Will Rents fall with current economic turmoil?
- Thread starter Nathan
- Start date
You have every right to plan for the worst. But while doing so, hope you're wrong.
Hyper-inflation will cause great misery to many of your family and friends so pray it doesn't happen.
Sunfish
Would you care to elaborate on that statement - I would be very interested in your thoughts/reasons!
Cheers
LynnH
LynnH,
I've already asked him earlier. Maybe he doesn't wish to answer. C'mon Sunny - be a good sport.
Inflation is not the reason, he is probably thinking that shares are very cheap and wants to buy more...
LynnH,
I've already asked him earlier. Maybe he doesn't wish to answer. C'mon Sunny - be a good sport.
Some answers require some time to write. I have a business to run.
If you are really interested I'll try later tonight.
OK, but be aware that I am just a clapped out tradesman. Outside my job, I knew almost nothing till I got broadband so now I can boast that I know more than "almost nothing".
I say "inflation", BV says "no inflation". That's OK. This is just a discussion board. BV says deflation is the threat while I think "depression". This may be little more than different definitions. I think a little deflation (which we are possibly seeing some of already) will rapidly look like depression and will scare the pants off bankers worldwide who will apply the only known cure.... re-flation.
(They are on TV now)I have mentioned Keynesians more than usual lately but this is fair enough: They rule the world where economics is concerned. They cured the Great Depression (after the fact). John Kenneth Galbraith belonged to the school and was both a thinker and a Humanist. His writings on The Great Depression are still considered important works. I have no wish to criticise such a man but it is always reasonable to test theories after the passage of time. It goes without saying Greenspan, Bernanke and Pitt St are Keynesians.
So can the same economists who got us into this mess, lead us out of it? The Austrian School has been vocal for most of the oughties decrying the stupidity of US monetary policy, and by association, ours. We "printed" more money (as a percentage) than they did. Yuk! According to the Austrians, increasing money in circulation is inflation.... by definition. They concede that the affect on prices is delayed if that new money goes into assets (who objects to asset inflation?) but it will filter down. Austrians say unequivacably that increasing the money supply is the inflation. Rising prices is just the filtered down result.
Why have we been increasing money supply so consistently? The excuses come as easily to them as reasons for another drink to an alco. First it was the dot.com crash. Nothing some easy money can't fix. Then Y2K. Money worked a treat again. 9/11, LTCM, Enron and other mini-disasters continued and Greenspan poured more good money at the problems.
It got to where the US bank bill rate was 1% and AAA rated banks could also borrow from BofJ @0.25% and lease gold from central banks at varying rates, never over 1%. If you could borrow billions of $s at those rates, wouldn't you travel to the ends of the earth looking for someone to borrow from you @ 5%? It seems they found the players.
So where are we now? The patient is haemoraging profusely and needs massive transfusions of liquidity to survive. In my mind I took this analogy much further to include aenemic donors and more, but let's not go there.
These new dollars just add to the existing pool of money so inflation is inevitable. More money, same goods equals inflation. Even Keynesians accept this, sort of.
So why has my attitude to property investing changed? I always felt that the Jan Somers' model needed property to double every 7 yrs to work. If it only doubled every 10 yrs then it was marginal. Doubling every 12 and it was underwater. I also dumped on the idea that inflation "inflated away" your debts because in my (quite long) lifetime, interest rates were always well above inflation so we met the inflation component every year with hard cash.
That is about to change! Soon inflation rates will be very high because interest rates are forced down so low. The central banks will be caught between the massive implied threat of deflation and the equally massive truth of inflation. Trust me. Keynesists will always choose "inflation".
Last edited:
Sunfish, i was going to post, and posted similar but not as in depth in other thread. its spot on and i believe this will happen 100% sure...
let me make one point very very clear the people that will be hurt the most by this, is the SAVERS, i will post a link where robert kyiosaki goes into detail about this so you can see someone more cedible then all us here. he has been pretty spot on with a lot of his predictions. this was taken in febuaray this year, and may sound like a ploy to offload his silver holdings but... the fundamentals are very very correct.
This is a different ballgame we are in, all countries in a global way have pulled their hands up (and pants down) and said we are screwed.
I myself am very optimistic about the new future and what will arise over the next 3 year time frame. Not wishing any hyperinflation, but as he says it will take a strong person to fix this mess up. they caved in to patch a sinking boat by the $700billion bail out. it would have been stronger charachter for bush to stand up and say NO BAILOUT because injestiong more magic funds into the economy is making the situation worse...
It is true we may see a day where we get paid $10 grand a week as a basic wage, but bread will be $50 a loaf, and milk $40 a litre...
Its interesting times ahead, and you can crusify me f you want, however no one knows the final result this the day has come and gone, and we have many finacial gurus working together for solutions, nothing is in sight... the only way is to deflate the worth of our fiat currencies.
Heres the link..
http://www.youtube.com/watch?v=FOKn7tiUMyc
Make sure you watch it a few times, it may just save your wellbeing.
let me make one point very very clear the people that will be hurt the most by this, is the SAVERS, i will post a link where robert kyiosaki goes into detail about this so you can see someone more cedible then all us here. he has been pretty spot on with a lot of his predictions. this was taken in febuaray this year, and may sound like a ploy to offload his silver holdings but... the fundamentals are very very correct.
This is a different ballgame we are in, all countries in a global way have pulled their hands up (and pants down) and said we are screwed.
I myself am very optimistic about the new future and what will arise over the next 3 year time frame. Not wishing any hyperinflation, but as he says it will take a strong person to fix this mess up. they caved in to patch a sinking boat by the $700billion bail out. it would have been stronger charachter for bush to stand up and say NO BAILOUT because injestiong more magic funds into the economy is making the situation worse...
It is true we may see a day where we get paid $10 grand a week as a basic wage, but bread will be $50 a loaf, and milk $40 a litre...
Its interesting times ahead, and you can crusify me f you want, however no one knows the final result this the day has come and gone, and we have many finacial gurus working together for solutions, nothing is in sight... the only way is to deflate the worth of our fiat currencies.
Heres the link..
http://www.youtube.com/watch?v=FOKn7tiUMyc
Make sure you watch it a few times, it may just save your wellbeing.
I presume you meant to say that .....inflation "deflated away" your debts....?
Or am I misunderstanding your post. As long as (yield > IR + inflation) it doesnt matter too much. However as Nathan said, if you are Saving only and IR < inflation you are going backwards. Especially after tax.
So let me get my head around this........
1) Easy money and excess debt caused an asset bubble
2) The people who geared up are now going -ve equity on a number of assets as the world delevers
3) The people who took a "cash is king" position are now extremely secure and potentially have the oportunity of a lifetime to by cheaply on fundamentals.
BUT
The very strategy that got the world into trouble (leveraging on cheap debt) is the stategy that will now be the safe option to ride out the next several years (once the initial asset deflation completes).
The irony is striking, no? Because every commentator will be lambasting cheap debt and overgearing just when it is (potentially) the right thing to do. For that matter my accountant has been rolling his eyes at me for the last 2 yrs because I did not take a more aggressive position with my "good debt".
I think we will have a period of rapid asset deflation followed by stagnation so I'm included to hold cash until the dust settles and the leverage into whatever asset class I deem worthy.
I think one thing in terms of rentals to come out will be that lower -> median valued properties in big cities will hold up well or increase, whereas high value properties or properties in small non-diversified towns and mining towns will struggle.
I suspect a lot of mining town realestate will crash over the coming years, with big rent drops.
I suspect a lot of mining town realestate will crash over the coming years, with big rent drops.
Similar threads
