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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (6095)	5/11/2004 5:35:41 AM
From: Elroy Jetson	Respond to of 116555

The late Charles Rist, Governor of the Bank of France during the Great Depression, wisely refused to align the monetary policy of France with the price stabilization policies implemented together by the Bank of England, the U.S. Federal Reserve, and the Reichsbank of Germany. Looking back on the failure of British, U.S, and German policies, he said: "A policy aiming at monetary stability will secure a relative stability of prices, but the economic history of the 1920's teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation. Sound familiar? Like an account of today's Fed policy? Raising short-term rates normally lower long-term rates because higher short-term rates slow the economy and the expectation of future inflation. But these are very unusual times. Japan made the choice to bypass the long-term market by offering home mortgages directly from the Treasury through the "Home Lending Corporation". This abomination has been able to offer mortgage rates as low as 2%. Far lower than the 3.25% rates offered by banks in Japan, or by U.S. banks during the Great Depression. Yet, these ultra-low rates have failed to stop the decline in Japanese real estate prices. home.pacbell.net

To: JRI who wrote (6095)	5/11/2004 5:40:01 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

I'm more familiar with West Coast American cities and Australia than I am with Florida. But the concept remains the same. Compare real estate appreciation with local or national GDP (income). In the long run real estate that appreciates faster than income will again meet up with the income trend line, either by falling or failing to appreciate for a long duration. Keep in mind, after implementing the "price stabilization" policies of the 1920's, America, Britain and Germany saw real estate prices fall far below the trend line of income in the 1930's. Even as incomes declined, real estate prices declined further. Japan is currently experiencing a similar phenomena.