Post #45 – The Five Stages of Australia’s Housing Bubble

So recently I blogged about some of the common myths surrounding the Australian housing market. That post also hinted that I believe our housing market is entering a very fragile phase, where finally, after many false prophecies of collapse, our luck might finally run out. I am predicting that the Australian housing market will enter a volatile period within the next 9-12 months, with a drop of approximately 20-40% in the next two to three years after that. And I’m going to borrow the theory of an obscure and oft-forgotten 1960’s economist by the name of Hyman Minsky to explain exactly how this housing market bubble will pop and collapse.


Hyman Minksy

This man’s ideas have never really been applied to a housing market though, dabbling predominantly in the world of finance. However, I believe that the financialisation of the housing market in Australia means that the leap between his theory and the housing market in Australia can be made. Let me quote BBC News to give you a brief introduction to this man:

American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented…

Minsky spent his life on the margins of economics but his ideas suddenly gained currency with the 2007-08 financial crisis. To many, it seemed to offer one of the most plausible accounts of why it had happened.

He referred to his theory as the Financial Instability Hypothesis (FIH), and argued that lending goes through certain stages in a capitalist economy. Considering housing in Australia is no longer just a roof over your head, but rather seen as an investment and an asset, it’s easy to apply his different approach to finance to the housing market here. This is how it flows:

1. THE HEDGE POSITION: Your expected inflows are expected to be less than your committed outflows for the foreseeable future. You’re good.

2. THE SPECULATIVE POSITION: Your committed outflows are larger than your inflows, but enough to pay interest. You must refinance to pay the principal. You’re playing with fire, but still… you’re good.

3. THE PONZI POSITION: Your interest payments are greater than your inflows. You’re fucked.

I’m going to outline the steps below, and explain how they can be applied to what we have seen, and what we are currently seeing in the Australian housing market.


This is the first stage, when banks and borrowers are cautious. They’re usually cautious because the inherent contradictions of capitalism have once again fucked things up, the housing market is a shambles and everybody is broke. You can take your pick which economic downturn you’d like to focus on. For example, (more…)


Post #26 – My Rules For Living In A Share-House

So I know my blog posts have predominantly been about politics and economics, but sometimes, just sometimes I go a little crazy and write about something like beer or Taylor Swift… I’m that unpredictable!  Anywho, my last few posts have been pretty deep and arguably a little wordy. So I thought I’d ruffle through some of my old stuff and give you something a little more upbeat. Below represents a chapter in my life when I used to live in a share-house in a bohemian and hectic part of this wonderful city called Sydney. At any one stage I lived with about 8 other people, and our landlord owned another Federation-era carbon copy of our building right next door at #125 – with another 8-9 people residing there. So 16-18 transient people from all over the world, all roughly the same age, with all our mates coming and going – living together. To say it was a lawless mad-house is an understatement. Days were crazy and nights were crazier. So crazy in fact, this OCD-riddled control freak had to write up some house-rules for the dwelling – 123 Bedford St. I’ve posted them below – word for word. These rules were printed out and put around the house for all to see. They’re tongue-in-cheek (most of them) so I hope you’ll find them humorous, and if you’ve ever lived in a share-house I’m sure you can relate. Enjoy!


  1. WWJD (WHAT WOULD JESUS DO?) – Well, probably not live in a share house for a start. But if he did, he probably wouldn’t take other people’s stuff without their permission. Don’t believe me? It’s in a little something called The 10 Commandments’ (it was referring to livestock mostly, but can be applied to things like (more…)