My position is that rents will drop in real dollars. Our $2600/month lease ended this month, and we are looking for a better deal on rent (with this existing home, or move to another).
However, it becomes a very tricky question when we talk nominal dollar trends for rents, housing prices, and the stock market.
There are very significant MULTIPLE pressures for the US government to allow inflation to accelerate into a massive decline in the dollar. This solves our government’s runaway foreign debt problem: simply inflate your way out of debt.
One could even argue that it is inevitable our government will allow (and promote) massive dollar inflation, because our country has backed itself into a corner in terms of debt, housing crisis, coming recession, and trade imbalance; it appears the only way out is massive dollar inflation. Ron Paul believes that government (dollar inflation) conspiracy is already underway. I see this leading to a significant decline in the American standard of living.
We also have the Fed dropping rates, and directly pumping billions into the system to: 1) avoid a collapse of financial systems. 2) As stimulus avoid a recession. Then we also have trade imbalance pressures upon the dollar. And we have nations like China getting VERY TIRED of holding 1.5 trillion in a declining currency. Eventually, nations like China will start dumping dollars and dollar-denominated investments (has that already started?)
The dollar has already fallen 15% in twelve months against a basket of trade weighted currencies.
I’m suggesting that it IS possible that accelarating dollar inflation will result in housing prices starting to RISE in nominal dollars, and same for our dollar denominated stock markets.
I’m keeping a close watch on this because it is a risk factor for nominal – dollar short positions I have against US stock market indexes, including S&P 500, NASDAQ, and also the US oil and gas stock index.
If I’m right about even half of the above ramblings, gold appreciation will dramatically accelerate. It is one obvious alternative to the dollar.
