Mish calls the Aussie housing market "tulip mania":
Anyone who knows markets knows that volume changes precede price changes because volume implies supply and price is a function of supply and demand. The demand for homes is not going to go up just because so many people are now trying to sell. In fact, this generally leads to a lack of demand because people start to get very picky about what they buy when the selection is so great. Higher supply in the face of lower demand = lower prices, period.
When you see so many begin to head for the door it is not wise to stand in the way. The Australian housing market is going to crash and so will the Canadian housing market because the prices for these homes were bid up using credit provided by fractional (fictional) reserve bankers to real estate speculators, not from real money actually earned by people who just wanted shelter. High levels of credit were ridiculously justified for Aussies and Canadians because these commodity producing nations are benefiting from China's commodity buying spree which itself is just an attempt to get rid of dollars before they become worthless. It was also driven by China's ridiculous speculative building boom which will also go bust.
China has been taking increasing steps of late to fend off credit availability in order to halt the growth of its housing bubble and this will eventually result in a collapse of commodity buying from Australia and Canada. It has to because all the credit speculation has brought forward so much demand.
When we see the Aussie/Canadian housing markets rolling over it is the market's way of telling us that it believes China is running out of ability to buy their commodities (and thus for Aussies and Canadians to make their ridiculously high house payments). Once this happens the next logical step is for the Chinese real estate bubble to collapse with a very loud thud. I believe that this event could turn out to be of major concern for the whole world because, unlike relatively rich Americans, Europeans, Aussies, and Canadians, the Chinese people will not see the collapse as an "unfortunate economic event" like more economically secure people might be able to do. For many millions of poor Chinese it could easily become a matter of life and death as their wealth collapses and they can't afford food. Yes, even the poor people of China have been pooling their funds to speculatively invest in housing. If starvation of the poor becomes a real threat then they will have nothing to lose by storming the halls of government and hanging their leaders in the streets. To prevent their own demise, the Chinese government may have to take steps to appease the people when civil unrest reaches a critical stage. Such steps could affect the whole world - like going to war, etc. It would be very easy to vilify America for everything and a starving population will gladly enlist in the military if it means some daily rice. I am not predicting this must happen but folks who rule this out have their heads in the sand IMO.
This kind of dynamic is exactly what we have to expect for allowing the scam of fractional reserve banking to exist.
"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency [Dave:including the issuance of credit which spends just like currency in the market place], first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)
