How much worse can it get?

This is the market falling properly without any fiscal backup.

Realisticly this is what it should have done in the first place. But most countries spent to prop up their credit worthiness. Now most countries just dont have the money flows to backup again.

This produces an 'honest' crash. And thats actually a good thing.

It means there will be a period without money flowing ANYWHERE. No spending. Businesses will go bust .. jobs will go, and the whole economy will stagnate. Its due .. and its been due for a while.

Property will flatten out with few buyers. Drops of up to 30% would not be out of the question. But the bounceback with recovery .. will succeed the initial drop. Interest rates will drop .. as demand for goods and services dries up.

How bad? This crash is not going to be the 1987-1990 crash. Its going to be longer and deeper.

I dont see it being any longer than about four or five years. But there is really no precedent .. not even the 1929 – 1935 Depression.

"…and he huffed and puffed and blew his house in…"

People will still need to live somewhere,
People will still need to eat something &
People will still need to keep themselves warm & clothed.

As long as you've built with bricks (Excuse the pun, its not meant literally), then there is little to worry about.

In fact – "knock knock" –  is that opportunity at our front door?

enjoy…

I think the market is over-reacting to the credit downgrade in response to their ludicrous overestimation of the credibility of the 3 big ratings agencies. Remember, these are the ratings agencies largely responsible for putting AAA+ on those vastly complex derivative securities that were ultimately underpinned by high-risk, low-grade mortgages.

Great article here; http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?_r=1&src=me&ref=general

All-in-all there doesn't seem to have been any fundamental change in any of the fundamental economics in the U.S. It is still struggling, the growth is anemic to flat. And this is exactly what has been predicted all along. So I don't think it is a surprise. Their leadership is struggling to deal with the debt, no real surprise there, it is, afterall, a monumental problem with no magic bullet answer. Mix in political powerplays and it is no wonder things have gone the way they have. I am not surprised at all.

I kind of agree with Xdrew. My view is that this is the fall the market should have had without all the sovereign money being pumped in. But I don't agree that it will be deeper and longer. Recession may be approached or touched, but not drawn out over years. More of this anemic growth with a gradual decrease in volatility over the next few years.

I also agree that this is a good thing. The sooner it happens the sooner we can get on with the next era of prosperity. Survival of the fittest companies will prevail and be stronger on the other side. Do not underestimate the creativity of US businesses and their "low friction" environment for starting up and bringing new ideas and products to market. I have experienced this first hand. I work for an American company that has prospered greatly since the GFC primarily due to great culture, amazing innovation, fantastic vision and great leadership over an extended period. They do think about and approach business in a different way.

My 2c.

While the stock market is getting hammered im still making massive gains on my silver.

The world economy should have had a massive crash back during the good old "GFC"  Remember ? when Kevin handed out cheques to everyone for a G to buy a new plasma ?

Instead of letting capitalism sort out the bad from the good, Our socialist ministers intervened, (stacking the domino's even higher with more debt) which they call stimulating,  See our government says one thing and does the opposite, Stimulating would be lowering taxes, Though they call stimulating making the debt ball chained to our feet even heavier.

I like this parable

"To presume that productivity would multiply thanks to government largess is the equivalent of assuming that a thief could aid a convenience store by first stealing $20 from the store, then returning later in the day to spend it. Logic tells us that no stimulation results from money simply changing hands."

You can't have it both ways, Everybody wants the massive 20% speculative gain on gains every year, They want to use capitalism to leverage themselves and prosper like we do under the free market, But we don't want to get disciplined through losses.

The losses are far wide and will eventually hit home, Its just a matter of time until it happens, These debt borrowing's, stimulus packages and quantitative easing debacles DO NOT HELP US, they only prolong the inevitable and make the ultimate downturn harder and longer then it has to be. Why do you think the great depression lasted so long and was so painful ? it wasn't just by chance. It was caused by the same interference we have today just in different ways, Back then they tried to regulate food prices and it caused people to starve to death.

