Housing costs less than half compared to 2006

[barnaby33]

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.

Josh

[markmax33]

[quote=barnaby33]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.

Josh[/quote]

Amen it is a sign of the Federal Reserve price fixing the market and blowing up another bubble, the debt bubble and the printing press.

[markmax33]

[quote=AN][quote=jstoesz]I doubt I disagree with you AN, at least I am not trying too. Fun just said something that struck me as overly optomistic. Now might be a good time, but I sincerely doubt it’s a sure thing.

My statement was meant to convey self doubt. You can think something and be right about it, but still get clobbered. Timing…[/quote]
I agree with you. I was only stating what would happen if we get run away inflation. I’m not saying that we will see run away inflation. Which is why I agree with you that it’s not a sure thing that it’s a good time to buy if one based their buying decision on hope for inflation.[/quote]

EVERY CURRENCY in history that has printed endlessly has resulted in massive inflation and destruction of the currency. Why are we different? We are the biggest ponzi scheme ever…

[markmax33]

[quote=AN][quote=jstoesz]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.

As a parting contrarian statement…markets can stay irrational longer than you can stay solvent.[/quote]
I agree it’s not so simple. There are many unforeseen scenarios. I agree that inflation will crush people’s buying power and ability to borrow. However, if you already bought/already borrowed with a fixed rate, ability to borrow won’t affect you. However, the devaluation of your currency will affect positively. I assume that inflation won’t get to a point where no one can even buy food to eat without bringing a bag of cash to the market. However, glass half full would say hell with it, I’ll be hungry anyways, I can skip one meal and use my bag of cash that would buy me a loaf of bread and pay off my house. You get where I’m going with this?

I’m not predicting the future. I’m just stating what I understand about inflation or hyper inflation. Feel free to correct me if I make any mistake with my assumption. How does the statement “markets can stay irrational longer than you can stay solvent.” apply to inflation and devaluation of the currency debate?[/quote]

You all seem to forget the fact that when inflation hits the GOV is broke because it can’t print anymore. They start raising property taxes and can take your home away from you if you can’t pay them. Don’t think it won’t happen….again.

[briansd1]

[quote=markmax33] Why are we different? We are the biggest ponzi scheme ever…[/quote]

Have you heard of American exceptionalism?

[lifeizfunhuh]

[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.

[an]

[quote=markmax33]You all seem to forget the fact that when inflation hits the GOV is broke because it can’t print anymore. They start raising property taxes and can take your home away from you if you can’t pay them. Don’t think it won’t happen….again.[/quote]
Why can’t they print anymore? Would they run out of ink and don’t have the money to buy more? They can already raise property taxes if we voted for it. Do you suspect that we’ll have marshall law and they can dictate how much we pay? Can’t they already take your home away from you if you can’t pay the property tax?

[jstoesz]

[quote=lifeizfunhuh][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.[/quote]

Seems to me commodities might be more inline with your thinking if you are hedging against inflation…its more liquid.

[jstoesz]

deleted

[markmax33]

[quote=AN][quote=markmax33]You all seem to forget the fact that when inflation hits the GOV is broke because it can’t print anymore. They start raising property taxes and can take your home away from you if you can’t pay them. Don’t think it won’t happen….again.[/quote]
Why can’t they print anymore? Would they run out of ink and don’t have the money to buy more? They can already raise property taxes if we voted for it. Do you suspect that we’ll have marshall law and they can dictate how much we pay? Can’t they already take your home away from you if you can’t pay the property tax?[/quote]

You can’t print anymore when you debase the currency and it becomes worthless. Austerity measures from the GOV can raise property taxes as has happened multiple times throughout history when GOVs get desperate.

[an]

[quote=markmax33]You can’t print anymore when you debase the currency and it becomes worthless. Austerity measures from the GOV can raise property taxes as has happened multiple times throughout history when GOVs get desperate.[/quote]
The Argentina Peso was pretty worthless and they seem to have no problem making it even more worthless. When did the government raised property taxes due to austerity?

[Author]

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