

Australian Economist who lost bet will walk from Parliament to Mount Kosciousko - samh
http://www.keenwalk.com.au/

======
10ren
I thought house prices in Australia would fall... of course politicians would
try to try to prop them up, because falling prices would be fatally unpopular
for them. But you can't keep funding housing prices forever...

...unless you have a source of money. Australia aka 'the lucky country' has
tremendous mining resources. Now these, being commodities (e.g. copper is the
same wherever you buy it), are typically cyclical in price, over a decade or
so. But a strange thing has happened: Australia is currently one of the few
sources of many metals in the volumes needed (by China, predominately):
Australia has a 'monopoly' on these 'commodities'.

Thus, the sustained metal prices are propping up the housing market.

I don't know how sustainable this 'monopoly' is - whether e.g. higher prices
will justify other countries opening up mines, or accessible reserves will be
discovered elsewhere etc. I doubt it can continue indefinitely.

 _disclaimer: this is based on information gathered over years, and might be
out of date in some respects._

~~~
sailormoon
Even though Australia has the windfall mining receipts, it still runs a
current account deficit and has basically forever. And although the mining
take is large, it's dwarfed by the larger economy. I don't think it is that
which is inflating house prices, with the possible exception of some mining
towns, where increased wages chase finite supply. But that's not the case on
the east coast, for example.

~~~
10ren
I didn't mean that mining is causing it, but facilitating it. The mining
income feeds the rest of the economy - without it, the larger economy would
shrink: when rents increase, people are willing to pay it because they are
employed.

------
jdietrich
I think economics needs a lot more of this. Economists are rational people, by
and large, but a lot of them have very perverse incentives. I think we could
see a minor revolution in economic forecasting if we gave stronger incentives
for accuracy and vice versa.

~~~
samh
Absolutely. Every time I see the senior economist from the Westpac bank being
interviewed on the television I think :

1 - Why do they keep interviewing him about the future but never talk about
how accurate he was in the past.

2 - He is deliberately couching everything he says in 'weasel words' so as to
never risk being wrong.

But he wears a suit, has a position of authority and looks like he should know
what he is talking about, that seems to be all they want.

Much of the world is a confidence trick.

~~~
mos1
_2 - He is deliberately couching everything he says in 'weasel words' so as to
never risk being wrong._

This is often because he has to grossly simplify what his actual research has
said in order for it to be consumable by a mass audience.

The papers may spell out certain prerequisites and gotchas quite explicitly,
but in a TV interview, that turns into a vague-sounding "it depends".

 _1 - Why do they keep interviewing him about the future but never talk about
how accurate he was in the past._

I've often wished that people who made predictions for a living were forced to
assign probabilities to their statements, and give some clear definition, so
we could keep score.

------
samh
Check out his Economics blog at : <http://www.debtdeflation.com/blogs/>

The most interesting thing is that he diagnoses the problems in a very similar
way to Peter Schiff, but comes up with almost opposite conclusions.

------
ahi
He's using the walk as an opportunity to raise money for Swags for the
Homeless, a bit of very cool bed/backpack engineering.
<http://www.keenwalk.com.au/homelessness/>

------
fnid2
224.7 KM
[http://www.bing.com/maps/default.aspx?q=parliament+house+aus...](http://www.bing.com/maps/default.aspx?q=parliament+house+australia&mkt=en-
CA&FORM=BYFD#JmNwPS0zNS45MjYzNTU1fjE0OC44NTE0NTQmbHZsPTgmc3R5PXImcnRwPXBvcy4tMzYuNDU2NDMyMDQ0NTA2MDdfMTQ4LjI2MTQ0NDE5NjEwNV9Nb3VudCUyMEtvc2NpdXNrbyUyQyUyMEF1c3RyYWxpYV9fX2VffnBvcy4tMzUuMzA4MjA3ODY5NTI5NzI0XzE0OS4xMjQ2NTIxNDcyOTMxX1BhcmxpYW1lbnQlMjBIb3VzZSUyQyUyMEF1c3RyYWxpYV9fX2VfJnJ0b3A9MH4wfjB+)

