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Toto deVeer

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Posts posted by Toto deVeer

  1. Looks like he's influencing the "chattering classes" now too :blink:

    "....With no improvement likely in Mr Brown’s dismal poll figures, Labour loyalists will have to start taking seriously my argument, now gaining attention among the chattering classes, that the 2010 election may not merely mark another rhythmic swing from left to right in Britain’s political pendulum.

    Instead it may set off a once-in-a-century upheaval in the structure of British politics, with the Liberal Democrats displacing Labour as the dominant part of the Left in a neat reversal of the process that began almost 100 years ago with the defeat of David Lloyd George".......

    Ha! More like left to left. There is no right in British politics, and there is no right in US politics either. In both countries, you couldn't hardly slip a piece of paper between the policies of the parties. They all work to increase the power of the state.

    Right means no state interference, left means complete state domination. The Libertarians are the most right wing party in politics today, but they never get a look in.

    This is why the politicians are making such dire mistakes in the USA; the backbone of the US are very right wing in that they are strong individualists, bordering upon anarchists, and that is how the US works. This is going to lead to great conflict. Apparently bullets are selling so fast over there that there just is not enough stock. But nonetheless there are also a number of private citizen groups who probably can make their own ammunition in large quantities, if necessary.

    Kaletsky is all about mood music, not specifics, IMO.

  2. This is the whole point and purpose of the European superstate; encourage regional representation in Brussels outside the bounds of member nations, so that member governments can be weakened and more power can be placed in Brussels.

    Czech Republic/Slovakia, the old Yugoslavia, the UK (Wales and Scotland have offices in Brussels), etc, etc. There has been talk of Italy fragmenting and tensions have developed in Belgium.

  3. He's obviously been reading the DrBubb Diary on GEI. Right?

    Actually, I think that the UK Property rally may go on a few more weeks or months,

    since the Turns in property are rarely immediate, and Builder stocks normally turn down first

    But I believe that the Dollar Turned up yesterday, and that stocks, property, and commodties,

    will trend lower for some weeks or months.

    I will continue to watch BDEV as a bellwether for UK property, and expect some sort of UK Property

    low in 2011-13.

    /DX took a moonshot today, moving from just above 76 to 77; oil (/QM) has collapsed from 72 to 66; Sterling next destination is 1.6, gold (/GC) back under $1000.

    A week ago when asked on another forum; I advised dumping gold and buying dollars. Dollar is finally getting legs now.

  4. Everybody's been on edge since June for a correction in the markets.

    Historically these bear rallies go on a lot longer that expected. The March S&P 666 level is going to be retested.

    However, experience says that it will take 9 to 12 months to begin this process. Sometime between now and April.

    This is what I've been predicting. Waiting for something to trigger it.

    The government stimulus programs have fallen right into this trap. Already a very low future consumption level, the friggin' idiots moved consumption forward with housing and auto stimulus.

    This is a disastrous thing to do. Now the upcoming consumption stats are going to be horrible. I mean horrible.

    There will be nowhere to hide. When these corrections occur, housing is going down another leg.

    Could be what is going to trigger it is the political mood in the US. It's gotten real bad over there. They've started murdering Feds. It's pitchfork time. The Government does not want to push this any further. This means that it is going to be very, very difficult to push through any more spending. When the realization occurs that the US spending is exhausted, this could pull the trigger.

    Right now they've been trying to raise the borrowing ceiling, and so far the answer has been NO! They will run out of stimulus in about a week if this happens. It will be interesting to watch this develop.

    Add to that an election in Germany in about a week, and an election in the UK soon (with rumours that Brown could resign), and complete change of government in Japan (the first in 54 years), and China just today slapping more tariffs on US imports, well there is a lot of uncertainty out there. And then there is the midterm Congressional elections next year, that will almost certainly change the balance of the House and Senate.

  5. Well, you see, consumption and borrowing had reached a very very low level.

    So the government solution is stimulus....consumers get: $8000 to buy homes and $4000 to buy cars. Yay!

    But, hold on, this is just moving forward consumption from an already low future level, at the cost of taxpayer funds; $43,000 for each $8000 stimulus, and $4000 for....Toyotas....

    And the stimulus is extended to....Puerto Rico, Guam, the Virgin Islands....

    Hmmmm....

    That brilliant plan worked well, didn't it!

  6. Gold is not reacting to inflation or hyperinflation, but rather to credit stress.

    I'm watching a number of indicatiors, /GC, /DX, /QM, among others.

