Most people make the assessment of whether the market is going up or down, based on the price volatility of the underlying assets. In case of the housing market, if house prices are going up, the general assumption is that the housing market is going up. The stupidity behind this assumption is beyond words to explain so I’ll just call it for what it is – its dumb.
Market Watch
Capitalism is not a self-organising structure. It needs cooperation between governments/central banks and market makers to keep things going. The problem, however is that central banks, that are meant to act as referees are becoming active players on the field with their exacerbating QE policies and forward guidance programs all in the name of “printing more FIAT currency”.
Capitalism by its very definition has a massive internal issue which no one can escape from for too long because that issue is built into the SYSTEM. It is this issue that causes market cycles. The caterpillar of boom and bust – its part of its nature. Capitalism was and always is a short term fix to a long term problem.
The first and most important thing to understand is that when a central bank (e.g. the Reserve Bank of Australia or The Reserve Bank of New Zealand) reduces interest rates, its a strong signal that the central bank is looking to stimulate the economy.
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