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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: gpowell who wrote (46815)1/11/2006 12:07:46 PM
From: shadesRead Replies (1) of 306849
 
Be that as it may, what we have seen with house prices since 2001, is simply a portfolio adjustment and once the market realized (and expected) that we live in an era of low inflation - housing became cheap.

from Benson:

...In looking back now, you can't help but notice how the economic model has changed. For decades, America had an economic model built around recycling savings into investment. In a few short years, those savings have simply vanished and our society has become comfortably cavalier about borrowing far more than they earn.

Despite the fact that total debt to GDP is now 310 percent (well in excess of the 290 percent it was before the 1929 crash), he is determined to keep debt and inflation growing. (For a balanced economy, total debt to GDP is about 150 percent). Today, it takes $4 of new debt to create just one new $1 of real GDP. Under Bernanke's watch, the Federal Reserve will have a lot of printing to do....

Now you claim that the savings did not disappear - they simply shifted into real estate right? - a portfolio adjustment - japan shifted a lot of wealth into real estate too - where has that wealth been bleeding into the past 15 or so years - did they shift it into something else - another portfolio adjustment?

I think Buffet recently said it was ok to trade what you produced on your farm with your trading partner - but what we have done is sell off the farm - so using your soap example - it doesnt matter if you buy ivory or coast soap - but if you used to buy them with money you earned from PRODUCTION off your farm - and now you are buying them by selling off your farm - that is a whole different model/paradigm eh?
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