Purchasing power can't be created out of thin air (tier, creditors, borrow)
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Hyperinflation is a real possibility. In fact it's the most likely outcome.
And the dollar has certainly lost lots of purchasing power. Why do you think most millennials can't afford to purchase a home? Why are the majority of Americans living essentially paycheck to paycheck?
Hyperinflation can come if the virus kills us all along with our productivity. As a doc I think that highly unlikely. And if it does, then all currencies throughout the world will no longer be so important.
The most important factor with millennial and houses are their choice of location and jobs. Not general inflation per se.
This doesn't sound like a strong argumentative statement. No supportive details and more like " No, my Dad is better than your Dad" one. The problems that America have to deal with including inflation, debts, devalue of currency,... are real and choosing to ignore them or going into denial is not going to make them go away.
If anyone has been following the housing markets all over America in the past 4-10 years, you can see the huge increasing in house prices in almost every cities to the point it became unacceptable. Regular workers living at the edge of a collapse. It's not a healthy economic state and it's shouldn't be that way. The fake values in the economy and especially in the housing market keep everything floating temporarily. When the limit is reached, a crash will be unavoidable.
Inflation is already here. When the economy frozen with lost income and debts stashed up everywhere at every level in the society, house prices are supposed to come down given the nature demand, yet the prices shoot up ridiculously even in "the middle of nowhere" cities, way above the height of the last peak to the point of being laughable, since it senses the decreasing in purchasing power of the US dollar. That would price out the majority of the average American in getting their own places and struggling in everyday life which is not what we want to see.
Fortunately, in the end, the fake values and economy manipulating will succumb to natural rules of reality. The factor called affordability will offset the overvalued housing market and make it collapsed just like the housing crash we saw last decade.
The housing crash will go in in the next few years when the economy start to feel the effect of shrinking in business loses and unemployment. A fact that we have to face is post-coronavirus problems. Many countries which suffered way less than the US are having problem to get their economy up and running again when the fear of the virus still around. Add in the lock down of other countries in the world as many still block trading, travelling to the outside world creating a sluggish state in trading world that would take many years to overcome.
Regarding of the US housing market, a government decision letting homeowners to waive on their mortgage payment will just add more fuel to the fire for a mass housing foreclosures. From the outlook, it seems like they didn't learn their lesson, but I think everything is set up. The Fed and the banks possibly can't predict and dictate to build the economy up, but they definitely can foresee the consequences of their own act such as the loose lending practice last time and the mortgage forbearance this time. They are not naive despite many people tend to think they are. In the end, some people in the Fed and the bank are the one who benefited from getting mass fees and money from bank closures in the process.
There were too many unethical people out there who are waiting to take advance of the economy for the own sake. In 08-10, I know many people, even without the mortgage forbearance, somehow stayed living rent free, mortgage -free up to a year before leaving the old place and moved to their new places, rent or buy. Many people who" lost their houses" in the last housing crisis didn't actually lost their houses. With the money they accumulated in their one year mortgage/rent free they were in good shape to start new elsewhere, using that saved money at the down payment and having someone else in the family to purchase the house. Soon enough, many other people learned the lesson, and in the state where their houses are underwater with owned money greater than the house values, they left in droves despite they totally were able to stay in their houses. That would trigger another housing crash in a domino effect fashion that we saw.
We will have to wait at least a year for that to be happened.
This doesn't sound like a strong argumentative statement. No supportive details and more like " No, my Dad is better than your Dad" one. The problems that America have to deal with including inflation, debts, devalue of currency,... are real and choosing to ignore them or going into denial is not going to make them go away.
If anyone has been following the housing markets all over America in the past 4-10 years, you can see the huge increasing in house prices in almost every cities to the point it became unacceptable. Regular workers living at the edge of a collapse. It's not a healthy economic state and it's shouldn't be that way. The fake values in the economy and especially in the housing market keep everything floating temporarily. When the limit is reached, a crash will be unavoidable.
Inflation is already here. When the economy frozen with lost income and debts stashed up everywhere at every level in the society, house prices are supposed to come down given the nature demand, yet the prices shoot up ridiculously even in "the middle of nowhere" cities, way above the height of the last peak to the point of being laughable, since it senses the decreasing in purchasing power of the US dollar. That would price out the majority of the average American in getting their own places and struggling in everyday life which is not what we want to see.
Fortunately, in the end, the fake values and economy manipulating will succumb to natural rules of reality. The factor called affordability will offset the overvalued housing market and make it collapsed just like the housing crash we saw last decade.
