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walktothewater

Trichet Ain't Messin About

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[posted this on another thread]

``It is our duty to try to maintain the credibility of what we do, not just now but in the future as well. That really takes its purest form in anticipating inflation,'' Trichet told the European Parliament's economic policy committee Feb. 20.

Confidence in the financial system, i.e. unbacked paper currency, is dependent on users of the paper believing in it's usefulness as a store of value and as a medium of exchange. Why did the Fed raise rates to 21% in 1979 and knowingly precipitate a nasty recession? The central banks, with the Fed as the biggest offender, have created an inflation monster in recent years by printing excessive amounts of their paper, they MUST crush inflation.

I think I have a new theory about when the Irish bubble will top:

When the EXPECTATION becomes entrenched in Ireland that rates are going much higher than currently anticipated, and I mean higher than say 4 or 5%,appetite for more debt will collapse v quickly. Rem. us Irish have a strong herd mentality- once a new opinion appears it takes root very quickly. This I believe will be the event horizon for the Irish bubble, it will feel like an overnight collapse in demand and buyers will simply move to the sideline en masse. Sellers suddenly won't have anyone to pass the bag on to.

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I think that the Bundersbank (sorry the ECB) is throwing a bone at the housing bubbles in Spain and Ireland. The German economy is the driving force of the wider Euro economy, and no way is Trichet going to sell a fundamentally sound economy down the river for the sake of a couple of gold rush driven madhouses.

The Spanish and Irish were supposed to employ fiscal policies (taxation) to address any market distortions resulting from employing the same borrowing costs across differing economies. I believe that the Spanish have introduced some measures of late, but too late to save the Costas and prevent the general mal investment and demand destruction that has taken place.

The Irish government has withdrawn and then reintroduced tax breaks for investors further stoking the fires of speculation. The boys in Bonn must have been gagging on their weinersnitzel when then heard that one. The yahoos have again won the day in Ireland, a case of crash and grab economic policy, driven by a mindset never truly believing in the sustainability of the Tiger economy.

PS

What about that LOKI, WTTW? priceless :D:D

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I think that the Bundersbank (sorry the ECB) is throwing a bone at the housing bubbles in Spain and Ireland. The German economy is the driving force of the wider Euro economy, and no way is Trichet going to sell a fundamentally sound economy down the river for the sake of a couple of gold rush driven madhouses.

The Spanish and Irish were supposed to employ fiscal policies (taxation) to address any market distortions resulting from employing the same borrowing costs across differing economies. I believe that the Spanish have introduced some measures of late, but too late to save the Costas and prevent the general mal investment and demand destruction that has taken place.

The Irish government has withdrawn and then reintroduced tax breaks for investors further stoking the fires of speculation. The boys in Bonn must have been gagging on their weinersnitzel when then heard that one. The yahoos have again won the day in Ireland, a case of crash and grab economic policy, driven by a mindset never truly believing in the sustainability of the Tiger economy.

PS

What about that LOKI, WTTW? priceless :D:D

agree, but I still think ECB rates will go higher than expected, and certainly higher than the Irish banks are letting on. Inflation in base metals, energy, oil, natgas etc. is out of control- [i know I've been coining it in the last year-- the chess pieces are moving though, gold is next Duplex]. I don't think any economy will escape the eventual pass thru of inflation to consumers. Also, Germany is much stronger than we're led to believe. The Fed is going MUCH higher also. So all in all, I think we're looking at ECB rates north of 4% early of 2007, and more to come. But my point is they wont even have to go there, just merely expectations of it, that should destroy demand in Ireland. 3% will hurt, 3.5% will a lot hurt more, but 4%+ will crucially dry up demand...

[as for Loki, well what can I say. Just goes to show the level of mentality out there. I had fun, hope u did 2!! :)]

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http://economist.com/agenda/displaystory.c...y_id=E1_VVRSDNP

Todays economist print edition again repeating the possible outcome for Ireland:

"In Ireland and Spain home prices are the most overvalued in the zone; worse, the bulk of mortgages are at variable rates. Elsewhere, most mortgage rates are fixed. A rise in ECB rates from 2% to 3.5% seems modest, yet it implies a rise in mortgage interest payments (assuming a rate one percentage point above the central bank rate) of 50%. Irish and Spanish borrowers have taken on so much more debt in recent years that their extra payments would correspond to an increase in interest rates in the early 1990s from 10% to 15%—enough to cause considerable pain.

If rising interest rates hurt these economies by much more than those of Germany, France and Italy, there will be nothing the ECB can do to lessen homebuyers’ misery. Its job is to set rates for the whole of the euro area. Having enjoyed the benefits of Europe’s “one size fits all” policy when money was cheap, Ireland and Spain are about to suffer the cost."

I have many friends back in Ireland at the moment who are in their 20's, pinned to their collars and cannot afford to fix their mortgages. I feel that many of them are going to get wiped out in the coming year or two. It's very scary

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To survive in the Euro you need your economic cycle to be as close to Germanys as possible. You need to peak when they peak and you need to bottom out when they bottom out. The beauty of clubbing together is that it makes the currency more stable and therefore more attractive to hold.

The reason we never joined was that sterling was fairly attractive in its own right and we were out of sync with most of Europe. Our recent growth during their stagnation would have been wiped out in favour of getting us nearer to syncronization. The ECB has an obligation to protect the most valuable parts of the Eurozone, thats Germany then France. But Germany will always come first due to the size of their economy.

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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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