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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (78095)	1/25/2007 2:39:17 AM
From: pogohere	Read Replies (1) \| Respond to of 110194

You mean like GS in China?

To: GraceZ who wrote (78095)	1/25/2007 4:38:49 AM
From: bart13	Read Replies (1) \| Respond to of 110194

Historically RE rises in price when interest rates fall. Only when inflation is excluded as a factor.

To: GraceZ who wrote (78095)	1/25/2007 9:45:08 AM
From: John Vosilla	Respond to of 110194

'Historically RE rises in price when interest rates fall.' Most real estate markets did very well ina rising rate environment during the 1970's. A host of markets in a declining rate envirnoment went nowhere from about 1986-2000. So to me it is inflation, easy credit and undervalued assets after a prolonged sideways move that drive initial bursts in home appreciation. Then the speculative mania takes over in the later stages to a blowoff top..

To: GraceZ who wrote (78095)	1/25/2007 11:39:54 AM
From: Jim McMannis	Respond to of 110194

Prices do indeed rise when rates fall. Simple Keynsian theory. As powerful or more powerful are tax cuts which can be very stimulatory. The joke about RE prices is that they are off the books (assets) as far as gov. inflation is concerned. Free to run wild. So we had to wait for related things to inflate, materials, taxes, insurance etc., to see it but the correlation still isn't close to 100%. Wages can appear to be held down by "under the table" payments, illegals, subcontractors operating as Schedule C's, etc.

To: GraceZ who wrote (78095)	1/25/2007 6:47:03 PM
From: glenn_a	Read Replies (2) \| Respond to of 110194

Grace. Yes you are right of course, there are simply too many "idiots" on this board - myself included - who are ignoramuses when it comes to history. ((Historically RE rises in price when interest rates fall.)) But don't you think that the "reasons" for interest rates falling are key to this analysis? Do you think it "matters" if interest rates fall (and asset prices rise) when money supply is stable, or if interest rates fall (and asset prices rise) because there is an explosion in credit growth??? Put another way, does it matter if interest rates fall: 1) As a consequence of "massive" credit growth that distorts the cost of credit, such that there is the "illusion" that the cost of money is exceptionally low, if not free, and if as a result asset prices are distorted because the lack of "real" returns on savings encourage holders of financial assets to speculate so as to obtain a real return on their capital, or 2) In a stable monetary environment, where the "real" cost of money is not artificially depressed, and prices in an asset class rise because of increased scarcity of the asset class relative to the rest of the economy. ((Historically RE rises in price when interest rates fall. This occurred even before there was a Fed to set short term rates or make permanent passes.)) Well, manipulation of the money supply certainly didn't begin with the Fed ... although, they would seem to have perfected the art. Hmm, and you note that the phenomenon has been around since at least the time of Adam Smith. Hmm, and when was the Bank of England founded??? :) Regarding the above, I love the following introduction to Chapter 9 of G Edward Griffin's The Creature from Jekyll Island ... "The condensed history of fractional reserve banking; the unbroken record of fraud, booms, busts, and economic chaos; the formation of the Bank of England, the world's first central bank, which then became the model for the Federal Reserve System." That says it all really. Then again, I'm probably as much of a dullard when it comes to economics as I am about history, so perhaps ahah could make an appearance again on this forum and set me straight on these matters. However, he is SO brilliant, I probably won't be able to even BEGIN to comprehend his insightful analysis. Best wishes, Glenn