The housing bubble is over!

[Diego Mamani]

Why the Euro?

The peso is the currency of many countries, including the Philippines. You knew that, right? Which country were you referring to? I’m sure you also know what the euro is.

The European Union, whose currency is the euro, had a GDP of almost US$17 trillion in 2007, amounting to 31% of the world’s total. (The US GDP was only 14 trillion). The EU is the largest exporter of goods, the second largest importer, and the biggest trading partner to several countries such as the United States and China. 163 of the top 500 largest corporations measured by revenue (Fortune Global 500) have their headquarters in the EU.

Former Fed Chairman Alan Greenspan said in 2007 that it is “absolutely conceivable that the euro will replace the dollar as (world) reserve currency, or will be traded as an equally important reserve currency.” The recent weakness of the US dollar might encourage various parties to increase their reserves in euro.

Someone who uses the “Mean Reversion” name would surely understand that the dollar can’t lose value against the Euro, gold, oil, etc., while at the same time we wouldn’t experience inflation at home. You should look up “purchasing power parity” as a basic concept.

In the short term, a $3 burger may still be $3 while the Euro, gold, etc. go up in value: But such divergence is unstainable, sooner or later that burger (and cars, clothes, etc.) will cost a lot more than $3. Unless we are drinking the Fed’s Kool Aid, we’ll see that they’re trying to fix the current credit crunch mess by inflating away the value of debts.

[sdduuuude]

I like your analysis – makes you think a bit – but not your conclusion.

In essesnce, you are saying that if the dollar stays where it is with respect to gold and the euro plummets, the bubble will be back on ? I’m fairly sure that isn’t how it works.

[sdduuuude]

I like your analysis – makes you think a bit – but not your conclusion.

In essesnce, you are saying that if the dollar stays where it is with respect to gold and the euro plummets, the bubble will be back on ? I’m fairly sure that isn’t how it works.

[sdduuuude]

I like your analysis – makes you think a bit – but not your conclusion.

In essesnce, you are saying that if the dollar stays where it is with respect to gold and the euro plummets, the bubble will be back on ? I’m fairly sure that isn’t how it works.

[sdduuuude]

I like your analysis – makes you think a bit – but not your conclusion.

In essesnce, you are saying that if the dollar stays where it is with respect to gold and the euro plummets, the bubble will be back on ? I’m fairly sure that isn’t how it works.

[sdduuuude]

I like your analysis – makes you think a bit – but not your conclusion.

In essesnce, you are saying that if the dollar stays where it is with respect to gold and the euro plummets, the bubble will be back on ? I’m fairly sure that isn’t how it works.

[bsrsharma]

Your analysis, while interesting in itself, has more meaning. One way the Fed is helping to solve our severe indebtedness is through inflation. By successively shrinking the value of US $, we actually have to pay less in real value to our Creditors, both public and private. Since most of the Debtors are American and Creditors are Foreign, this is politically very attractive. (Of couse, the world has wizened up now and is repudiating US $, causing precipitous drop now!).

It has another advantange – once oil reaches $200 or $300, Gas is $6 -$9, Gold is $2000, A box of cereals is $10, A loaf of bread/doz. Eggs are $5 etc., a $500K house may start looking cheap. That should help end the housing crisis.

[bsrsharma]

Your analysis, while interesting in itself, has more meaning. One way the Fed is helping to solve our severe indebtedness is through inflation. By successively shrinking the value of US $, we actually have to pay less in real value to our Creditors, both public and private. Since most of the Debtors are American and Creditors are Foreign, this is politically very attractive. (Of couse, the world has wizened up now and is repudiating US $, causing precipitous drop now!).

It has another advantange – once oil reaches $200 or $300, Gas is $6 -$9, Gold is $2000, A box of cereals is $10, A loaf of bread/doz. Eggs are $5 etc., a $500K house may start looking cheap. That should help end the housing crisis.

[bsrsharma]

Your analysis, while interesting in itself, has more meaning. One way the Fed is helping to solve our severe indebtedness is through inflation. By successively shrinking the value of US $, we actually have to pay less in real value to our Creditors, both public and private. Since most of the Debtors are American and Creditors are Foreign, this is politically very attractive. (Of couse, the world has wizened up now and is repudiating US $, causing precipitous drop now!).

It has another advantange – once oil reaches $200 or $300, Gas is $6 -$9, Gold is $2000, A box of cereals is $10, A loaf of bread/doz. Eggs are $5 etc., a $500K house may start looking cheap. That should help end the housing crisis.

[bsrsharma]

Your analysis, while interesting in itself, has more meaning. One way the Fed is helping to solve our severe indebtedness is through inflation. By successively shrinking the value of US $, we actually have to pay less in real value to our Creditors, both public and private. Since most of the Debtors are American and Creditors are Foreign, this is politically very attractive. (Of couse, the world has wizened up now and is repudiating US $, causing precipitous drop now!).

It has another advantange – once oil reaches $200 or $300, Gas is $6 -$9, Gold is $2000, A box of cereals is $10, A loaf of bread/doz. Eggs are $5 etc., a $500K house may start looking cheap. That should help end the housing crisis.

[bsrsharma]

Your analysis, while interesting in itself, has more meaning. One way the Fed is helping to solve our severe indebtedness is through inflation. By successively shrinking the value of US $, we actually have to pay less in real value to our Creditors, both public and private. Since most of the Debtors are American and Creditors are Foreign, this is politically very attractive. (Of couse, the world has wizened up now and is repudiating US $, causing precipitous drop now!).

It has another advantange – once oil reaches $200 or $300, Gas is $6 -$9, Gold is $2000, A box of cereals is $10, A loaf of bread/doz. Eggs are $5 etc., a $500K house may start looking cheap. That should help end the housing crisis.

[cr]

Diego Mamani-

I see your point and you present an interesting case but it’s conveniently lacking the single most important element of prices: incomes.

Late August 2001 (house price $407K)
Mid March 2008 (house price $700-725K)
172% appreciation in 7 years, roughly 24%/yr.

I’d have to look for exact data, but I’m pretty confident in saying incomes didn’t go up by 172%.

[cr]

Diego Mamani-

I see your point and you present an interesting case but it’s conveniently lacking the single most important element of prices: incomes.

Late August 2001 (house price $407K)
Mid March 2008 (house price $700-725K)
172% appreciation in 7 years, roughly 24%/yr.

I’d have to look for exact data, but I’m pretty confident in saying incomes didn’t go up by 172%.

[cr]

Diego Mamani-

I see your point and you present an interesting case but it’s conveniently lacking the single most important element of prices: incomes.

Late August 2001 (house price $407K)
Mid March 2008 (house price $700-725K)
172% appreciation in 7 years, roughly 24%/yr.

I’d have to look for exact data, but I’m pretty confident in saying incomes didn’t go up by 172%.

[cr]

Diego Mamani-

I see your point and you present an interesting case but it’s conveniently lacking the single most important element of prices: incomes.

Late August 2001 (house price $407K)
Mid March 2008 (house price $700-725K)
172% appreciation in 7 years, roughly 24%/yr.

I’d have to look for exact data, but I’m pretty confident in saying incomes didn’t go up by 172%.

[Author]

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