The majority of people including people in top positions of power like Ben Bernanke believe WW2 ended the depression in america though its not true, It was the deregulation caused by the government being "busy at war". If interferience in the markets worked then our economy would be fixed by now, Though obviously what has failed to fix the problem in the past is not going to suddenly work now when things are many times worse.

When people like me say that "the stock market" or the "property" market is in general overpriced we are called "DOOMS DAYERS" or "DOOM and GLOOM" pessimists, Though I believe people should be looking at the correction as a very positive thing, A way of fixing our economy.

The sooner the market can be left alone without government interference the sooner prices can change, jobs that we don't need can be lost and new investment can be made for the future which will improve conditions for everyone.

one example is property, If you work in the building industry like I do then you will obviously know how bleak things are, many builders I know who are old men now have told me that they have "NEVER" in there life seen construction this quite

7x wage earning accommodation is not affordable which is having a negative effect now on the trades which are linked to this sector, If property crashed it wouldn't be long until our industry could recover.

We need capitalism to be allowed to take its course, expunge the bad investment, purge the unnecessary jobs and start over fresh much stronger.

Though I don't think our governments will allow what needs to be done to happen, instead taking us down the very long and dark hole and letting our whole economy sink with the entire ship.

You could build 25 million kings palaces in Australia, Though it doesn't mean people are going to buy them

I have heard this excuse from the property spruikers so many times it makes me laugh. It really isn't a valid reason for anything.

Lets change your statement to something more REALISTIC so that you can invest based on true principles instead of using statements with no fixture to there variable price limits

People will still need affordable housing
People will still need to eat something (Yes thats true, Though it dosent mean there is a shortage of caviar)
People will still need to keep themselves warm & clothed (True, Though it doesn't mean everyone will buy the latest dada attire)

While there has been a housing crisis shortage for the past 50 years, What the spruikers have not told you is that the number of people per household has dramatically fallen in this same time period (this strickly goes AGAINST the so called laws of supply and demand for housing which has caused price rises)

So the truth is that while prices have skyrocketed, supply has also done the same, Which is the opposite of supply and demand

There is only a certain price people will pay for accommodation (be it rent or mortgage) there will be a cap which I think we have already hit where people realize its unaffordable and stop buying. People will board with others and you will see the number of people per dwelling increase, As is already being seen according to this article today

http://www.news.com.au/money/property/kids-who-wont-leave-home-put-squeeze-on-families/story-e6frfmd0-1226111394283

There is over 65 million unoccupied dwellings in China, massive new city's await people to live in them while the population live just outside them in not much more then a garden shed because there income cannot afford the prices the government sets.

while you are correct in saying that people require accommodation, It will not relate in people paying more then they can ultimately afford.

Wow, dollar bellow parity now, Just goes to show what investors really think of Australia in times of uncertainty

I believe that the swiss franc is the nest of safety investors will run to, Not the aussie

Check out these charts

http://aud.kurs24.com/chf/graph/?q=365

will the stock market recover long before the real estate market????????????

Debt has been growing unsustainably for a long time now – possibly as far back as the 80s. It has to correct. Doesn't matter what is done, the underlying problem has to go away for real growth to resume.

Only sustainable solution is a deleveraging the likes of which the world hasn't seen since the great depression.

That's my take anyway.

Doesn't mean there won't be oppurtunity – just means over-leveraging yourself in this environment is a little foolhardy, be it with property, shares, gold or whatever.

Oh, I totally agree with Steve's take that the RBA will lower rates – soon and fast. Have thought it for ages but have just been before the times or overzealous in my bearishness:)

Surprisingly, I fully agree with most of the stuff xdrew posts lately? They say the crash arrives when the last bear capitulates – perhaps it's when the bulls and bears agree that they are really here?

Sounds good to the ear, but in reality doesn't mean anything tangible IMO.

Safety and Liquidity are in the eye of the beholder. [Even I am not sure what I meant by that]