The More Things Change

Here are the six dangers to America's future:

  1. The high levels of debt,
  2. A decline in real earnings,
  3. Inflation,
  4. Shrinking gains in productivity,
  5. The mounting tax burden,
  6. The decline in the US dollar,
as listed by the Federal Reserve chairman, Arthur Burns in 1975, after trying to understand the recent recession America had just entered....

The more things change...

We see the same muddled thinking and economic concerns in Australia too. Endless discussion goes on, but no one ever seems to see what brings it about. Have a look at the following links, whilst keeping in mind the dates of the real estate boom and bust 18-year cycles since the Second World War: 1955 to the early 1970's, then bust, 1975 to the late 1980's, then bust, and the current cycle, 1992/3 to 2006/7, then bust. It's been a regular 14 years up, 4 years down. The exact repetition of this is documented in chapter 17 of The Secret life of Real Estate, page 340 in particular.

The same concerns from the main housing industry representatives, even back in 1968: “Builders seek boost”, The Age, Melbourne, December 23, 1968. ...blaming a tightening of bank credit, increasing land price...

The soaring cost of land as we go into the end years of the 18-year cycle, 1969 style:
Melbourne Herald August 23, 1969, forecasting “Sites for homes 'up by $1000 in 1971”. Speculators and those trying to flip properties clamour for more of the action.

( The 2006 US action is here:)

The worries about home affordability from politicians, 1970:
Age, September 30, 1970.

Land values boom into the end of the cycle, and the crazy ideas to halt it, 1971:
Age, May 27, 1971. “City land boom out of control”.

It's now harder to buy a home, and the fading Australian dream:
Age, August 26, 1971.

Herald Jan 14, 1972. “Inflated land prices and rising costs in the building industry are threatening to put home ownership beyond the means of the average home seeker”.

The State Governments act, by releasing yet more land... Age, July 26, 1972.

The problems of the highly geared homebuyer, Australian Financial Review, August 10, 1972.

1973, soaring land prices are now front page news: Age, May 10, 1973.

Even quicker rises in prices, and even more schemes to do something about it. “Land rose 30% in 90 days” – half the buyers were home developers who would sell the land at even higher prices... and on the same page, “States get $218m for housing” (low cost housing initiatives): Age, July 2, 1973.

The scandals as governments make speculators rich, buying land at peak prices, right at the top: Age, June 14, 1974.

1974 to 1992, here we go again... Age, June 14, 1988 “Record prices put the squeeze on home buyers”. This time though, the buzzwords are 'residential property', or 'residential market'. THE LAND is now obscured.

It's the high rates of stamp duty to blame (an opposition politician's favourite) Age, June 14, 1988, A3, page 5.

Harder to buy a home, and the fading Australian dream: (soaring prices, rising interest rates) The Age, 1989 style (21st Jan).

Yet more crazy ideas to solve the crisis...“Better land use may solve housing crisis”, but at least he got the reason right. The price crisis “was associated with the cost of land”. Australian Financial Review, January 11, 1989.

Japan saw the biggest problems: strenuous efforts made to find “the answer”. Of course they don't, and go on to experience the worst bust ever, after the biggest boom ever. Age, November 24, 1987. Every cycle, the warning signs are always there before the bust - for those that know their history – in the land price.

What the newspapers were saying...

The blame game; blame anybody, or anything, except the real culprit, the capitalised rent. (Shows the total ignorance of all concerned.) The Age, January 21, 1989.

1989, it's official, the cost of entering the housing market in Melbourne as a home buyer is now beyond the reach of the average Australian family: Melbourne Herald, Feb 8, 1989.

The turn: Age, December 28, 1991, “Recession tearing families apart”

The real estate cycle repeats because the underlying process of the scramble for the rent remains unchanged. Whilst the rent continues to be capitalised into a tradable government granted license, nothing can change, and the real estate cycle will (must) continue

This is what EIS teaches – the real cause of the cycle - so that you can be confident:
     a) That the cycle absolutely definitely will repeat, and
     b) Then take advantage of the fact, by timing it.
99.9% of people will tell you this cannot be done.

It is known how to stop the real estate cycle from eventuating, the theory and practice of which is discussed in chapter 16 of The Secret life of Real Estate, and then reviewed in the final chapter, 'the secrets'.

[Thanks to Terence for all the hours of research on this one.]

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