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Nominal V. Real Prices

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With what the Fed's up to with M3:

DISCONTINUANCE OF M3 WILL SAVE FED 0.00000699%

and the confirmations from the booming stock and commodity markets, I am more and more wondering if the government (globally) isn't (insanely) going to try to inflate its way out of this great looming deflationary depression that it subconsciously sees coming.

Mad as it sounds, maybe the nominal House Price Crash will be diluted away by a sea of money and dirty tricks and houses will lumber onwards and upwards with stocks and the rest, just at a slower pace. Ungeared houses would still be a terrible investment in real terms, but leverage would rescue all the heavily indebted - and completely betray the scrupulous and thrifty who have saved into the government-approved paper financial system.

Horror story or possible future? Any thoughts? :huh:

Yeah one of Greenspans old friends said he used to talk about doing exactly this thing when they were at college.

[been trying to find a link to the story that contained the name and quote, but I can't. Anyone else see it? I'm sure it was a broadsheet in the last couple of weeks]

Edited by algor

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With what the Fed's up to with M3:

DISCONTINUANCE OF M3 WILL SAVE FED 0.00000699%

and the confirmations from the booming stock and commodity markets, I am more and more wondering if the government (globally) isn't (insanely) going to try to inflate its way out of this great looming deflationary depression that it subconsciously sees coming.

Mad as it sounds, maybe the nominal House Price Crash will be diluted away by a sea of money and dirty tricks and houses will lumber onwards and upwards with stocks and the rest, just at a slower pace. Ungeared houses would still be a terrible investment in real terms, but leverage would rescue all the heavily indebted - and completely betray the scrupulous and thrifty who have saved into the government-approved paper financial system.

Horror story or possible future? Any thoughts? :huh:

This sort of thing keeps me awake at night.

If this happens wouldn't we all be better just running up a load of debt and letting it get inflated away?

This is a serious question

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..just read this on the ft site...

king sees risks to asset prices

“At some point the ratio of asset prices to the prices of goods and services will revert to more normal levels.”

Either the price of goods and services would rise to catch up with asset prices, through higher inflation, or asset prices would fall.

In neither case would it be easy to keep inflation close to the 2 per cent target,” Mr King said.

..sounds like he's preparing the ground for a bit of inflation... :unsure:

Edited by how much...?? you must be joking

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I know where you are coming from. I am trying to develop an inflation strategy and a deflation strategy. So far I can choose between them and am actively pursuing both options. Sooner or later I will have to make some life decisions based on one or the other.

Which will it be? And more importantly - how severe will the inflation be and how will wages respond?

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I posted this thread late last night, but I thought I'd bump it now for any fresh opinions. It's important to me - I'm trying to make a decision at the moment and I need to decide how likely this is.

Highly unlikely.

I think that they'll go for the shortest sharpest shock possible whilst all the time telling us everything is getting better and the worst is over.

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I am more and more wondering if the government (globally) isn't (insanely) going to try to inflate its way out of this great looming deflationary depression that it subconsciously sees coming.

I have been wondering the same thing. I have also been wondering whether the attempt to do this could go horribly wrong and result in a worse crash than has ever been seen - but in two or three years time.

Part of me is worried and part of me is thinking well if that is what is going to happen you can't do anything about it really anyway.

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I have been wondering the same thing. I have also been wondering whether the attempt to do this could go horribly wrong and result in a worse crash than has ever been seen - but in two or three years time.

Part of me is worried and part of me is thinking well if that is what is going to happen you can't do anything about it really anyway.

Real house prices are falling and inflation is under control. This is happening now. They'll be a recession, everyone will believe that things can only get worse and then they'll get better and a politician will take the credit.

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Highly unlikely.

I think that they'll go for the shortest sharpest shock possible whilst all the time telling us everything is getting better and the worst is over.

All politicians follow the creed - "not in my term of office" - if they can put things off they will.

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I posted this thread late last night, but I thought I'd bump it now for any fresh opinions. It's important to me - I'm trying to make a decision at the moment and I need to decide how likely this is.

You'll have to forgive me if I misunderstand the described scenario:

Basically (you believe) the US could be planning to increase money supply (without owning up to the policy). The consequences being that inflation rises, wages rise, everyone gets 'richer' and those with huge liabilities (a dozen BTL mortgages etc.) see the real value of their debts fall away?

Am I on the right track?

If this was the plan then it could only result in one situation. Those with bad debts would get into an even bigger hole because they wouldn't be able to help themselves but carry on spending their 'new' wealth. More MEW, more BTL etc. For the reckless gamblers, it isn't in their nature to suddenly stop and cash in on their fortuitous position.

