This discussion was started as a continuation from another:
Given that private debt is issued through a bank who creates both the deposit and the loan together, then by your measure net debt would be 0 (as there is private savings in the system to match all debt)?
I think that private debt relative to the size of the economy is a pretty important measure to keep an eye on. There has to be a limit at which point the burden becomes too much and it tops out... whether we are there or not is another question?!
I've seen property booms before and I think we will see them again . We bought our first PPOR at the peak of the late 80's boom which saw prices double in close to one year . There have been booms in the 60's and 70's .
I think there's skill to picking the right locations for each cycle, but it's unlikely the next 50 years will replicate the last 50 (as far as property price growth goes).
Unless property investors expect private debt to double relative to GDP (300%)?
Is that gross debt or net debt? Doesn't sound right to me also. Our public net debt to GDP is a lot lower than that. I'm surprised private debt is that high
Net of what?
Public debt is relatively low in comparison: http://2.static.australianindepende...ault/files/styles/full_width/public/Keen2.png
Net of savings. Common sense no? I may have a lot of outstanding debt, but maybe my debt is entirely offset by cash in offset account. Everything comes back down to the most basic, fundamental things.
Given that private debt is issued through a bank who creates both the deposit and the loan together, then by your measure net debt would be 0 (as there is private savings in the system to match all debt)?
I think that private debt relative to the size of the economy is a pretty important measure to keep an eye on. There has to be a limit at which point the burden becomes too much and it tops out... whether we are there or not is another question?!