Your profit burbs, is in the equity that you have in your house,
which is in today's Dollar value and will more or less keep up
with inflation in real terms. Your debt meantime, is in old Dollar
value, as at the time you took out the loan. In other words, after
20 years of inflation, what you still owe would be insignicant.

Sure you have paid interest, but then you have also used the house
to live in. My point is that in real terms you have not paid
6.5% at all, more like 2.5 %. That is exactly why a bit of inflation
has benefitted you as an average punter with a mortgage.

At some point, you will be able to sell that house, as you can't
take it to the grave with you. You might buy a cheaper house
in the country, you might move into a retirement unit etc.

You might even leave it to your kids, in which case they will benefit
and can live it up at your expense, but then that is your choice.

Now if there was no inflation at all, you would in fact be paying
6.5% until the last day of the last payment, which is much
harder to do.

So my point stands.

Yabby ,house prices are over inflated as a result of easy credit manufactured by the Global Reserve Banks.It would be better that individuals were made to save 30% for a deposit before a loans is granted.This would have the double effect of less debt and keeping prices down.It is easy credit that over inflates prices.

The money does not have to be borrowed from the Global Banksters.This is a fraud.Kevin Rudd is borrowing fron China for stimulus packages so we can buy more Chinese goods.There is no productivity in it.Why borrow from those who create counterfeit money anyway?Create your own money and control inflation by measured interest rates.

The US Fed has failed in it's most basic charter,ie the responsible supply of credit.You do not reward failure by re-instating Bernanke or
keeping this most vile and corrupt institution called the US Federal Reserve.

The real problem Arjay, is that we have a shortage of houses being
built, compared to our high migrant intake. People have to live
somewhere.

Given that some states like NSW, were charging up to 100k$ per
block in fees and charges, no wonder there is a problem!

To build a house in Australia is still not expensive and given the
size of the country, land is not in short supply either.

Banks generally restrict mortgages to 30% of peoples incomes. Fact
is that people place a high value on their houses, so with high
double incomes of today, Australians have the world's largest
houses!

What you are implying is that you want Govt to interfere in the
market.

*Create your own money and control inflation by measured interest rates.*

That is exactly what the Americans did.

The US Fed certainly did not fail, the SEC and other organisations failed, Bush and Co failed.

In fact Bernanke is now largely credited with having averted a
global depression, by his actions. Had Bernanke acted differently
and not stopped the falling dominoes, you Arjay might well be
here complaining that you are broke and out of work, due to the
global depression. Yes, some US $ were created to avert a global
depression, but given the nature of the US $ as the global reserve
currency, it was a calculated risk worth taking, as the evidence
shows.

US voters however, can only blame themselves for their bad judgement
of Bush and Cheney. The US economy has paid a huge price for that
and poor old Obama has been left to clean up the mess.

Yabby. Obviously you're entitled to your opinion and what you do with your money is your business. But if it's OK with you, I'll give your financial advice a miss.
I'd be interested to catch up with you a few years down the track when you do sell your house, and find out how much money you think you've made.
Suggest you look up "profit" in the dictionary though. I think you'll find there's no profit to be made in the house you live in.

At some point, Arjay, you are going to have to admit that you and economic theory will never be best mates.

>>Why borrow from those who create counterfeit money anyway?Create your own money and control inflation by measured interest rates.<<

In what sense do we not already "create our own money", Arjay? And doesn't our Reserve Bank have the specific responsibility to keep inflation in check, through interest rates? Why do you suppose that the pundits are predicting further rises in those rates, if not to perform precisely this function?

But even more fascinating are your sweeping assertions on cause and effect.

>>It would be better that individuals were made to save 30% for a deposit before a loans is granted.This would have the double effect of less debt and keeping prices down.<<

Now you might be surprised to hear that I actually think that your proposal that a higher level of deposit required is relatively sensible, from an objective standpoint. The impact on our savings rate would be, on the whole and in the longer term, beneficial to our economy.

But where your arguments fall apart is when you try to apply your theories to the real world.

Requiring a 30% deposit would pretty much kill the first home-buyer market. This in turn would dry up supply - if no-one is buying at the entry level into the market, then no-one particularly wants to invest in building new properties.

The problem with this is good ol' supply 'n' demand theory.

As Yabby points out, demand for places to live is not falling, but increasing. And when demand moves ahead of supply, guess what happens?

Prices go up, not down.

So the people already in the housing market, who have the ability to plonk down 30% (from the proceeds of their previous house) will continue to move the market as a whole, northwards, in line with the strength of demand and weakness in supply.

The result of all this will not, as you suggest, be "less debt and keeping prices down".

But the exact opposite.

Pericles,I do not deal in economic theory,I deal in economic facts.Money only represents human potential.It is merely an oil for the interaction of human creativity and endeavour.The banksters and Wall St have turned it into a commodity/derivatives that pervert the true course of the economy.

We will never agree on issues of the Fed, because I believe in fair play and rewarding those who produce.

How can the Global Reserve Banks be the most powerful institutions on the planet when they produce nothing of tangible worth? Aye, but they do create counterfeit money from which they keep the planet in perpetual debt slavery.

In my view they are the lowest of parasitic creatures ever to frequent the universe.At least real parasites drop off host when they have had their fill.This lot are not just happy being wealthy beyond self indulgence.They want power over the entire planet.Money now means nothing to them.It is the thrill of absolute power,since they have exhausted all avenues of their own limited creativity.

They are now in the throngs of self destruction,unlike the drug addict,they are obsessed by the lust for power.

The real economic collapse has yet to play out.The stimulus packages are just amplifying and delaying the inevitable.Degrade any currency by hyper-inflation and you end up like Zimbabwe.