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OnlyMe

Pimco - Sums It Up For Me

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This is why floating your boat on debt/housing is a stupid way to grow your economy.

http://www.pimco.com/LeftNav/PIMCO+Spotlig...as+Feb+2006.htm

Q: If the global economy is awash in liquidity, wouldn’t that normally lead to inflation?

Dialynas: The inflation has occurred. The inflation is in the housing market. The inverse of the current account deficit has been debt creation, and debt has accumulated in the consumer side and federal component of the economy. So the inflation that we have realized in the U.S., the U.K., Australia and other current-account deficit countries, but also in some surplus countries like China with low-priced labor and undervalued exchange rates, has been huge price inflation in the real estate markets. Housing price inflation is, in essence, the externality of this global liquidity and fixed exchange rate regimes.

Housing price inflation has some very important longer-term implications. A housing bubble leads to more investment in housing, which contributes to current GDP growth. However, if that investment were in plant and equipment of equal magnitude then we would have a productive resource with which production could be utilized to repay the current account deficit. In the case of a housing bubble and construction boom, no such product is available. The economic prospects for the national economy will rise and fall with the housing market. A pop in the housing bubble may invoke a ruinous downward multiplier reduction in the U.S. economy while the debts remain. Ultimately, the houses themselves may need to be liquidated to settle debts with foreigners.

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that's what I like about the usa, when they know it's a bubble, they call it a bubble.

over here, it's all pussyfooting around the problem, soft landing this, soft landing that, the bubble word is never mentioned.

it's all going to end up the same way on both sides of the atlantic whatever happens.

it's just that the usa are more open about it. well the ones I seem to listen to anyway.

Edited by pop

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that's what I like about the usa, when they know it's a bubble, they call it a bubble.

over here, it's all pussyfooting around the problem, soft landing this, soft landing that, the bubble word is never mentioned.

it's all going to end up the same way on both sides of the atlantic whatever happens.

it's just that the usa are more open about it. well the ones I seem to listen to anyway.

As an engineer I notice the different a lot when I do a contract for an American company or a Brittish company.

Americans tend to go straight to the point with a necessary minimum of subtrefuge. Very often I end up shaking my head in disbalief at the performance involved in working with Brittish companies.

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  • 302 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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