Although this would be horrendous for people without housing assets (would-be FTBs), it wouldn't be a solution in itself.

Who, in the palaces of power, would believe that such a trick would painlessly get everyone back to a happy and stable situation? It would be another desperate throw of the dice.

Xil.

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Guest magnoliawalls

I feel really sorry for all the hardworking FTBs on this forum that this is even a possibility, because it would worry me if I were one.

If this happens it is just effectively theft from them and a gift to the feckless accidental rich (all labour ministers and media types seem to be in this pool).

It's crazy that people have to plan for a future where one option is that they are ruthlessly betrayed by their fellow man.

Good thread.

This is why I feel stressed about not owning a house. But for nominal house prices to stagnate while real prices drop we would need to have wage inflation relative to asset prices. Is that possible in a globalised world where we struggle to compete?

Nearly everything I see in the supermarkets and shops is imported - if there is devaluation of GDP relative to other currencies there will be significant increases in the cost of living. If there is competitive devaluation of the world's currencies, what then?

Do you agree that a mortgage is effectively a short position against the fiat currency it is taken out in?

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You'll have to forgive me if I misunderstand the described scenario:

Basically (you believe) the US could be planning to increase money supply (without owning up to the policy). The consequences being that inflation rises, wages rise, everyone gets 'richer' and those with huge liabilities (a dozen BTL mortgages etc.) see the real value of their debts fall away?

Am I on the right track?

If this was the plan then it could only result in one situation. Those with bad debts would get into an even bigger hole because they wouldn't be able to help themselves but carry on spending their 'new' wealth. More MEW, more BTL etc. For the reckless gamblers, it isn't in their nature to suddenly stop and cash in on their fortuitous position.

Although this would be horrendous for people without housing assets (would-be FTBs), it wouldn't be a solution in itself.

Who, in the palaces of power, would believe that such a trick would painlessly get everyone back to a happy and stable situation? It would be another desperate throw of the dice.

Xil.

A pretty NeoCon Fed chairman?

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I posted this thread late last night, but I thought I'd bump it now for any fresh opinions. It's important to me - I'm trying to make a decision at the moment and I need to decide how likely this is.

I honestly think decisions for one's future could be decided on the toss of a coin so illogical and against what might seem sense things are now.

Me, I'm not one of the figures types although appreciating their use and taking infomation from them.

I look at what the important "players", the Politicians and Central Bankers, are doing and what they appear to want.

We know they want to keep everything much as now, claiming low inflation and interest rates to match that.

The influx of cheap consumer goods has been a godsend in all this and they will want to maintain that at all costs as other costs like energy and public services rise.

Deficits appear to be of little concern in all this and I ask why?

It's the mix of politics and economics that you have to try to take an opinion on.

I don't think those "in charge" of these things are stupid but are manipulating all they can to keep things on the course they hope will maintain order.

A true correction of all discussed here would not be very pretty would it?

What do the Markets think of all this?

Seem happy at the moment don't they?

Still as others here remind us, there's always ways to make money. You just got to find them!

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I posted this thread late last night, but I thought I'd bump it now for any fresh opinions. It's important to me - I'm trying to make a decision at the moment and I need to decide how likely this is.

I would never vote for any party that ever tried this. In fact I would go to fairly subatantial lengths to fight and oppose any political entity undertaking this kind of action.

Would such a technique make the developing nations even more competitive?

and exacerbate the trade gap?

I think that as long as China, Russia and India can find fuel to grow, wage inflation in the west will remain low and any attempt to inflate away debt will just make us all poorer.

http://www.cia.gov/cia/publications/factbo...r/2001rank.html

The CIA would have you believe China and India are already the second and fourth largest economies in terms of purchasing power parity and with the Chinese saving a good portion of what they are raking in, it’s hard to see them suffering high inflation.

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All politicians follow the creed - "not in my term of office" - if they can put things off they will.

They won't attempt to use inflation because you can't. Once you lose control inflation feeds upon itself.

As house prices fall politicians will remind us that they couldn't rise indefinitely and that they fall as a part of a cycle.

They will point to other areas of the economy that are doing better.

Mr Brown will blame the ignorance of other countries in the global recession ruining his economic miracle. He might even cosy up to the "business cycle" as an explanation.

They already put off one contraction this one they will spin.

Edited by bandylegs

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All politicians follow the creed - "not in my term of office" - if they can put things off they will.

They won't attempt to use inflation because you can't. Once you lose control inflation feeds upon itself.

House prices are falling, politicians will remind us that they couldn't rise indefinitely and that they always fall as a part of a cycle.

They will point to other areas of the economy that are doing better.

