Nayved Posted October 31, 2005 Share Posted October 31, 2005 Hello all, I've been reading about House Price Cycles & crashes & recoveries & debt. Cycles can only be be seen historically. You can't really predict future recoveries. People do not say "Oh in five years time life will be better so I'll buy a house then" If interest rates were reduced again in say 2 years time to 1% like the US did, I'm sure house prices would boom again. The previous boom was related to technology I'd say. Mobile phones, Windows 95, Internet, Windows NT, Networking, Cable TV. Hardly anyone predicted it. The boom was needed to get all the investment in the internet shopping infrastructure. The investment came from Joe Public, who nodoubt lost a lot of money. You can see this drop in house prices is having an effect on some highstreet stores. Bascially, spending is on debt, so how much debt can the world take? Here is a report on US debt (As there is no equivalent UK website I can find). They will never pay it back. It is too much. Grandfather US Total debt So they are going to pile on as much debt as they can, before they declare themselves bankrupt. One more year, 5 more years, 10 more years who can predict? The main points I'm trying to make, but maybe not very well as I read through this is the governments of the world will do all they can to prevent a crash, because once it happens, there won't be a recovery for decades (Like Japan, but worse) as there is just too much debt. Also, cycles do occur but when governments and business have so much power, the length of cycles cannot be predicted as there actions are unpredictable. If there is a recovery post 2010 (like Dr Bubb says I think) will technology push the next recovery? Which technology? It should be present write now but undeveloped. Don't say the usual nanotech & solar! Thanks for reading! Quote Link to comment Share on other sites More sharing options...
karhu Posted October 31, 2005 Share Posted October 31, 2005 Hyperinflation will get rid of that in no time What lives, vibrates. And a market behaves like a living thing, moving towards cycles, which can come and go in importance, but which reflect the more-or-less fixed speed of the human learning process I'd say cycles [and their existence] depend on your point of view - relativity. If this economic behaviour is unsustainable from the US point of view then it may not be cyclical [from the US point of view]. However, the world economy will probably still exist, and so the US economy will be absorbed into the world economic supercycle. Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 What lives, vibrates. And a market behaves like a living thing, moving towards cycles, which can come and go in importance, but which reflect the more-or-less fixed speed of the human learning process Morning Dr Bubb, Just the big fish I was hoping to converse with. You're very poetic this morning! I agree with what you say most of time. I hoping you could share your thoughts about debt. What will happen with the world's debt? Do you think the people will become responsible and elect responsible governments that will pay the debt? Have you ever read the gradfather reports? Do you think they are good? This debt relates house prices and thats why I'm posting here. Do you any reasons for saying there will be a recovery in the next 5 years? What are they? Although high house prices have stopped me from moving out of my parents home, it's the questions above that cause me more concern. Look forward to hearing from you and all the other intelligent people on this site. Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Hello, A number of people have read the post, but not commented. I have complete faith the crash is here already and many people here do so aswell. When there is boom we should concern ourselves with crash, so when the crash is progressing, we need to talk about how far it will crash and recoveries. To make these predictions, we need to understand the uselfulness of cycles and the drivers (governments and world wide debt). Should we not debate & share knowledge on these subjects? Quote Link to comment Share on other sites More sharing options...
Losing Faith Posted October 31, 2005 Share Posted October 31, 2005 Although high house prices have stopped me from moving out of my parents home... You could rent ? Quote Link to comment Share on other sites More sharing options...
bert Posted October 31, 2005 Share Posted October 31, 2005 You could rent ? Living with parents is normally free! Quote Link to comment Share on other sites More sharing options...
