[quote=jstoesz][quote=AN][quote=jstoesz]read up on how Argentina’s home prices fared through their last serious bout with hyper-inflation.
Things are far from a sure bet.[/quote]
Thanks for pointing me to Argentina’s experience w/ hyper-inflation. According to Wikipedia:
[quote=wiki]Argentina
Argentina went through steady inflation from 1975 to 1991. At the beginning of 1975, the highest denomination was 1,000 pesos. In late 1976, the highest denomination was 5,000 pesos. In early 1979, the highest denomination was 10,000 pesos. By the end of 1981, the highest denomination was 1,000,000 pesos. In the 1983 currency reform, 1 Peso argentino was exchanged for 10,000 pesos. In the 1985 currency reform, 1 austral was exchanged for 1,000 pesos argentinos. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983 pesos.[/quote]
Even if housing price dip nominally, if the currency weaken at a much faster rate due to inflation, then you still come out ahead. Which, I think is what lifeizfunhuh is trying to say. A 1000 peso in 1975 is equivalent to 1M peso in 1983. If we see this kind of inflation, everything that have fixed rate interest will look dirt cheap in the future. Even if we don’t see hyper inflation like Argentina, if we see inflation like we experienced in the US in the 70s, it will still be dirt cheap to pay back with much weaker currency.[/quote]
That was exactly the article I was referring to. I saw it on the Gonzolo Lira blog
My point was that it is not so simple. Lifeisfunhuh, was making the point that A leads to B. Except, it is far from that simple. There are many times when inflation has crushed peoples buying power, and ability to borrow. They now have less to spend on housing and interest so that they can keep eating.
This is economics we are talking here. If you are predicting the future, you are either stupid, delusional, or a combination of the two.
.[/quote]
I respectfully disagree on the “predicting the future” remark. I agree that in free markets predicting the future is folly. However, markets for almost all things in finance are no longer free-flowing. To the contrary, it is a rigged casino. Case in point: nearly all major bank trading desks have near perfect trading records.
As someone famously said “I don’t care IF the markets are rigged, as long as I know HOW they are rigged so I can play along.” The House Rules of monetary policy REQUIRE significant inflation. It is both the only mathematical outcome, and also the only historical one as well.
The question is not IF, but when, and how much. While I’m not stupid or delusional enough to think I can predict the future of a particular stock, bond, or other asset class, I CAN be certain that the value of the cash I keep in the bank is, and will continue deteriorating at an unacceptable rate. From this premise I can make appropriate decisions on what assets to purchase with that cash. Whether those assets go “up” or “down” is not the issue, and is not something I am trying to predict.
