charles hugh smith-Unpopped Housing Bubbles Abound

Though much has been written about the popping of the housing bubble in the U.S. and Ireland, remarkably little has been written about the many housing bubbles that remain unpopped. As a rule, speculative bubbles pop and revert to their pre-bubble levels, so we can anticipate the eventual popping of all remaining housing bubbles.

David P., proprietor of the excellent Market Daily Briefing blog, recently shared two charts depicting housing markets in the European Union. David explains his methodology of dividing the EU housing markets into two groups (EU Property Bubbles):

Notice that Ireland's decline tracks a classic bubble pop; the U.S. decline was stopped by gargantuan Federal subsidies (3% down payment loans passed out like candy, etc.) and Federal Reserve intervention (zero interest rates and $1+ trillion purchases of mortgages). Spain and The Netherlands have rolled over but still have a long way down to reach pre-bubble levels.

Belgium and France prove that "stone" (real estate) is still a popular investment, especially when credit money is sloshing around (see chart below).

Austria and Germany are playing catch-up in the housing bubble game--better late than never. Perhaps capital is fleeing risky EU locales and finding a home in German and Austrian real estate.

These two charts reveal the driver of the EU housing bubble and its piecemeal devolution: massive credit expansion, and a sharp decline in credit growth:

Housing bubbles are not limited to Europe, of course; here is David's chart of the Australian housing bubble:

Given the dearth of investment options open to households in China seeking to invest their prodigious savings, it is unsurprising that China's housing bubble continues expanding. Every proponent of housing during bubbles confidently proclaims that "this time it's different," and a decade later the dazed survivors shift through the financial rubble, wondering what went wrong with "guaranteed" fundamentals, trends, valuations, collateral and wealth.

Roundtable discussion with CHS, Gordon T. Long and Bill Laggner: China, Japan & Central Banking (25 Minutes, 34 Slides)

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy
Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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