grossly over-valued property market up?
They still haven't worked out the real saviour of this market, is volume, not over inflated margins!
That said, there are places where one can invest in the property market, as positively geared investment.
None of those places are in overcrowded gridlocked capital cities; and or, their quite massively over-valued property markets.
We have the highest median house prices in the English speaking world, and our properties are overvalued by as much as 60%, in real terms.
Some wish for this to continue, along with the things that underpin it, like welfare for the rich, negative gearing.
We are great innovators at everything, except bringing our best ideas to commercial reality.
Methinks, a combination of the ingrained cultural cringe/bricks and mortar/service industry mindset, is responsible!
An average house used to cost some 2.5 times the average income, now its closer to ten, or even higher, if in fact, the RBA has been quite massively over estimating average incomes?
There is a housing bubble, we all know what happens to housing bubbles, and what follows that!
Rhrosty.

My first house back in 1980 was 4 times my annual salary.That same house recently sold for 11 times current average incomes.

That's a bubble.

Philip says that the vast majority of mainstream economists missed or denied the housing bubble, owing to lousy economic theory based on completely unrealistic assumptions; which I think is undeniable.

But on the other hand, the problem, according to Philip was “privatization and deregulation”, in other words, the mainstream economists and central planners who got it so wrong, didn’t have enough power to control the economy. They should have had more of a free hand to inflate the money supply and inject the newly printed cash into whatever sector they chose. This would solve the problem of bubbles (NOT).

What the mainstream, Philip Soos, and Steve Keen all have in common, is the belief that if only they could dictate policy, then we would have the correct outcome. But Philip gives no more reason for believing he can do it, than they do. In fact he doesn't give any reason for any of his assertions of economic propositions.

What if his assumption is wrong? What if central planners do not get it right, because they can't? And they can't because they don’t have any rational basis for deciding what the rate of interest should be – rational in terms of the subjective evaluations of the mass of buyers and sellers?

What if the central bank simply does not, and can never have the knowledge or the capacity to know what interest rates should be, and all their pretensions to knowledge
a) are false, and
b) only serve to corrupt vested interests?

That would have explaining power, wouldn’t it?

A very interesting and illuminating article, the implications of which may reveal themselves strenuously when the current mining 'boom' begins to ease - particularly if our economy has not prepared itself properly for this inevitable eventuality, through development of alternative 'capital generators', such as gas, uranium or other resources in high export demand, and of new and internationally competitive industries.

If/when there begins a significant decline in jobs and/or average household incomes, the 'bubble' may present as a looming gargantuan tsunami - well beyond any 'bandaid' response, and even a US30 cent A$ probably could not stave off an ensuing catastrophe.

(Where to place our investment bets? Pharmaceuticals, alternative energy, higher education, tourism? - Since our agriculture has limited growth potential, we are well behind in IT, defense industries, automotive and general manufacture, and can forget about selling 'carbon credits'. Or do we just sell our productive public and private assets to overseas interests - until all the attractive 'baubles' are gone - and then what? Kindly ask China to take us over? - Since I don't think anyone else would be interested - save Indonesia of course.)

One aspect of the U.S. 'crash' not mentioned in the article was the habit of the U.S. financial institutions 'insuring' themselves against the (inevitable, as it were) advent of 'mortgage default' - whereby the most shonky of these financial institutions involved in sub-prime lending, and/or the packaging of these loans into even more shonky derivatives, were able to make a motza from the very much anticipated 'burst' they had actually created - exacerbating the intensity of the fallout by several factors.

One has to hope that our lenders are locked-in to carrying full responsibility for their loans - with no 'get-out-of-goal-free-card' like that used in the U.S. fiasco. That, at least, could act to induce honest dealings, temper enthusiasm for questionable 'commission' schemes, and offer us some protection from a double-whammy collapse like that being experienced in the U.S., Europe, UK and Ireland. Fingers crossed.

(Cont'd):

I have reasonable confidence in our economy at the moment, but I look forward to visionary development policies from our Governments (and Oppositions, Greens, and Independents), State and Federal - particularly in the lead-up to the coming Federal election.

We, the People, will be watching with bated breath; and beware if we are disappointed by more unfunded social handouts and unproductive 'lemons', for we are at a crossroads, nationally and internationally, with the prospects for our nation's current and future generations firmly in the balance.