Sunday, October 14, 2012

QE & a slow death

Will house prices in 2013 be maintained by central bank easing?

Mohamed El-Erian writing in the FT said that the Fed and other central banks’ action to print money is maintaining an asset bubble. And yes, that includes property prices and this concept needs to feed into any forecast of property and house prices for 2013 and beyond.

Posted by happy mondays @ 03:12 PM (2320 views)
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13 thoughts on “QE & a slow death

  • it’s a currency crisis that the central banks seem to want.

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  • I live in a fairly affluent area of London (south west). Over the last 10 months i have noticed a tightening of the belt by the classic middle classes, many who seem to have been totally unaffected by the first dip of the recession. Those that had jobs benefited from lower interest rates, were able to maintain the same standard of living even though food, electricity, insurance, parking. train fares, school fees, coffee shops, etc soared upwards. It has now reached a point, that even with much lower mortgage interest rates, the pinch is being felt. It is almost as if the recession has been gradually creeping upwards through the classes. It effected the people who lost their jobs first, then the lower paid and lower incomes through price rises and then creeped up through the lower middle classes to the middle classes.

    This puts the economy on a finally balanced precipice. The lower paid and those without jobs are screwed. The middle classes are now conscious that they have had their most affluent times and their finances are much tighter. Quantitative easing is now like water in a tap
    (it is already subconsciously factored in) and at best will maintain the status quo and keep house prices stable in the middle class areas. The real day of reckoning now comes when the quantitative easing finishes and interest rates go up as there is only one way this will effect peoples standards of living through both the working classes and middle classes that have mortgages. My guess is this will coincide with a major event like a banking crisis or a war as major events are often the catalyst to major changes in peoples sentiment.

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  • mark wadsworth says:

    A reasonable, if deeply depressing, summary.

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  • I can’t see QE maintaining house prices but the reverse as higher commodity prices, eg oil and gas, stoke higher inflation and result even less real cash in people’s pockets. House prices will stagnate at best. There’s been massive QE here and in the US already and house prices generally have fallen, despite what the deluded Daily Express says.
    London’s different, with the market there buoyed by money fleeing Greece, Spain, Italy, Eastern Europe and the Far East.

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  • London may well be the exception but one day all that property bound money will move elsewhere and very quickly.

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  • Hi Enuii,
    If I remember rightly, you have a lot of contact with Japan.
    The Rubik’s cube metaphor article in the FT was pointing out how we in UK are now like Japan.

    I am no expert, but I reckon as everything we make is much better quality and lasts longer, we have finally run out of Capitalism’s ability to expand forever. There is no reason to keep spending. Economies are therefore not going to continue expanding (apart from the developing world).

    Some people are doing fine. But it’s not the “Forrest Gump” style economy of “No more boom and bust” …thank you New Labour.
    I really enjoyed the sunshine today – and that was free 🙂

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  • I can’t see QE maintaining house prices

    It will because it will keep interest rates VERY low, if you look around.

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  • The Rubik’s cube metaphor article in the FT was pointing out how we in UK are now like Japan.

    I don’t think so. Japan had lots of saving, and not the level of UK debt that there is. Also, UK is trying QE in unison with the rest of the world, not on it’s own.

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  • I think the key fact is that despite the government keeping the base rate fixed at 0.50% banks and building societys are raising their interest rates rather than in the past being in lock step with the government, the government is therefore starting to lose control of monetary policy.

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  • The US election is only a few weeks away. After that Obama will bulldoze stacks of dollars into the IMF to bail out anyone who asks. Note that Rajoy in Spain wants the cash, Rajoy has needed a bail-out for the past month or two, but its all waiting on the US election.

    As for the population of the US, they have all beeen bombarded with “He’s a bum” ads. guaranteed to make citizens exercise their vote “properly”.

    More QE in the UK after the 6th November – just wait……. “They” will make house prices rise somehow..!

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  • ”House prices WILL rise”

    and they call this socialist rubbish capitalism?

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  • if anyone sees MW tell him his twitter account has been hacked and sending a link out via DM with a virus
    thanks

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  • @7

    Interest rates have been very low for four years yet house prices have fallen.

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