Mish's Global Economic Trend Analysis Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: CalculatedRisk who wrote (15020)	11/7/2004 11:32:31 PM
From: mishedlo	Read Replies (2) of 116555

Questions for Hyper-Inflationists I believe the follow charts without a doubt shows that there can be price deflation with monetary inflation economagic.com economagic.com There are no charts that I can find on housing prices or land prices in Japan but it is my understanding that prices have been falling for 18 years in spite of the fact that there is little land available relative to population density. What I find interesting is that most hyper-inflations on the FOOL as well as SI talk openly of the housing bubble. I want some hyper-inflationst to tell me exactly how with wages stagnant and jobs stagnant, and interst rates rising, exactly how housing housing prices are going to keep rising? Here is civilian employment. I doubt it is keeping up with population growth. economagic.com Here is personal savings rate economagic.com Here is average weekly hours worked economagic.com I do not know why I can not fing US wage growth but here are two regions that I did find economagic.com economagic.com Real wages have actually declined for close to 4 years. How have housing prices gone up faster than wages? Easy... Interst rates have fallen, mortgage rates dropped and credit standards lowered. The combination of all of those factors led to a boom (bubble?) in housing. We have also had round after round of cash out refis that supported consumption. Does anyone here dispute this paragraph? What I want the hyper-inflationsts to explain to me is how home prices keep going up in a RISING interest rate situation whith real wages falling. To keep construction going, credit standards got looser and looser and looser. In spite of that we are beginning to see some cracks are we not? In Las Vegas and San Antonio Pulte dropped prices. In Southern California housing backlog went from 2 week supply and now has leveled off at 4 1/2 month supply. For how long? Housing prices could rise as long as interest rates were falling. People could "afford" (using the word "afford" loosely, higher prices. What happens to cash out refis on falling or stagnant home prices? Housing is slowing. Leading Economic indicators have been dropping for some time. Wages are stagnant. I have to admit there was a discussion on SI over wages and they have started to go up in China. Does that matter? When manufaturing jobs here pay $35/hour and they make $2 per hour is a 10% wage hike in China relevant? Let's assume that it is relevant. How does rising wages in China support US consumption or higher prices in the US? I say that it does not. Can anyone here tell me what would happen to car sales if GM hiked prices by 20%? What would happen to home sales if home owners raised asking prices now? Is there any doubt that car sales and home sales would crash immediately if the asking prices were a firm 20% higher than they are now? How about 10%? 5% anyone? I think you can see where I am headed here. How is this environment even REMOTELY hyper-inflationary? Has anyone been following the posts on housing prices in the UK? Does anyone think we are not headed for a slowdown here with 1 more hike guaranteed and possibly 2 more back to back in NOV/DEC? It took 1.25 in hikes to stop escalating home prices in the UK. Will it take more here? Why? Point blank without any further ado I am going to say that hyper-infaltionists have many major Achilles Heal's type problems 1) Housing Bust 2) Jobs and wages 3) Lack of savings 4) The debt levels themselves 5) Rising energy prices 6) Lack of pent up demand for anything In the context of those problems, someone please take each one and show me the hyper-inflationary scenario. This recovery was housing led and consumption was supported by falling interest rates and cash out refis. I want hyper-infaltionsists to tell me exactly what is going to support house prices in a rising interest rate environment. If housing prices fall I want someone to tell me why everyting else will keep going up. Eventually (perhaps we are not there but perhaps we are) but eventually as in SOONER rather than later at the current rate of rate hikes, housing is going to go soft. Do not tell me that monetary inflation alone will always save the day because I proved it will not always do so. Deflation in Japan set in with a housing bust and 18 years later is still going strong or perhaps perhaps JUST NOW after 18 years shoing sign of remission. That is what a major housing bust country-wide will do to you. Exactly what is going to prevent a housing bustor at least a major slowdown here? The PPT can keep stock prices up, intervention can prop up the US$, but what if anything is going to support house prices? Are we going to buy more junk from China if prices are rised 20%? 10% 5%?. Is there that much pent-up demand for computrers, TVs, and cell phones? Will rising energy prices take away from other consumer spending or not? If 1% interest rates did not create any jobs other than in housing and walmart what will? What will happen to those housing related jobs? I want the hyper-inflationsts to address these issues. I do not think they can. Mish

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next