You’ve got to hand it to them. They are good. Our best-in-class bubble managers have just delivered the world’s first housing bust boom!
I know, I know yesterday’s GDP is not going to last (known around MB as the “Botox Boom”). Indeed, it is already over. But for bubble management posterity, the gumption, the desperation, the wild inventiveness and maniacal values must be acknowledged. The resultant stillborn boom was a misshapen thing – like a lipstick-smiling and wrinkle-free botoxed pig – that shat upon many more people than it fed. But boom it was and the managers deserve their comeuppance. Growth was running at a 4.1% rate over the first six months of the year.
There is no mystery to how it was achieved. They simply stuffed in people until everything broke requiring investment to repair it. A giant broken window fallacy, neh, broken city fallacy, that throws money at a problem even as it stands still:
- building houses, and
- building infrastructure.
Add a little ruthless financial engineering with a lot of the public investment done off balance sheet by selling the assets to the private sector so that they can apply private taxes to it and voila Botox Boom!
Alas for our illustrious bubble managers it is all fake growth built on three cosmetic tricks. First, it is built around the deepening acne of household debt which is now curtailed. Second, the plumped public investment only adds to growth while it is increasing. The moment it plateaus growth stops. There is a little more ahead but the big ramp up is already behind us. Third, the consumer has been financially repressed into massive dissaving despite real wages falling thanks to the supply shock that comes with the people stuffing:
In short, we’ve all gone backwards so that pollies can turn their botoxed faces to the camera with seamless, porcine grins.
It did not come without costs. Falling living standards can’t be hidden and that cost Malcolm Turnbull his job as the polity splinters into angry breakaway movements threatening the multicultural consensus. Youth was trashed by it, with underemployment rife and house prices pushed beyond all hope of ownership. Working classes were mercilessly exploited as cheap foreign labour flooded in.
These are also now the basis upon which the Botox Boom falls away. It was always only makeup ladled over broken economic structure:
- house prices and wages fall together choking off consumption;
- housing construction falls;
- public investment plateaus.
Sooner or later the people stuffing will also be forced to stop in a political boil over.
It was a short time not a good time and it is over.
