Tuesday, September 18, 2007

Messages for the wider economy and markets

Falling house prices mark the end of the Great Stability

This 'no-nonsense' financial website has regularly plotted long-history 'real' house price indices (ie realtive to general inflation) to support bubble claims. Evidence the US bubble had burst has now been followed in short order by the UK. You don't need house price databanks to realise that the psychological shock of queues of depositors outside Northern Rock marks the end of the great bull market. As a liquidity crisis gradually transforms into a credit cycle, it also marks the end of the Great Stability: politicians' hollow claim to have tamed both inflation and the business cycle. Always circumspect about economic forecasts, No Monkey Business is unusually confident in predicting recession because of the predictablity of real house price cycles and their knock-on effects.

Posted by stuart fowler @ 11:11 AM (583 views)
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One thought on “Messages for the wider economy and markets

  • If you look at their time series chart of house prices (http://www.nomonkeybusiness.org/archives/00000096.htm) the present boom looks about the same as those in 1974 and 1989 – just about to blow !
    Deflating prices by RPI gives a different (probably more realistic) picture than the HPC graph on the homepage and shows that ‘real’ prices are not as high as they appear to be because CPI underestimates the true extent of inflation.

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