The housing bubble is over!

[sdduuuude]

HereWeGo – yes ! That is the right question.
And what what of rents in Euros ?

[Diego Mamani]

Houses are immovable objects and they should be valued with respect to local incomes.
–You say incomes, I say gold/silver/oil/commodities. It doesn’t matter which. Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices. I’m not saying that higher nominal incomes will make us better off: inflation will more than offset nominal income gains (because of the weak dollar).

Popular but false sentiment. There has been very little money-printing since 2005.
–By ‘printing presses’ I was using a metaphor. The Fed increases the money supply by lowering the discount rate, the federal funds rate, making the discount window more attractive, or by offering to swap hundred of billions of US Treasury securities for other toxic debt, ad announced this week.

Who’s being robbed? I’m not being robbed. Most of my money is in things like FXE. There’s no monetary inflation. There’s just flight from the dollar.
–You haven’t been to a grocery store or a gas station lately. Most prices are going up at a faster rate than any time since the late 80s, the 90s, or early 2000s. Savers who have saved dollars are being robbed (again, metaphorically!) every time their dollars buy less at the supermarket, the department store, and the gas station, to mention a few places. And you still say there’s no inflation??

The US dollar is extremely overvalued. Trade deficit of 6% of GDP is proof. Sooner or later it had to devalue on its own.
–So, you agree that the dollar has even more pressure to go down, that is, to devalue. That’s what I’ve been saying all along: a weaker, and rapidly weakening dollar, will reduce the housing price/rent and price/income ratios faster than many had anticipated. House prices will still drop some more, but I think we have the end of the correction around the corner. Which is bad news to me because it’s being achieved at the expense of the dollar.

[Diego Mamani]

Houses are immovable objects and they should be valued with respect to local incomes.
–You say incomes, I say gold/silver/oil/commodities. It doesn’t matter which. Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices. I’m not saying that higher nominal incomes will make us better off: inflation will more than offset nominal income gains (because of the weak dollar).

Popular but false sentiment. There has been very little money-printing since 2005.
–By ‘printing presses’ I was using a metaphor. The Fed increases the money supply by lowering the discount rate, the federal funds rate, making the discount window more attractive, or by offering to swap hundred of billions of US Treasury securities for other toxic debt, ad announced this week.

Who’s being robbed? I’m not being robbed. Most of my money is in things like FXE. There’s no monetary inflation. There’s just flight from the dollar.
–You haven’t been to a grocery store or a gas station lately. Most prices are going up at a faster rate than any time since the late 80s, the 90s, or early 2000s. Savers who have saved dollars are being robbed (again, metaphorically!) every time their dollars buy less at the supermarket, the department store, and the gas station, to mention a few places. And you still say there’s no inflation??

The US dollar is extremely overvalued. Trade deficit of 6% of GDP is proof. Sooner or later it had to devalue on its own.
–So, you agree that the dollar has even more pressure to go down, that is, to devalue. That’s what I’ve been saying all along: a weaker, and rapidly weakening dollar, will reduce the housing price/rent and price/income ratios faster than many had anticipated. House prices will still drop some more, but I think we have the end of the correction around the corner. Which is bad news to me because it’s being achieved at the expense of the dollar.

[Diego Mamani]

Houses are immovable objects and they should be valued with respect to local incomes.
–You say incomes, I say gold/silver/oil/commodities. It doesn’t matter which. Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices. I’m not saying that higher nominal incomes will make us better off: inflation will more than offset nominal income gains (because of the weak dollar).

Popular but false sentiment. There has been very little money-printing since 2005.
–By ‘printing presses’ I was using a metaphor. The Fed increases the money supply by lowering the discount rate, the federal funds rate, making the discount window more attractive, or by offering to swap hundred of billions of US Treasury securities for other toxic debt, ad announced this week.

Who’s being robbed? I’m not being robbed. Most of my money is in things like FXE. There’s no monetary inflation. There’s just flight from the dollar.
–You haven’t been to a grocery store or a gas station lately. Most prices are going up at a faster rate than any time since the late 80s, the 90s, or early 2000s. Savers who have saved dollars are being robbed (again, metaphorically!) every time their dollars buy less at the supermarket, the department store, and the gas station, to mention a few places. And you still say there’s no inflation??

The US dollar is extremely overvalued. Trade deficit of 6% of GDP is proof. Sooner or later it had to devalue on its own.
–So, you agree that the dollar has even more pressure to go down, that is, to devalue. That’s what I’ve been saying all along: a weaker, and rapidly weakening dollar, will reduce the housing price/rent and price/income ratios faster than many had anticipated. House prices will still drop some more, but I think we have the end of the correction around the corner. Which is bad news to me because it’s being achieved at the expense of the dollar.

