Thursday, June 22, 2006

The reality is that excessive credit and money supply is inflationary

How the credit crunch will hit property

The most important asset that stands behind this debt nightmare is the housing market, which in America is crumbling. Chickens are coming home to roost and debt deflation is likely to be hatched from their eggs. Once the loose credit process goes into reverse, and we think it has already started, then the suppliers of credit will gradually remove themselves from the market and anybody out there who wishes to continue to monetarise their debt won't be able to. Instead they will unavoidably default and the truth will be out.

Posted by Converted Lurker @ 01:01 AM (532 views)
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2 thoughts on “The reality is that excessive credit and money supply is inflationary

  • Another article that mixes up what MIGHT happen with what is happening. Sure, debt is a problem for many people but until interest rates rise, many people will continue to adequately service their debts. Will money tightening cause the debt levels of some rate tarts to become unmanagable? Possibly a few but I do not believe rates tarts will go to the wall in sufficient numbers to cause a house price crash.

    Will interest rates rise? Currently there is not much of a case for interest rates to rise in the UK and a growing case for interest rates to fall. See the Money Week article.

    So no House Price Crash.

    This is a Cassandra article.

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  • Okay, so Money Week have found someone who thinks rates should hold or fall – a few weeks back they found someone who thought the opposite:

    And no doubt things will be different a few weeks from now. However, if the governor of the BoE is anything to go by the general consensus – despite Jeremy Batstone – is that rates are likely to rise. Of course, as you point out whether this will cause HPC is another matter.

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