    /DX has hit a Maginot Line at 76. We shall see if it holds. /GC is very very stable at the moment...as if the market is in a holding pattern. This scares me more than volatility, which is the pattern that gold normally follows. There is no break out in any direction, and I think that a 50 pt move would be needed to indicate any serious action there. And oil hit the skids during the last 48 hours, but the robots haven't reacted. Very strange.

    The market is just waiting at the moment, looking for a direction, and there is great uncertainty there.

  7. The truth is, and most people don't realize this, is that property is not wealth, it is debt.

    It only creates the illusion of wealth if you can get someone else to pay more for it than you did.

    The banks are the parties who gain wealth from property. The is ESPECIALLY TRUE IN THE UK!

    In the US the national 'wealth' (which has dropped from $52 trillion to $40 trillion since 2006) is largely based upon housing. However, this is another outright economic lie. That is, in order to realize this 'wealth' home owners would have to sell their properties. But they still need somewhere to live. So if they all downsize, there would not be enough houses to exchange, and if there were enough houses, there would not be enough buyers for their larger properties. Therefore this is not national wealth, it is simply an illusion.

    I have read that there are some home builders in America (D R Horton/Texas) who are going gangbusters at the moment, building small, cheap houses. I have to wonder if some of the demand for these is coming from home owners who are deeply in negative equity in larger homes, downsizing to reduce their outgoings and debt and then walking away from the ne property, letting the bank absorb the loss. After all, most of these people only paid 5% or less down.

    Although the housing 'industry' would say that this is an 'immoral' thing to do; people in the US are realizing now that it is nothing to do with morality, it is purely a financial decision. This, along with some recent court decisions, is going to create havoc in the banking system there. I suspect, in the end, that many people will simply stop paying their mortgages and claim the property in full, because the banks have not retained the original contract documents. There are suspicions that the banks are deliberately destroying these documents because there is fraud in them, and the courts are not allowing cases to be heard unless the banks produce the documents.

    Ha Ha.

  8. Keep watching. The Bank of England's policies of chasing house prices are about to get the UK's credit rating removed. This is the last gasp of a desperate policy measure.

    ...

    Keep watching - the final act is coming soon when QE party stops and/or the UK gets a downgrade.

    Yes, this will be the ultimate destination; but the timing is uncertain. The fools don't realize that the solution is not more debt, but instead is more income. The only way to solve this problem is to roll back government, reduce taxes. But instead you will see precisely the opposite action taken.

    I still contend, however, that house prices historically perform better under Labour than the Tories. Perhaps this is because the Tories tend to get called in after Labour ****'s everything up, but nonetheless it portends that 2010 and beyond may be difficult for housing.

  9. From P11 of Augusts Inflation Report.

    "One channel through which asset purchases by the Bank

    should boost nominal spending is by pushing up asset prices

    and lowering yields.(1) That boosts wealth and reduces the cost

    of borrowing for households and companies, both of which

    should increase their spending"

    Madness. This immoral policy only serves to rob OAPs of their security and turn the nation into lottery junkies. It is not going to have any lasting benefit for housing; quite the reverse.

  10. zero, in my opinion.

    The only debts that the UK has are repayable in pounds sterling, and those can be manufactured at will by the bank of England.

    The reason Argentina and the US (gold) defaulted on their debts is that in both cases the debts were denominated in somthing they did not have the ability to manufacture - i.e. foreign currency in the case of Argentina, and Gold in the case of the US.

    This in fact is not correct. The UK has assumed the debts of Northern Rock, Lloyds, HBOS and RBS (as well as some others). These debts are largely foreign currency, and are in excess of 3 trillion USD. Keep in mind that this does not include derivatives exposure.

  11. didnt the US go back on to the Gold Standard (sort of) in 1873

    I'm not 100% sure as to the type of standard that was in place; there was a sort of bimetallic standard in place and this included silver and gold (15:1); eventually silver was phased out. But to me the key is what happened to the money supply that Rothbard indicated was increased during this 10 year period by about +3% y/y.

  12. As for the government being unable to inflate away debt obligations - that's pure nonsense. They can just add a zero or twelve to the currency and pay everything nominally - provided they keep the armed forces sweet and an inner cadre paid up there is very little anyone can do to stop them.

    Debt is a past obligation. What I have said is that inflation is no benefit for future obligations. If you have a future obligation, and you inflate the currency, that future obligation must be paid in future currency. The US faces future obligations of perhaps $100 trillion, whereas the past obligation is about $14 trillion. This can only be reduced through deflation. The only solution is to achieve what was achieved during the period of 1869 to 1879. Using Rothbards numbers, the future obligations after a similar ten year period as 1869 to 1879 would go from about 100/14 = 714% GDP to 68/22 = 310% GDP.

