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TW11, June 26, 2006 in House prices and the economy
Central banks will have to move faster to raise interest rates because global inflationary pressures are rising and the economy remains vulnerable to a “bang” of market turbulence, the Bank of International Settlements warned on Monday.
This is the only reason I still haven't bought a house. As things stand, I don't see much upside or downside in the housing market. Debt is high, but it is not the level of debt which causes (short term) problems. Lenders do not care how much you owe, they just care whether or not the payments arrive on time.
If inflation does break out however and forces IRs up, then bargains will start to appear (and bargain hunters!). This will also cause economic growth to slow dramatically, or even go into reverse, employmant will fall and lending criteria will tighten, perhaps dramatically. So make sure you have a good deposit and an excellent credit record !!
Taxes up, fuel prices up = no inflation
Wages up = lots of inflation
Captive audience trapped with debt can be forced to pay more interest on money lent out twenty times over if only we can say inflation is up and put interest rates up.
Now the suckers have been sucked in it’s time to milk em dry
bang on the button, wrongmove - my sentiments exactly.
I was very interested to see that article. For a long time now I've thought that interest rate setting over the last 5 or so years has been fundamentally wrong as it ignored the deflationary effects in the global economy. Debt levels should have counted towards at least 50% of the decision. I don't claim any economic expertise - it just seemed "Bleeding Obvious" (a subject I do claim expertise in!!).
Seems I wasn't mad after all.
What also seems Bleeding Obvious is that the debt bubble will screw over an entire generation and anyone who thinks house prices will be supported at current levels can't see the extent of their own stupidity.
I wonder what those economists polled by Reuters have got to say about this, they must reside in La La Land
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