Australia’s housing market

I’ve written before about why I think housing price growth is unsustainable. Michael Janda has written an excellent piece on The Drum, which sets it out well:

For those who deny Australia has a credit-fuelled housing bubble by pointing to the fact that people have been warning of a crash for years and it hasn’t come, the lesson of US fraudster Bernie Madoff is illustrative.

Mr Madoff admitted to running his investment firm as a Ponzi from 1991, and authorities suspect it may have been much longer. He wasn’t found out by US authorities until December 2008.

That’s not because there were no tip offs – financial analyst Harry Markopolos told the Securities and Exchange Commission repeatedly for almost a decade that Madoff was running a fraud.

But it took the aftermath of the global financial crisis to finally bring Madoff’s Ponzi down.

The next international financial crisis risks doing the same to Australia’s housing market, whether negative gearing stays or not.

If a government curtails negative gearing and capital gains tax discounts and deflates the Australian housing bubble before this happens, we could end up with the recession we had to have instead of the depression we could have avoided.

The Hot Take

From Leon Wieseltier at The Atlantic:

A take is an opinion that has no aspiration to a belief, an impression that never hardens into a position. Its lightness is its appeal. It is provisional, evanescent, a move in a game, an accredited shallowness, a bulwark against a pause in the conversation. A take is expected not to be true but to be interesting, and even when it is interesting it makes no troublesome claim upon anybody’s attention. Another take will quickly follow, and the silence that is a mark of perplexity, of research and reflection, will be mercifully kept at bay. A take asks for no affiliation. It requires no commitment.

There’s a history of the hot take over at the New Republic.

Ip Man

If you’re one of the few people watching Ip Man for the plot you may be disappointed, but it has some beautifully choreographed fight scenes.

Some of the pieces I found interesting, apart from the action scenes, were:

  • The traitorous translator, who juggles intent between Japanese and Chinese speakers, converting what Chinese prisoners (including Ip Man) into something more palatable for the Japanese occupiers.
  • There’s an interesting storyline that follows a factory-owner friend of Ip Man’s. It was interesting to see how the movie treated the factory owner – who else was going to give the workers jobs? I don’t know the ins and outs of how factory owners in general (or specifically in Foshan) fared during the Japanese occupation, but I imagine it was complex.

If you’ve seen Jet Li fight Nathan Jones in Fearless, this is familiar territory for you as a martial arts hero resurrects national pride with his fists, before unfair attacks from outside the ring bring him low. It still makes for decent TV.

The Big Short

I’ve been meaning to see The Big Short for months now. It’s a difficult story, told brilliantly, and it was excellent to watch.

Now granted, I find finance and economic policy fascinating. If you don’t think derivatives are interesting, your mileage may vary. What underlies this story, though, is a very simple and powerful narrative. It’s a group of individuals, waging a campaign against an entire system that they believe is wrong.

I think Adam McKay does it really well. I wouldn’t have guessed that the director whose filmography includes Step Brothers and Anchorman 2 would have created one of the better narratives about the financial crisis, but I think he has.

Adam McKay does well keeping the finance simple. He intersperses the narrative with regular narration by all of the characters, and cameos where international stars (and Richard Thaler) explain complex financial structures for a general audience.

But The Big Short works because at its heart, there’s a very simple narrative. A group of people believe that an entire financial system an regulatory structure is wrong. They set out to prove that. Everything else, really – their financial struggles, and personal challenges – hangs off this conflict of individual vs. social structure. It’s a strong narrative to use.

It pays off in one of the final scenes of the movies [spoiler alert: the housing market plummets and a major bank collapses]. One of the major banks is folding, staff streaming out the door – it’s chaos on the streets. Two protagonists, who earlier have been denied entry to the market by one of the big banks, and have since bet everything on the housing market collapse, are waiting outside. But they want to see what it’s like inside – inside the hallowed halls. They borrow a pass from a disgruntled employee, and fake their way in past the hordes streaming out, carrying their boxes with them. Inside, it’s empty – a former hive of activity is silent, one or two final employees sitting forlornly at their desks. It’s an Ozymandias moment, and I wish I could find a clip of it. They stand there, and talk about how different it is from what they expected. This, then, is the payoff for the narrative structure – for two outsiders to stand on the inside and realise that it’s all hollow. The emperor is naked. The wizard of Oz is just a little man pulling strings.

I’d say this is one of the best movies about the financial crisis I’ve seen, because of that approach of individual vs social structure. There have been a few that have tried to wrestle with what exactly the story of the financial crisis is. Margin Call told a story about a greedy bank board that was careless and wrong; it felt more whistle-blower vs. greedy corporate structure, than individual vs. monolithic system. 99 homes I haven’t seen yet; it seems similar in some ways (an individual vs. a system), but it hones in on someone in a very different social context.

I think capturing the struggle between an individual and a social system, or the seismic shift that happens when there’s structural change in a society, is incredibly difficult. Les Miserables occurred to me as a strong literary example. It’s a story of individuals, but it’s also a story about a massive social change. I think in many ways that’s harder to do in the constrained format of a two hour movie, than in a sprawling novel.

McKay does it well. The Big Short is a well told story, worth seeing, about a major crisis. It critiques major flaws in a system that hasn’t provided justice. But as this excellent pre-release piece at Vulture shows, there’s a sting in the tail – the film has electronics product placement, and took a placement deal from a multinational corporation to explicitly mention one of their casinos.