liquid Posted October 31, 2005 Share Posted October 31, 2005 ...it's the questions above that cause me more concern. Hello, Welcome to the site. There is a view that governments will inflate themselves out of debt. Those that accept this view have a tendency to believe in gold and similar assets. Here are a few interesting links that underline this. http://www.financialsense.com/stormwatch/2005/1028.html I think this article is from 1999 which in itself is note worthy. http://www.usagold.com/GermanNightmare.html You say, "Do you think the people will become responsible and elect responsible governments that will pay the debt?". There is an admirable aim in what you say, but it's not going to happen. However, you have youth on your side and perhaps in your lifetime you can vote for a government that is responsible. I like to consider myself astute rather than intelligent, but thanks for the compliment?! Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Thanks for your post Liquid. Also, thanks for the links. I read part of them. I'm familiar with financialsense. Their articles have great detail but lose the message they are trying to tell. These links make buying a house a good idea I think. If your money is going to worthless due to hyperinflation, you might aswell invest it in property and borrow as much as possible. At least you've got a possesion and that is 9/10 of the law! If the Americans want to infalate their debt away, why raise interest rates to prevent inflation? Also inflation was great before but with globalisation it doesn't work. For example Previous inflation of debt Year 1, loaf of bread £1.00, salary £10,000, debt £1,000. Debt is 10% of salary. Infalation... Year 5, loaf of bread £5.00, salary £50,000,debt £1,000. Debt is 1% of salary. Now inflation of debt Year 1, loaf of bread £1.00, salary £10,000, debt £1,000. Debt is 10% of salary. Infalation... Year 5, loaf of bread £5.00, salary non-existant as I lost my job to some dude in India,debt £1,000. Debt is defaulted on. Sidenote: Looks like General Motors has got too much debt and will default on it's bonds, pensions & healthcare. This sholud cause a tidel wave in the bonds & derivatives markets. Regards, Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Hey Dr. Bubb, Don't give me another quick comment and zip back to your trading screen. How about your personnel detailed thoughts about debt and house price recovery? Can the US government infalate their debt away? Inflation was correctly reported in those days so whoever stepped into the Fed would be the "Inflation killer" so I don't think Mr. Volckers did something special. As I recall, the government of that day was just as corrupt as today so they didn't install Mr. Volcker for the benefit of the man on the street. I'm suprised you mentioned him. Do you have a soft spot for him? Come one everybody, the crash is upon us. Why waste time thinking about it. Let's go to the next step. How low can it go and why? How will it recover? Regards, Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted October 31, 2005 Share Posted October 31, 2005 (edited) Nayved, Good point, ignored inflation in a competitive world is an absolute killer - both for buiness and personal budgets. It looks like debt will keep on being pumped into the system, costs will rise and rise as that money washes over all the wrong areas of the economy, jobs will continue to be axed, work outsoruced and busineses shut down and relocated in cheaper parts of the world, then bang people wake up and realise that effectively at the end of each month they are insolvent - that goes for those that lose their jobs as well as those who over-extended with no appreaciation that they are ectually going backwards financially. Edit. That is if it isn't already happening, same state, different country. The CEO of Walmart, in a speech to directors and executives, asked Congress to raise the minimum wage, because ---it is becoming increasingly difficult for the ---company's customers to afford basic goods ---between paychecks. [from Barrons, page 12, Oct 31 2005] Edited October 31, 2005 by OnlyMe Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Hey OnlyMe, I've noticed that many of your topics are about job losses, and you've pickedup that theme on this thread. Do you not want to put down your thoughts on about cycles & recovery and explore these ideas. Lets take the job loses and work that through logically: A few people lose their jobs overseas These people buy less services & products. This causes businesses to lay off more people and outsource some of these jobs. The newly layed of people buy less services & products. This causes some businesses to close and lay off their UK people and their outsourced people. The layed off outsource people buy less services & products. etc... What happens next? What is the next step? More doom & gloom or recovery? How why? Personally, I can't see a recovery until half or more of the debt is defaulted on and people can then start taking on more debt. Like students who have declared themselves bankupted and can not get credit for a year (use to be three years). They will go back to debt eventually unless they have learnt the art of abstinance. But really I have no idea. Regards, Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted October 31, 2005 Share Posted October 31, 2005 Nayed, Don't see any chance of a recovery from an industry or even secvice sector led boom until costs have equalised. Jobs are not only being lost to Asia but Eastern Europe and even Western Europe and the US. I think jobs and compeitiveness - or total lack of it and taxation will have a far greater effect this time around and it won't be down to whether rates are high or low - in fact they are pretty much immaterial when you have already busted your economy, all that jamming rates down can do is lenghten and deepen the process. Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Don't see any chance of a recovery from an industry or even secvice sector led boom until costs have equalised. Excellent. How do you think costs will equalise? If Wallmart wants an increase in the minimum wage, we are moving away from the equalisation. Equalisation must come from exchange rates, dollar loses value, outsource currency gains value. Do you agree? But China manipulates it's currency so that equalisation does not occur. So how will it equalise before we are all outsourced? What are your thoughts or anybody elses thoughts on the matter. By the way, I read Lewrockwell and Bill Booner (Daily reckoning emails) as well. MOGAMBO is the best! Regards, Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted October 31, 2005 Share Posted October 31, 2005 (edited) Excellent. How do you think costs will equalise? If Wallmart wants an increase in the minimum wage, we are moving away from the equalisation. Equalisation must come from exchange rates, dollar loses value, outsource currency gains value. Do you agree? But China manipulates it's currency so that equalisation does not occur. So how will it equalise before we are all outsourced? What are your thoughts or anybody elses thoughts on the matter. By the way, I read Lewrockwell and Bill Booner (Daily reckoning emails) as well. MOGAMBO is the best! Regards, Good question, there was a better chance of it happening wihtout the debt/housing bubble though - well at least in a controlled manner. The housing bubble has supported sterling exacerbating the currency differential and like you say China will just keep an artificial rate until it has what it wants. Give it 10 years and I bet nearly every company that has outsourced production to China has a me-too competitor backed by Chinese money and employing the staff skilled up on the outsourcing wave. I think I must have been an Austrian economic theory believer before I'd ever heard of the term, mind you that is not so surprising you just need to experience what is happening industryto see where this is all going. Edited October 31, 2005 by OnlyMe Quote Link to comment Share on other sites More sharing options...
Not_a_herd_mentality Posted October 31, 2005 Share Posted October 31, 2005 Global Financial System on the brink of a major melt down - Basically the asset bubbles of UK, USA, Canada and Australia, and a number of other countries, has had the effect of many financial institutions leveraging their assets to the hilt in the form of unprecedented levels of what basically are currency & derivative bets. The reason for these 'bets' is that nominal interest rates at this point in time are extremely low in the USA, and the rest of the western world. In many ways this situation is far worse then if there were just a housing bubble, as when the asset bubble bursts, it will immediately lead to enormous volatility in the derivatives and currency markets. Which has already begun to manifest itself in the currency markets where wild gyrations in the US $ has been experienced during Jan and Feb. 04, and continuing into March. As the volatility increases so does the likely hood of a crash in the $ once it is realised that the assets upon which much of the positions will decline, this will lead to an immediate rise in US interest rates to stem the flow of funds out of the US $ which will further accelerate the collapse in the housing market. This has already been observed during the collapse during 1998 in the asian 'tiger' economies. In Summary When the bubble bursts ? * Don't expect it be a slow steady decline in asset values, as liquidity in the financial system will appear to disappear overnight. * The knock on effect on world financial markets will be immediate as the volatility in the derivatives market will force a number of exposed institutions to go bust as liquidity drives up due to the rush to liquidate positions in a move to reduce exposure to falling asset prices and increased volatility / uncertainty. * That the $ will collapse and rapidly force up US interests, which will further accelerate the collapse in western asset values. The collapse in the dollar will not be uniform and will be a violent tug of war between central banks, bond holds and speculators, as experienced during the ERM debacle during the early 1990's. * Actual effect on house prices relative to the rest of the financial system will appear relatively mild. So yes in today's terms with a strongly rising housing market, a drop of 10% over 6-9 months will be perceived as a crash. But in the conditions following a credit crunch, it will be perceived as the lesser of two evils. Just as investing in a falling stock market, where losses in values were indicated in how much relative loss has been suffered in x stock or fund relative to the other, as if it were a good indicator to add to continually eroding and losing positions. The effect this has is of the rabbit in the headlights, stagnation inability to act, which will further reduce the level of transactions conducted in the housing market. This will have the effect of accelerating falls in house prices as the lack of liquidity will lead to sharper mark downs in pricing by estate agents to entice buyers into the market. What should I do ? * If you are planning on selling your house, then you should do it sooner rather than later. Preferably