Falling house prices are deflationary symptoms. Rising food prices are inflationary symptoms. I keep thinking back to a quote I made on Ben’s blog several years ago. We’ll have inflation in things you need and deflation in things you want. Mostly because we’ll have currency inflation, but global wage arbitrage will ensure that wages mostly don’t rise.
Its that which I’m seeing. Food and basics are increasing in price quickly while house prices and electronics get cheaper. That is until we enter a new phase.
People banging on the strong inflation drum still haven’t been able to come full circle and say, yep we’ve got inflation but its not going into wages. So where is a housing recovery going to come from? 4% mortgages are only a good idea if prices are at a floor. The more my food costs the less I’m interested in a stucco box full of liabilities no matter how inferior my culture makes me out to be. As a matter of fact 4% mortgages are an explicit sign that our economy and markets are not recovering.