[Diego Mamani]

Houses are immovable objects and they should be valued with respect to local incomes.
–You say incomes, I say gold/silver/oil/commodities. It doesn’t matter which. Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices. I’m not saying that higher nominal incomes will make us better off: inflation will more than offset nominal income gains (because of the weak dollar).

Popular but false sentiment. There has been very little money-printing since 2005.
–By ‘printing presses’ I was using a metaphor. The Fed increases the money supply by lowering the discount rate, the federal funds rate, making the discount window more attractive, or by offering to swap hundred of billions of US Treasury securities for other toxic debt, ad announced this week.

Who’s being robbed? I’m not being robbed. Most of my money is in things like FXE. There’s no monetary inflation. There’s just flight from the dollar.
–You haven’t been to a grocery store or a gas station lately. Most prices are going up at a faster rate than any time since the late 80s, the 90s, or early 2000s. Savers who have saved dollars are being robbed (again, metaphorically!) every time their dollars buy less at the supermarket, the department store, and the gas station, to mention a few places. And you still say there’s no inflation??

The US dollar is extremely overvalued. Trade deficit of 6% of GDP is proof. Sooner or later it had to devalue on its own.
–So, you agree that the dollar has even more pressure to go down, that is, to devalue. That’s what I’ve been saying all along: a weaker, and rapidly weakening dollar, will reduce the housing price/rent and price/income ratios faster than many had anticipated. House prices will still drop some more, but I think we have the end of the correction around the corner. Which is bad news to me because it’s being achieved at the expense of the dollar.

[Diego Mamani]

Houses are immovable objects and they should be valued with respect to local incomes.
–You say incomes, I say gold/silver/oil/commodities. It doesn’t matter which. Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices. I’m not saying that higher nominal incomes will make us better off: inflation will more than offset nominal income gains (because of the weak dollar).

Popular but false sentiment. There has been very little money-printing since 2005.
–By ‘printing presses’ I was using a metaphor. The Fed increases the money supply by lowering the discount rate, the federal funds rate, making the discount window more attractive, or by offering to swap hundred of billions of US Treasury securities for other toxic debt, ad announced this week.

Who’s being robbed? I’m not being robbed. Most of my money is in things like FXE. There’s no monetary inflation. There’s just flight from the dollar.
–You haven’t been to a grocery store or a gas station lately. Most prices are going up at a faster rate than any time since the late 80s, the 90s, or early 2000s. Savers who have saved dollars are being robbed (again, metaphorically!) every time their dollars buy less at the supermarket, the department store, and the gas station, to mention a few places. And you still say there’s no inflation??

The US dollar is extremely overvalued. Trade deficit of 6% of GDP is proof. Sooner or later it had to devalue on its own.
–So, you agree that the dollar has even more pressure to go down, that is, to devalue. That’s what I’ve been saying all along: a weaker, and rapidly weakening dollar, will reduce the housing price/rent and price/income ratios faster than many had anticipated. House prices will still drop some more, but I think we have the end of the correction around the corner. Which is bad news to me because it’s being achieved at the expense of the dollar.

[Eugene]

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.

Why does the burger cost $3? Certainly not because of commodity prices. At todays sky-high prices, one pound of high-quality wheat flour costs around 50 cents, and you can make 10-15 hamburger buns from that flour. So, one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

Even though dollar goes down, financial capacity of burger buyers stays the same. Dollar-denominated prices of flour and beef go up (because you can sell them overseas), therefore, the part that gets squeezed is labor. You have fewer cashiers, burger makers, and truck drivers working for less money making slightly fewer slightly more expensive burgers. To compensate, farmers, aircraft manufacturers, and everyone else who’s paid in Euros becomes slightly richer. Some people quit cashier jobs and become farm-workers. A new equilibrium is reestablished where tradable goods (flour) are more expensive than before, and nontradable goods (truck driver services) are cheaper than before.

[Eugene]

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.

Why does the burger cost $3? Certainly not because of commodity prices. At todays sky-high prices, one pound of high-quality wheat flour costs around 50 cents, and you can make 10-15 hamburger buns from that flour. So, one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

Even though dollar goes down, financial capacity of burger buyers stays the same. Dollar-denominated prices of flour and beef go up (because you can sell them overseas), therefore, the part that gets squeezed is labor. You have fewer cashiers, burger makers, and truck drivers working for less money making slightly fewer slightly more expensive burgers. To compensate, farmers, aircraft manufacturers, and everyone else who’s paid in Euros becomes slightly richer. Some people quit cashier jobs and become farm-workers. A new equilibrium is reestablished where tradable goods (flour) are more expensive than before, and nontradable goods (truck driver services) are cheaper than before.

[Eugene]

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.