The housing crash will go in in the next few years when the economy start to feel the effect of shrinking in business loses and unemployment. A fact that we have to face is post-coronavirus problems. Many countries which suffered way less than the US are having problem to get their economy up and running again when the fear of the virus still around. Add in the lock down of other countries in the world as many still block trading, travelling to the outside world creating a sluggish state in trading world that would take many years to overcome.
Regarding of the US housing market, a government decision letting homeowners to waive on their mortgage payment will just add more fuel to the fire for a mass housing foreclosures. From the outlook, it seems like they didn't learn their lesson, but I think everything is set up. The Fed and the banks possibly can't predict and dictate to build the economy up, but they definitely can foresee the consequences of their own act such as the loose lending practice last time and the mortgage forbearance this time. They are not naive despite many people tend to think they are. In the end, some people in the Fed and the bank are the one who benefited from getting mass fees and money from bank closures in the process.
There were too many unethical people out there who are waiting to take advance of the economy for the own sake. In 08-10, I know many people, even without the mortgage forbearance, somehow stayed living rent free, mortgage -free up to a year before leaving the old place and moved to their new places, rent or buy. Many people who" lost their houses" in the last housing crisis didn't actually lost their houses. With the money they accumulated in their one year mortgage/rent free they were in good shape to start new elsewhere, using that saved money at the down payment and having someone else in the family to purchase the house. Soon enough, many other people learned the lesson, and in the state where their houses are underwater with owned money greater than the house values, they left in droves despite they totally were able to stay in their houses. That would trigger another housing crash in a domino effect fashion that we saw.
We will have to wait at least a year for that to be happened.
Housing is very locale dependent. Sure the general trend is up along with nominal inflation. But where I live in AZ, California folks buying here since the 1980's can get twice the house for half the money they spend in CA. That is the impact of location. Not helpful if you can't relocate, but more of the housing cost story that just inflation.
Housing is very locale dependent. Sure the general trend is up along with nominal inflation. But where I live in AZ, California folks buying here since the 1980's can get twice the house for half the money they spend in CA. That is the impact of location. Not helpful if you can't relocate, but more of the housing cost story that just inflation.
Housing is totally local. Some areas will always be desirable and will be affected less regardless what happened like the coasts and bigger cities. However, the housing prices in the whole America and to a lesser extent, the rest of the world are organically related whether we like it or not. They don't say something like" When CA's housing market cough, everywhere else got a cold" for no reason.
The fact that with the increasing in service field jobs in CA and big cities, adding the enormous money from Asian countries and part of European countries drive up the house prices there. Just like you said, many people from CA took their gain and in turn get out and drive up the house prices and cost of living everywhere making a bad splash and the grudge of the locals. The money source poured into the states are now not as it used to be, therefore that is a start of a process. So your post indeed supports mine. Not sure what you meant in your last sentence, but I'm totally fine, physical and financial, virus or no virus, relocating or staying. Thanks for the information, but AZ is not where I want to live.
The USD has a responsibility to provide the world with liquidity. Many times the domestic mandate and protecting the u.s economy internally is in conflict with this role, as Chinas central bank pointed out in 2009 when they called to reform the monetary system. However, now the internal and external policy seems aligned to me. Fire away.
I see it myself working with treasury inside a large multinational. Everybody wants dollars. Other currencies are getting hammered.
Last edited by Thatsright19; 04-19-2020 at 04:10 PM..
Hyperinflation is a real possibility. In fact it's the most likely outcome.
And the dollar has certainly lost lots of purchasing power. Why do you think most millennials can't afford to purchase a home? Why are the majority of Americans living essentially paycheck to paycheck?
How is the USD going to hyper-inflate when U.S debts are dollar denominated debts? In the often cited example of Germany, those were treaty of Versailles debts that were extra ordinarily punishing and the debts were held in foreign nations currencies. Printing their own currency to pay them down, caused the value to fall.
How is the USD going to hyper inflate when the BOJ, ECB, and BOA are employing many of the same tactics in lockstep? The USD is the standard which all others float against.
The USD has a responsibility to provide the world with liquidity. Many times the domestic mandate and protecting the u.s economy internally is in conflict with this role, as Chinas central bank pointed out in 2009 when they called to reform the monetary system. However, now the internal and external policy seems aligned to me. Fire away.
I see it myself working with treasury inside a large multinational. Everybody wants dollars. Other currencies are getting hammered.
Classic flight to safety. The USD will stay strong through all this.
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