House prices – with respect to both levels and changes – differ widely across OECD countries. As a simple measure of relative rich or cheapness, the OECD calculates if the price-to-rent ratio (a measure of the profitability of owning a house) and the price-to-income ratio (a measure of affordability) are above their long-term averages, house prices are said to be overvalued, and vice-versa. There are clearly some nations that are extremely over-valued and others that are cheap but as SocGen’s Albert Edwards notes, it is the UK that stands out as authorities have gone out of their way to prop up house prices - still extremely over-valued (20-30%) – despite being at the epicenter of the global credit bust. Summing up the central bankers anthem, Edwards exclaims: “what makes me genuinely really angry is that burdening our children with more debt to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing.”
Please share this article
from KingWorldNews:Please share this article
I’ve been wrestling with a moral question. Would it have been better
to allow the bear market of 2008-09 to continue down to its ultimate and
natural conclusion — or would it have been preferable to “step in” (as
the Bernanke Fed did) and attempt to halt the bear market in its tracks?
Of course, we know that Ben Bernanke chose the latter course, which
meant attempting to halt the bear market.
Personally, I’ve voted against the Bernanke way. The reason is that I
never thought it was possible to halt and then reverse the primary
trend of the stock market or the economy — any more than I think we can
halt the dawn and thus hold back the night.
Richard Russell continues @ KingWorldNews.com