Why does the burger cost $3? Certainly not because of commodity prices. At todays sky-high prices, one pound of high-quality wheat flour costs around 50 cents, and you can make 10-15 hamburger buns from that flour. So, one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

Even though dollar goes down, financial capacity of burger buyers stays the same. Dollar-denominated prices of flour and beef go up (because you can sell them overseas), therefore, the part that gets squeezed is labor. You have fewer cashiers, burger makers, and truck drivers working for less money making slightly fewer slightly more expensive burgers. To compensate, farmers, aircraft manufacturers, and everyone else who’s paid in Euros becomes slightly richer. Some people quit cashier jobs and become farm-workers. A new equilibrium is reestablished where tradable goods (flour) are more expensive than before, and nontradable goods (truck driver services) are cheaper than before.

[Eugene]

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.

Why does the burger cost $3? Certainly not because of commodity prices. At todays sky-high prices, one pound of high-quality wheat flour costs around 50 cents, and you can make 10-15 hamburger buns from that flour. So, one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

Even though dollar goes down, financial capacity of burger buyers stays the same. Dollar-denominated prices of flour and beef go up (because you can sell them overseas), therefore, the part that gets squeezed is labor. You have fewer cashiers, burger makers, and truck drivers working for less money making slightly fewer slightly more expensive burgers. To compensate, farmers, aircraft manufacturers, and everyone else who’s paid in Euros becomes slightly richer. Some people quit cashier jobs and become farm-workers. A new equilibrium is reestablished where tradable goods (flour) are more expensive than before, and nontradable goods (truck driver services) are cheaper than before.

[Eugene]

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.

Why does the burger cost $3? Certainly not because of commodity prices. At todays sky-high prices, one pound of high-quality wheat flour costs around 50 cents, and you can make 10-15 hamburger buns from that flour. So, one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

Even though dollar goes down, financial capacity of burger buyers stays the same. Dollar-denominated prices of flour and beef go up (because you can sell them overseas), therefore, the part that gets squeezed is labor. You have fewer cashiers, burger makers, and truck drivers working for less money making slightly fewer slightly more expensive burgers. To compensate, farmers, aircraft manufacturers, and everyone else who’s paid in Euros becomes slightly richer. Some people quit cashier jobs and become farm-workers. A new equilibrium is reestablished where tradable goods (flour) are more expensive than before, and nontradable goods (truck driver services) are cheaper than before.

[Eugene]

Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices.

Average nominal incomes can’t go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you’re paid with has to come from somewhere. If the amount of money in the economy is constant, some consumer prices may go up, but others will have to come down to compensate.

And why would nominal incomes go up in todays environment? It only makes sense to raise someone’s wages if there is competition for his labor/skills. In some skilled fields like programming, you might have competition because outsourcing and offshoring become more expensive. (On the other hand, global demand for programmers might fall!) In a wider picture, we have rising unemployment in the country, and dollar must fall a lot further before it starts to make sense to hire unskilled and poorly educated American Joe Sixpacks instead of unskilled and uneducated Indonesians to make shoes and toys.

[Eugene]

Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices.

Average nominal incomes can’t go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you’re paid with has to come from somewhere. If the amount of money in the economy is constant, some consumer prices may go up, but others will have to come down to compensate.

And why would nominal incomes go up in todays environment? It only makes sense to raise someone’s wages if there is competition for his labor/skills. In some skilled fields like programming, you might have competition because outsourcing and offshoring become more expensive. (On the other hand, global demand for programmers might fall!) In a wider picture, we have rising unemployment in the country, and dollar must fall a lot further before it starts to make sense to hire unskilled and poorly educated American Joe Sixpacks instead of unskilled and uneducated Indonesians to make shoes and toys.

[Eugene]

Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices.

Average nominal incomes can’t go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you’re paid with has to come from somewhere. If the amount of money in the economy is constant, some consumer prices may go up, but others will have to come down to compensate.

And why would nominal incomes go up in todays environment? It only makes sense to raise someone’s wages if there is competition for his labor/skills. In some skilled fields like programming, you might have competition because outsourcing and offshoring become more expensive. (On the other hand, global demand for programmers might fall!) In a wider picture, we have rising unemployment in the country, and dollar must fall a lot further before it starts to make sense to hire unskilled and poorly educated American Joe Sixpacks instead of unskilled and uneducated Indonesians to make shoes and toys.

[Eugene]

Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices.

Average nominal incomes can’t go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you’re paid with has to come from somewhere. If the amount of money in the economy is constant, some consumer prices may go up, but others will have to come down to compensate.

And why would nominal incomes go up in todays environment? It only makes sense to raise someone’s wages if there is competition for his labor/skills. In some skilled fields like programming, you might have competition because outsourcing and offshoring become more expensive. (On the other hand, global demand for programmers might fall!) In a wider picture, we have rising unemployment in the country, and dollar must fall a lot further before it starts to make sense to hire unskilled and poorly educated American Joe Sixpacks instead of unskilled and uneducated Indonesians to make shoes and toys.

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