A lot of people are celebrating today because they have
found this
out about their home prices:
“Australian house prices hit
new high according to March PropTrack data
House prices have continued
to increase for the third consecutive month, as buyer demand, job shortages and
supply chain issues continue to push costs up.
Home prices across Australia
have hit new highs, with the median value of a home in a capital city shooting
to $832,000.
Month-on-month, national
home prices set new records, growing by 0.34 per cent.
Dwelling prices in capital
cities increased by 0.4 per cent, and are now 7.64 per cent above prices in
March 2023, and a shocking 35.2 per cent higher than in March 2020.
The figures, released on
Monday in PropTrack’s Home Price Index report, found homes in all capital
cities bar Hobart had increased in price since February.
Home prices in Tasmania’s
capital fell by a slight 0.03 per cent month-on-month, and have dropped by 1.65
per cent year-on-year however they were still up 36.1 per cent since
pre-pandemic levels.”[1]
Many people who own homes, or who have investment homes
for renting, will be celebrating that their bottom line of wealth has increased
through no effort on their part; especially in the capital cities. Buying land in Australia is like buying magic
money. You just pay for the land, and then watch it expand in value again and again
and again, like magic.
And people in Australia’s often most forgotten city will
be doubly celebrating,
“Despite higher interest
rates eroding affordability, property prices in Perth are expected to rise
faster than any other state or territory due to a fundamental undersupply of
dwellings and a growing population.
Independent industry
forecaster Oxford Economics Australia’s Residential Property Prospects report,
released Monday, predicted prices in the west would increase by 30 per cent to
2027.”[2]
Western Australia is by far the largest state in Australia,
by land size not population, but it is easily the most forgotten state, because
we Aussies living on the East Coast can tend to forget that we have many
cousins over in Perth. But these cousins will be celebrating, at least those
who already own homes.
If you are not in the housing market but have been locked
into the rental market you might not be celebrating as much. For nearly two
years now interest rates have been raised and house prices have continued to
increase. This is due to a massive increase in immigration in the last two
years, though I suspect there are other factors as well, because many boomers
are selling their old homes and buying their country dream house, or coastal retirement home,
and they are so cashed up they are willing to pay the exorbitant prices that
these things are going for.
But I would like to suggest that this is not a good sign
of health for our economy, but a continuing trend of serious decline, and signs
of the boom before the crash. Vox
Day shared a link to this fascinating article on his blog about a week ago,
and it helps give insight into what is actually happening with our economy at
the moment:
“Arrighi adopted this
approach and, in his major work called ‘The Long Twentieth Century,’ elaborated
his theory of the cyclical pattern of ascendency and collapse within the
capitalist system, which he called the ‘systemic cycle of accumulation.’
According to this theory, the period of ascendency is based on an expansion of
trade and production. But this phase eventually reaches maturity, at which
point it becomes more difficult to profitably reinvest capital in further
expansion. In other words, the economic endeavors that propelled the rising
power to its perch become increasingly less profitable as competition
intensifies and, in many cases, much of the real economy is lost to the
periphery, where wages are lower. Rising administrative expenses and the cost
of maintaining an ever-expanding military also contribute to this.
This leads to the onset of
what Arrighi calls a ‘signal crisis,’ meaning an economic crisis that signals
the shift from accumulation by material expansion to accumulation by financial
expansion. What ensues is a phase characterized by financial intermediation and
speculation. Another way to think about this is that, having lost the actual
basis for its economic prosperity, a nation turns to finance as the final
economic field in which hegemony can be sustained. The phase of
financialization is thus characterized by an exaggerated emphasis on financial
markets and the finance sector.
How
financialization delays the inevitable
However, the corrosive
nature of financialization is not immediately evident – in fact, quite the
opposite. Arrighi demonstrates how the turn to financialization, which is
initially quite lucrative, can provide a temporary and illusory respite from
the trajectory of decline, thus deferring the onset of the terminal crisis. For
example, the incumbent hegemon at the time, Great Britain, was the country
hardest hit by the so-called Long Depression of 1873-1896, a prolonged period
of malaise that saw Britain’s industrial growth decelerate and its economic
standing diminished. Arrighi identifies this as the ‘signal crisis’ – the point
in the cycle where productive vigor is lost and financialization sets in.
