Wednesday, November 10, 2010

Slow motion Minsky moment

Wikipaedia defines the Minsky moment thus:
A Minsky moment is a situation in which investors who have borrowed too much are forced to sell even good assets to pay back their loans. In economic terms, it is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.

In retrospect, this past week might be pin-pointed as the Minsky moment for Australian housing.

The CBA rate rise and the other banks' bizarre silence, Chris Joye's freaky $100 million bet, and Ray White's failed Sydney Opera House auction form such a poetic moment of greedy overreach that it is totally irresistible.

This blogger is not even going pretend it's likely to be right. But something is happening. This blog, Delusional Economics and The Unconventional Economist, have all experienced unprecedented traffic spikes and flows this week.

Canberra had better rush its RMBS bailout.


Jai Parker said...

Oh David, everyone's just coming here to laugh at you (and us agreeing readers) because their houses are about to explode in value again. Ha ha! When they're all rich, sitting on million dollar yachts and surrounded by beautiful women we'll still be here, penniless and yapping on about the inevitible housing correction.

And regarding the RMBS, what could possibly go wrong? (warning, there's some bad language in this presentation)

Pallbearer said...

What magnitude are these spikes in visitor numbers, David?

Certainly may indicate a shift in the psychology of the general populace regarding house prices.

Increased traffic could also be an indication of peoples decreased confidence in main stream media and politicians, and have decided they wish to think for themselves, by doing their own research.

Will be interesting to see if the numbers trend up or if it is just a spike.

Pallbearer said...

Dah,found the site meter at the bottom of the page. The site had over 600 visits and over 1000 page views per day over the last 3 days.

Graphically, looks to be trending up since mid October, excluding the drop off over weekends.

Congratulations and keep up the good work.

Anonymous said...

I came here in the past two weeks through a link from Steve Keen. Found the delusional economist from your site and all the others from links on that site. If I followed the link, chances are others did too...

Anonymous said...

I'm an avid reader, love all the blogs you have mentioned. The internet, FREE media....BLACK SWAN!!! Keep the awareness, information and your knowledge going before we all turn into surfs!!!

David Llewellyn-Smith said...

You lot,

Yes, traffic is growing nicely but this week it has jumped significantly. A break in the trend...

Ta for the support. D

Torchwood1979 said...

I wouldn't go calling the housing correction either. I called it in 2003 and then in 2008 and both times something has bailed it out. The first time there were signs of the market turning but our terms of trade boom boosted our national income, a significant amount of which went straight into housing. Then when the market did turn in 2008 (dropping nearly 4%) I called it again, but the RBA cut rates a full % lower than I expected and the Rudd Government boosted the First Home Owners Grant. The second time I was more cautious but still got it wrong because of the government intervention.

This time the RMBS lunacy could bail it out, so I'm not going to call anything more than a period of stagnation or very slow growth. I am convinced however, that a correction will come and when it does it will be all the more painful because we didn't swallow our medicine in 2003.