immediately ! As after the bubble bursts it will be too late, the effects will be experienced with-in a matter of days. * Spread your investments in a number of 'safe' institutions. * Invest in fixed priced assets such as Guaranteed National Savings Bonds, Premium Bonds etc, Cash ISA's, i.e. an investment that does not have capital value volatility. * Pay off your debts ! As interests climb the cost of servicing the debt will increase rapidly, without any benefits of high inflation to reduce the value of the debt. more.... http://www.houzing.co.uk/forecasts.php?PHP...85dcf0c38#aug03 Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Global Financial meltdown? Are the people in power to smart to allow this? Meltdown is a stong word. Like a snowman melts can never come back. Should the dollar not have collapsed already. Euros are being used for so much including oil. Why the dollar does not collapse China produces goods. America prints dollars to buy goods from China. China buys dollar denominated assets with their dollars. US Fed & corporations take the dollars for their bonds to pay for domestic demands. China prints yuan to deflate their currency China produces goods etc.. (repeat the cycle) So the dollar remains as it in need for the Chinese to get rich. It may devalue, but not against the Yuan. The Chinese could stop using dollars and only deal in Euros. Then the Chinese would not get so rich and may have to become more efficent. As there are many American companies in the Far East, they will always want Dollars. So this is a Win-Win. No one will rock the boat and commit suicide. Would you not agree? Regards, Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Looks like this topic is going to fall off the first page soon and then it will be dead. Maybe this topic wasn't right for the forum. It does seem that postings about the prices going down are still the most popular. Do posters need to read them to re-affirm their faith to the crash (not much faith then) or are prices going down exciting. They were exciting a few months ago when I joined, but now they are expected and quite boring. Anyway, thanks to all the people that read & posted here. I hope it gave you something else to think about. Regards, Quote Link to comment Share on other sites More sharing options...
karhu Posted October 31, 2005 Share Posted October 31, 2005 Looks like this topic is going to fall off the first page soon and then it will be dead. Maybe this topic wasn't right for the forum. It does seem that postings about the prices going down are still the most popular. Do posters need to read them to re-affirm their faith to the crash (not much faith then) or are prices going down exciting. They were exciting a few months ago when I joined, but now they are expected and quite boring. Anyway, thanks to all the people that read & posted here. I hope it gave you something else to think about. Regards, I don't think many people want to think about the future it's just too depressing. The Western world is in a real mess and most people don't even know it, but there's no easy way out now. I agree with Durch. I think inflation will take hold and render fiat money worthless. We'll have to go back to a system based on gold to reinstill confidence and credit for the masses will become a taboo. Quote Link to comment Share on other sites More sharing options...
Nayved Posted October 31, 2005 Author Share Posted October 31, 2005 Hey Kahru, thanks for your second post. You're right that thinking about the future is depressing but I felt that the people on this forum were the kind of guys that would think about it if given a prod. Durch, you can always talk to me. We are on the same wavelength. The Muilt-nationals already own government. The oil lobby is the G.W.Bush. Did you know Bush is allowing drilling in protected parks of Alaska? How do you think Nutrasweet got approved. The Multinationals want one government (like the UN) as the multinationals are not just American but global. That why if US or UK jobs disappear, national governments does not care as it is in the interest of the multinationals. I spoke about debt inflation adjusted and dollars losing value. Any remarks on those views? Obviously when the whole thing blows up, currency will be backed by some metal or finite resource. See you all tomorrow! Quote Link to comment Share on other sites More sharing options...
Nayved Posted November 1, 2005 Author Share Posted November 1, 2005 Hello, On the second page today, back to the first---> I get an email from the daily reckoning daily and that article was in there "THE TROUBLE WITH ZEROES by Paul Tustain". Articles are great, but you can't argue against them. Pension funds buy bonds, and usually pension fund trustees are single minded and will certainly be investing the bonds cash for bonds. Who in there right mind would by Ford or GM bonds ($450 billion worth on the market)? Penion fund trustees! Also, most of the contratrian groups (lewrockwell, daily reckoning, gold-eagle) are also vested interests for gold. No doubt they've bought a boat load and waiting to make a profit. What makes them different from the property vested interests? Nothing! Money should be finite. It does not need to backed by Gold. The Fed and other banks need to stop printing all the time. It should be printed to replace existing monies or there shold be a yearly increase, say 1% increase in the number of $500 bills. Gold is not needed, responsible government is! What do say Durch? OnlyMe, have you thought more about the next step to outsourcing jobs? Regards, Quote Link to comment Share on other sites More sharing options...