  13. which ones

    When I speak of inflation or deflation here, I am talking of the effect as upon prices, not the monetary definition.

    Firstly, I have tried to determine whether there have been any periods in history similar to what the US is going through. I think that I have found one, not exactly the same, but underlying conditions are comparable. This is the post US Civil War period. This leads me to believe that the QE or stimulus will not have any impact, other than a very short transient effect. I believe that we can completely disregard this effort (provided it does not lead to a currency crisis). Let me explain.

    What are the underlying factors? Let's look at the period bounded by the US Civil War. Prior to the the war, the Natchez Trace boasted 7 of the 10 wealthiest people of the world. This was build upon the trade of cotton; but there was essentially no labour cost associated with the economy due to slavery. After the war, slavery was abolished and the plantation system collapsed, taking with it the economy and wealth of the south. Large national debt was incurred by both the southern states and US federal government; an historical extreme. Some of this was never paid back. During the period 1865 to 1869, prices of goods and services inflated. However, according to Rothbard, from 1869 to 1879 prices of goods and services deflated, about -3.8% per year, each year, even though the money supply was expanded by about +3% per year. There was also strongly positive GDP growth in the US, even though the bank run of 1873 and an international property value collapse punctuated this decade.

    I contend that slavery was a vast deflationary engine; if we define deflation as a reduction of the price of goods and services, as cotton was analogous to the 'oil of the time'. When this price deflationary factor was removed, the adjustment in prices was inevitable. After price readjustment occurred, then debt deleveraging became the driving factor of price discovery, and probably was a factor associated with the 1873 bank panic.

    Now today, the western economies, particularly the US, has again benefited from the near slavery wage structure of the east, and in a sense, Asia has been a vast deflationary machine for the world. But this has resulted in many structural imbalances that could not be sustained.

    So the financial crisis that we see is the first stage of the unwinding of these imbalances. In turn, the shock is causing Asia to 'unplug' or 'decouple' from the west, and concentrate on domestic and regional trading. The decoupling can be observed in the shipping figures that are just not recovering. In addition, trade protectionism will continue to expand. Although, in my view, this 'decoupling' is a healthy thing for the world economy in the longer term, it will lead to very significant price adjustments in the western world for some time.

    Therefore, just like the post Civil War period, the deflationary prop is being removed from western economies. This is going to lead to persistent price inflation. Eventually, once prices have reached an equilibrium level, which will probably be some months or years after trade has become more balanced, price deflation will begin in earnest as the deleveraging of debt becomes the overwhelming force behind the economy.

    So in, my expectation, there will be persistent price inflation, followed by a longer period of persistent price deflation during the major deleveraging process, that must ultimately include the deleveraging or default of the US national debt that will weigh down consumers for decades. In addition, the idea that the government can inflate away future obligations is a nonsense, and the most critical obligations lie ahead of the US, not behind. Therefore deflation will be needed to reduce future obligations, such as the stimulus spending, social security and health care costs. Deflation will also be needed to rebalance global trade, wage and asset values.

    So what we see in the RPI of most western economies so far can be exactly explained by this phenomenon. An initial collapse in the RPI; as existing inventories in the west are liquidated, but this is not followed by replenishment from Asia, as finance for consumption dries up. According, ships lay idle, the Baltic Index does not recover, Asia realizes she must begin the decoupling process, particularly China. Thus prices begin rising again in the western economies. As to the effect upon asset prices; ultimately these must decline, but there will be many oscillations along this path.

    We in the west are in for interesting times indeed.

  14. This is the corresponding chart for RPI:

    rpi0809.gif

    And this is the one for RPIX:

    (RPIX excludes mortgage interest payments and used to be targeted by the BoE at a rate of 2.5% before the switch to targeting CPI at 2% from December 2003).

    rpix0809.gif

    I think that people have got it wrong, and it is nothing to do with QE or money supply.

    Short of a dollar collapse (which is not probable but remotely possible), positive rpi is going to be persistent longer than people think (perhaps years). Ultimately though, it will go negative for some time, along with asset values. This is coming, but not yet.

    I've looked at historical parallels. This has nothing to do with the money supply. The RPI chart above fits my expectations precisely.

  15. There is a very high probability that this will happen in the UK. This is the net effect of gov't current policies.

    In fact, the early shape of the price curve so far is almost identical to that of Japan's. Japan's malaise began with an initial big dip, followed by a recovery to a more slow rate of decline that has persisted for many years since.

    If the gov't had not interfered at all, and just let prices reach their true market value, then the correction would have been very sharp, very short, and you could look to a long term recovery of price growth.

    But unfortunately you have a very weak gov't in control who are facing an election. The timing couldn't be worse.

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