That's a long walk for losing a bet.

~~~
bigiain
He _is_ taking 8 days to do it, so he's only got to walk ~30km (just under 20
miles) a day.

And although it's up Australia's highest mountain, we don't have "mountains"
as most people understand them, Mt Kosciousko is just a medium sized hill
piled on top of a medium sized plain. There's barely 1600m (~5000' or ~1 mile)
of vertical distance - Canberra's at 606m, Mt Kosciousko is only 2228m tall.

Iain

~~~
bootload
_"... He _is_ taking 8 days to do it, so he's only got to walk ~30km (just
under 20 miles) a day. ..."_

Hmm 20 miles a day for 8 days in hilly terrain in April is not to be
underestimated. Altitude is one problem. The inland 606m is cold, 2228 is
Alpine. The upper Kosciouscko areas is well known for snow to fall, melt then
re-melt. I remember going to Kosciouscko as a kid in shorts :) First time I'd
been to the snow ~
[http://climbing.about.com/od/mountainclimbing/a/KosciuszkoFa...](http://climbing.about.com/od/mountainclimbing/a/KosciuszkoFacts.htm)

And one other thing... _"... in a nutshell I will be running about 15km every
morning, and walking about the same distance every afternoon starting at about
2pm ..."_ ~ [http://www.debtdeflation.com/blogs/2010/02/15/launching-
www-...](http://www.debtdeflation.com/blogs/2010/02/15/launching-www-keenwalk-
com-au/)

------
philk
There's probably a good chance that house prices will continue to increase,
simply because whoever is in government can't afford the the economy to tank
in the short term.

I imagine these subsidies and handouts will continue until the government
lacks the ability to positively influence house prices any further, at which
point we'll have a much bigger crash.

~~~
samh
This is Peter Schiff's prediction.

The financial crisis becomes a currency crisis when the politicians keep
trying to pump up a false boom by printing money until the rest of the world
wakes up to the loss of value in the US dollar leading to massive inflation.

~~~
philk
I'd say the differences between the two are quite slender, Peter Schiff is
merely less optimistic[1] about what will happen politically.

[1] Being less optimistic about what will happen politically is probably a
very smart thing. Politicians are not incented on the long term performance of
their countries.

------
sailormoon
So if someone who was considering buying a house in Sydney (well, an
apartment) in the next year or so - because it seems prices just go up and up
and up and up and they feel like it will just be completely unaffordable if
they don't lock something in soon - what's the bottom line? Should they not
buy until after this correction? Any informed HNers want to tell this
hypothetical person what to do, since they're only just beginning to seriously
start looking into it? ;)

~~~
philk
As a general rule, buying something because prices just go up and up and up is
a good way to get thoroughly shafted.

At the very least consider the following:

a) What is your rent currently compared to your mortgage repayments? If you're
going to be paying more, just rent and invest the difference in something
else.

b) Do you have ambitions of quitting your job and starting a company? If so,
having a large mortgage is only going to hinder that goal (it's far easier to
make the plunge when you don't have to worry about servicing a large debt, and
it's much less painful to downsize between apartments when you're leasing.)

c) Consider whether you're going to want to do the place up, which can be a
huge black hole as far as money is concerned.

d) Finally, if you're living with a partner, consider whether you're willing
to have the added financial entanglements that owning a house together will
entail.

(I personally rule house ownership out for reasons a), b) and d))

~~~
sailormoon
Thanks for the reply. Some very good points.

Rent is quite a bit less than mortgage payments would be, but at least with
mortgage payments you're paying off _your_ loan, not someone else's! I'm not
too worried about (b) because I'd be trying to start something in my spare
time, then only quitting the day job if it was actually paying enough for me
to do so. Part c - well, I'd be looking for a fairly new place .. and as for
(d), it's much too late for that ..

I think that what I'm taking from this article is that I have to identify a
lot of "unknown unknowns". I admit that I was naively assuming housing prices
around here would just go up forever; this article raises the question that
they might not and I need to sit down, learn about this stuff and make an
informed decision...

~~~
blahedo
On the topic of "paying off _your_ loan": be a little careful with that,
because for the first several years of a mortgage (at least as usually
structured in the US, but I think this is typical elsewhere too) you're not
paying off the principal by very much; and if you rent rather than buy, you
are not responsible for building upkeep and the little surprises that an owned
home always seems to throw at you at inconvenient times.