karhu Posted November 1, 2005 Share Posted November 1, 2005 (edited) responsible government May exist in Utopia, but not on planet Earth. Successive governments will sap the planet dry until the world is on its' economic knees and then there'll be anarchy. Edited November 1, 2005 by karhu Quote Link to comment Share on other sites More sharing options...
liquid Posted November 1, 2005 Share Posted November 1, 2005 Money should be finite. Nayved, You have my attention. You appear to know more than you let on. What are your views? I am drawn to ideas and opinions that widen the scope because it is that scope that remains unclear to me. For example, on the one hand I see the devaluation of paper currency as a measure to eliminate paper debt and its consequences. On the other hand I see the current incumbents strive to maintain the status quo, i.e. easy credit, the creation of vacuous jobs and the homage to the consumer king. Both appear as scams. For the latter, the masses, it’s life, and, superficially at least, it appears to be enjoyable. What I don’t understand, and excuse the blair pun, is there a middle way? There appears so, but it comes across as intellectual tongue wagging. Nice ideas, but who has the guts to do it. In saying that, perhaps that just shows my impatience. Anyway, in your opinion, can there ever be honest money? http://www.honest-money.com/ Quote Link to comment Share on other sites More sharing options...
Nayved Posted November 1, 2005 Author Share Posted November 1, 2005 Hey Guys, Responsible government is sort of possible. Both Germany & France governments haven't sold their people to the highest bidder. For example, look what Blair is doing to the culture by allowing people to drink all night and get drinks from the loads of off-licences. Other European contries donot have this "drink till your dead" attitude. German or French people do not have the debt we have or the crazy house prices. I know that some parts of France do have high prices but thats because UK people have been buying in that area (like the Costas). Durch, your right, gold has it's place in future because of it's past and because we can't trust ourselves. The point is, gold can be easily removed from backing money as it occurred in the 70s. Regards, Quote Link to comment Share on other sites More sharing options...
Nayved Posted November 1, 2005 Author Share Posted November 1, 2005 Anyway, in your opinion, can there ever be honest money? http://www.honest-money.com/ Hello Liquid, I'm skim reading that link you've posted. My gut feeling is there can be no honest money as people can not be honest. Maybe the time will come soon that a computer system will control the availability of electronic money and thus stop the value from eroding. But computer systems written by humans and attacked by hackers will also come undone. Everything crashes eventually (like house prices LOL!). It's true that the Proles don't care. Give them Gladiators or Reality TV and they are happy. (I've just finished reading 1984 by the way). Regards, Quote Link to comment Share on other sites More sharing options...
Nayved Posted November 1, 2005 Author Share Posted November 1, 2005 Currency backed by gold & silver anyone: Liberty dollars Is this real? I've attached a document that has a little bit about honest money in the early years of America. It really opened my eyes a few years ago. I hope everybody on the site reads it. Extract from the attachment: How the American Colonists Originally Developed a System of "Sound" Money Between 1690 and 1700, the leaders of Massachusetts decided that money should be issued exclusively by the central authority of the government to represent the interests of the whole people. At the same time they set out to discover a "natural law" by which they could issue sound or stable money. When money is stable, people are encouraged to invest because they know their money will have the same value when they get it back as it did when they loaned it. Furthermore, stable money encourages people to save because they know it will have the same value when they are old as it had when they put it in savings. Meanwhile, it will have earned a great deal of interest. Sound money is the only way to structure a sound economy. Historically, there are only two ways to make money stable. One way is to relate all currency to precious metals which maintain a reliable degree of stability in their value or buying power. The other is to maintain the same relative amount of money and credit in operation and add to the money supply only as fast as the growth of the productivity of the people will justify it. Massachusetts issued its own paper money and made it full legal tender July 2, 1692. This money could be used to pay all debts, public and private. It was used to cover public expenses, to finance public works, and to lend to private citizens for long periods of time at a low rate of interest. Notice that these bills of currency were physically loaned out as though they were gold or silver. Furthermore, the treasurer of the colony loaned out currency at a modest interest rate, and the proceeds from this interest were paid into the treasury of the colony. This provided public revenue to the colony and greatly reduced taxes! Meanwhile, the colony paid no interest to anyone. Other colonies began following this same sound procedure, and it soon resulted in a period of unrivaled prosperity for colonial America. Regards, The_American_monetary_system.doc The_American_monetary_system.doc Quote Link to comment Share on other sites More sharing options...
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