Monday, August 24, 2015

Property prices related links

Property prices should fall: Raguram Rajan
Earlier :
"Rajan's prediction turned out to be right in the end and a little over three years later in September 2008, the world was in the midst of a full-blown financial crisis, the impact of which is still being felt, almost six years later. Banks and financial institutions about the go bust had to be rescued by governments all over the Western world. Also, in the aftermath of the crisis, Western governments and their central banks decided to print trillions of dollars in order to get their economies up and running again.
Now Rajan has sounded a warning again. In an interview to the Central Banking Journal which was published a few days back Rajan said "The problems arising are not so much from credit growth, which is relatively tepid in the industrial markets and has been much stronger in emerging markets, but from asset prices due to financial risk-taking and so on. Unfortunately, a number of macroeconomists have not fully learned the lessons of the great financial crisis. They still do not pay enough attention - en passant - to the financial sector. Financial sector crises are not as predictable. The risks build up until, wham, it hits you. So it is not like economic growth, where unemployment offers a more continuous indicator."
What Rajan is essentially saying here is that all the money printed and pumped into the financial system by the American and other Western governments has led to financial market bubbles all over the world. And these bubbles when they burst will lead to another financial crisis. As Rajan put it "We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost.""
Michael Hudson 2006 article: Real Estate, Technology and the Rentier Economy:
"The reality is that the economy is tilted to favor property owners, monopolists and creditors at the expense of those who produce goods and services. A widening share of national income is going to landlords, creditors and other rentiers at the top of the income and wealth pyramid, increasingly free of taxes. The wealth that produces these rentier incomes is not real capital investment, nor is it technological. It is created by law, often by stealth and insider dealing. "
Robert Solow recently on rents: The future of work: Why wages are not keeping up

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