And yet, as Arrighi quotes
David Landes’ 1969 book ‘The Unbound Prometheus,’ “as if by magic, the
wheel turned.” In the last years of the century, business
suddenly improved and profits rose. “Confidence returned—not the
spotty, evanescent confidence of the brief booms that had punctuated the gloom
of the preceding decades, but a general euphoria such as had not prevailed
since…the early 1870s….In all of western Europe, these years live on in memory
as the good old days—the Edwardian era, la belle époque.” Everything seemed
right again.
However, there is nothing
magical about the sudden restoration of profits, Arrighi explains. What
happened is that “as its industrial supremacy waned, its finance triumphed and
its services as shipper, trader, insurance broker and intermediary in the world’s
system of payments became more indispensable than ever.”
In other words, there was a
large expansion in financial speculation. Initially much of the expanding
financial income derived from interest and dividends being generated by
previous investments. But increasingly a significant portion was financed by
what Arrighi calls the “domestic conversion of commodity capital into money
capital.” Meanwhile, as surplus capital moved out of trade and production,
British real wages began a decline starting after the mid-1890s – a reversal of
the trend of the past five decades. An enriched financial and business elite
amid an overall decline in real wages is something that should ring a bell to
observers of the current American economy.
Essentially, by embracing
financialization, Britain played the last card it had to stave off its imperial
decline. Beyond that lay the ruin of World War I and the subsequent instability
of the interwar period, a manifestation of what Arrighi calls ‘systemic chaos’
– a phenomenon that becomes particularly visible during signal crises and
terminal crises.[3]
Of course, Australia is not an empire on anywhere near the
scale of the United States, but because of our very strong alliance and
partnership with the USA since World War 2, Australia has tied much of its
prosperity and much of its economic strategy to following the trajectory of the
United States. We have de-emphasized production and industry, like the US, and have pushed
more of our economy towards financialization and capital trading. And this has
had a massive impact on the cost of living and housing in Australia, because houses have become a hot commodity to trade in the financial markets. They are these magic entities that just go up in value, whether they are improved by investors or not. They just keep going up. As a result the cost of living in this country has skyrocketed out of connection with real
world wages. They are heavily unbalanced.
But the point of sharing this article is to show this:
the apparent boom in Australian wealth we have experienced since the 1990’s, is
not a sign of a healthy and booming economy. It is the sign of a parasitical
economy that gives the appearance of wealth, because assets are worth more and
more, but really this is just a result of financialization. That is money has
been poured into the housing market to make more money, not produce the homes
Australian's need. Not that Australia is not building homes, it is. But coupled
with this financialization has been record immigration growth for the last two
decades, which has meant that there is a continual pressure on demand for
housing so that the housing ponzi scheme can continue to expand, and expand it has, massively. This means
that no matter how fast homes are built in Australia, every government since
the last years of the Howard era, has insured that so many people come
into this country that houses cannot drop in value.
This gives the appearance of economic growth and
prosperity, but really these are financial games which are played in the late
stage of a system's economic collapse. Our country's economic managers and investors have found a way to squeeze massive profits out of an increasingly de-industrialized economy, at the expense of the quality of life of our people; an appearance of growth, when really the soil is about to go barren.
Now people have been predicting a collapse for some time. I have no idea when it will happen. But the fact that the United States, and to a lesser degree Australia, are following these economic trends as observed in history with the collapse of other empires, shows us that there will be an end to this game eventually. You can only financialize markets for so long, before you strip the economy of all its real value and the foundations come out from under you.
Wealth that is not connected to real world value will eventually be exposed for the fraud it is, it is that simple. You cannot ignore reality forever.
If there were no economic competitors to your country, you could
probably play this game for much longer, but there are. The world economy is breaking
into two main competitive systems BRICSIA and the globalist American dominated
western nations. And the nations which are surging have economies based on
industry and production, not financialization. This boom we see in the heavily
financialized Australian housing market is a sign we are heading towards a
massive brick wall. The only real question is: when will we hit it? I suspect right
around the same time the United States hits its own brick wall.
No comments:
Post a Comment