Mr Brown will blame the ignorance of other countries in the global recession ruining his economic miracle. He might even cosy up to the "business cycle" as an explanation.

They already put off one contraction this one they will spin.

Sorry; I appear to be repeating myself.

Edited by bandylegs

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Guest magnoliawalls

I would never vote for any party that ever tried this. In fact I would go to fairly subatantial lengths to fight and oppose any political entity undertaking this kind of action.

Would you rather vote for a party that wanted to raise more taxes to cover deficits and spending?

I recently met some undergraduate students at one of the UK's leading universities. Inflation came up in conversation and it became clear that the students had only a vague understanding what inflation means.

Their specialism? Political and economic geography. :rolleyes:

They won't attempt to use inflation because you can't. Once you lose control inflation feeds upon itself.

To steal some figures from OnlyMe in another thread

Broad stability - producer prices rising at nearly 20%.

Debt rising at nearly £100Bn a year.

Broad money rising at 10% a year through printing the stuff.

That is not stability, that is printing your way out of trouble and creating greater trouble for the future and destroying the real economy as you go, oh sorry the real economy doesn't matter any more we can keep on borrowing and spending on other people's products ad infinitum.

Smells like inflation to me.

Yes - you see in a sense it would be magically fiendish to go massively into worthless paper debt and buy real goods - great master paintings, gold, treasures - as the whole thing goes pear shaped. In fact that's what every other paper-money architect has done in the dying days of their ponzi scheme, loaded it on a cart, and tried to leave the country dressed as a peasant. (I see GB at the airport in a couple of years dressed as a "lady" from Little Britain with a few suitcases full of gold if they do attempt this.)

The alternative is that a Volker/Thatcher style hardman steps up and rescues the whole system, restoring faith and inflicting the necessary pain before the wheels come off and the pain is doled out wildly anyway. Bernanke is not that man IMO.

I agree but where would you go?

If things get that bad your wealth could make you a target. Being a foreigner could also make you vulnerable.

Edited by magnoliawalls

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Smells like inflation to me.

They won't attempt to use inflation but we will experience a more normal level of inflation. In fact we already are it's just stripped out of the "official figures". The important factor could be wage inflation, people are feeling the pinch and we will see more of this in 2006.

I got the idea that Durch was suggesting a more dramatic level of inflation that could wipe out his investments. I don't see that happening and I don't believe it would be a policy surreptitiously followed by Mr Brown.

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I got the idea that Durch was suggesting a more dramatic level of inflation that could wipe out his investments. I don't see that happening and I don't believe it would be a policy surreptitiously followed by Mr Brown.

Seeing as Mr Brown has constantly, whined on about prudence since 1997, this would be a pretty dramatic policy change.

I just can't see him standing up during a budget and loading a speech with a new buzzword that infers spending our way out of trouble (again). It just isn't his style.

Of course, it would be the USA that dictates the policy and we have to fall in line.

Xil.

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Seeing as Mr Brown has constantly, whined on about prudence since 1997, this would be a pretty dramatic policy change.

I just can't see him standing up during a budget and loading a speech with a new buzzword that infers spending our way out of trouble (again). It just isn't his style.

Of course, it would be the USA that dictates the policy and we have to fall in line.

Xil.

Timescale?

Perhaps GB is hoping he will be in No. 10 and another occupant next door will do the inflation deed.

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Timescale?

Perhaps GB is hoping he will be in No. 10 and another occupant next door will do the inflation deed.

Think that's what Greenspans has done to Bernanke?

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Would you rather vote for a party that wanted to raise more taxes to cover deficits and spending?

Nah... I'll be quite happy to see the whole thing just run out of steam and then everyone can stop buying luxury goods and repay their debts.

Wage inflation should remain low for a few years in the west, as most new jobs will be created in Asia.

Thinking of setting up a new car plat Mr. Tokamuki?

Where are you thinking?

How about Dagenham? The land there is very cheap and you will find plenty of available skilled labour.

No?

You know somewhere nearer to home that’s cheaper, where people will work longer hours and have no union?

Oh?

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Nah... I'll be quite happy to see the whole thing just run out of steam and then everyone can stop buying luxury goods and repay their debts.

Wage inflation should remain low for a few years in the west, as most new jobs will be created in Asia.

Thinking of setting up a new car plat Mr. Tokamuki?

Where are you thinking?

How about Dagenham? The land there is very cheap and you will find plenty of available skilled labour.

No?

You know somewhere nearer to home that’s cheaper, where people will work longer hours and have no union?

Oh?

We will of course, be pleased to buy your cars Mr. Tokamuki, wherever you make them.

Now what can we sell you in exchange?

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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