Conference in Madrid with Spain’s head of Housing

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This topic contains 40 replies, has 9 voices, and was last updated by Profile photo of Chopera Chopera 4 years, 6 months ago.

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  • #56348
    Profile photo of Anonymous
    Anonymous
    Participant

    Quiet day in the forum!

    Tomorrow I’m participating in a holiday-home sector conference in Madrid attended by Pilar Martínez – Spain’s Director of Housing for the national government in Madrid. I’m moderating the first session which looks at how the sector ended up where it is, what mistakes were made, and what lessons need to be learnt. We expect all the main players of the sector to be there, along with top management from all the banks’ real estate divisions. The objective is to understand what was done well and badly, and come up with some concrete ideas to improve the sector and help it recover.

    It will be interesting to see what comes out of it.

    I might try and do some live posting from the event…..

    Mark
    http://www.viviendavacacional.com/

  • #109097
    Profile photo of Anonymous
    Anonymous
    Participant

    Ask them why they don’t bail out the restaurant that goes belly up around the corner but does the exakt opposite when it comes to banks. Why do these banks gets the abillity to use “free” money to finance transactions when it comes to them offloading their own assets when private sellers with ok buyers are not given the same chance. Should the tax payer really pay for such a system? Should these politicians and banksters be rounded up and hung after a swift but just trial? Why do banks still value properties way to high in their books though they know it’s not correct.

    Congrats to you Mark because it sounds like a really good job for you.

  • #108897
    Profile photo of Anonymous
    Anonymous
    Participant

    Ask them why they don’t bail out the restaurant that goes belly up around the corner but does the exakt opposite when it comes to banks. Why do these banks gets the abillity to use “free” money to finance transactions when it comes to them offloading their own assets when private sellers with ok buyers are not given the same chance. Should the tax payer really pay for such a system? Should these politicians and banksters be rounded up and hung after a swift but just trial? Why do banks still value properties way to high in their books though they know it’s not correct.

    Congrats to you Mark because it sounds like a really good job for you.

  • #109098
    Profile photo of Anonymous
    Anonymous
    Participant

    To see many of the reasons where it went wrong they should take a look at the Finca Parks court case taking place this week. I’m not part of that case but I’m involved in a similar one. I’ve been waiting 3 years to cancel my contract on an unfinished development and still no court date in sight. The thing is if I did get my money back I’d consider buying a different type of property in Spain but I can’t do it until I get my money back.

    The main problem was many of them (banks, developers, solicitors, agents) ignored the rules when things were going well and Spain has not shown the desire to put these mistakes right.

  • #108898
    Profile photo of Anonymous
    Anonymous
    Participant

    To see many of the reasons where it went wrong they should take a look at the Finca Parks court case taking place this week. I’m not part of that case but I’m involved in a similar one. I’ve been waiting 3 years to cancel my contract on an unfinished development and still no court date in sight. The thing is if I did get my money back I’d consider buying a different type of property in Spain but I can’t do it until I get my money back.

    The main problem was many of them (banks, developers, solicitors, agents) ignored the rules when things were going well and Spain has not shown the desire to put these mistakes right.

  • #109099
    Profile photo of peterhun
    peterhun
    Participant

    @Ardun wrote:

    Ask them why they don’t bail out the restaurant that goes belly up around the corner but does the exakt opposite when it comes to banks.

    Because Banks are government institutions and part of the structure and value of money. A restaurant is of no importance whatsoever.

  • #108899
    Profile photo of peterhun
    peterhun
    Participant

    @Ardun wrote:

    Ask them why they don’t bail out the restaurant that goes belly up around the corner but does the exakt opposite when it comes to banks.

    Because Banks are government institutions and part of the structure and value of money. A restaurant is of no importance whatsoever.

  • #109101
    Profile photo of Chopera
    Chopera
    Participant

    From a bank’s point of view, the problem wasn’t the bubble it was the crash. A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. And in doing all it can to lend money the banking system is designed to keep increasing the amount of credit in circulation and create credit bubbles. To counter this you need a strong and independent central bank or government that is prepared to make it harder for banks to lend when there is too much credit in circulation. Unfortunately the Bank of Spain doesn’t have the power to do this, and the various Spanish governments have been complicit with the banks. This is what needs to change, one way or another. Once you control credit booms then you can control house prices and then you can prevent the rampant speculation and oversupply that comes with them.

    They have also got to understand that the Spanish economy still has to rebalance away from real estate. Economies based around governments and councils selling bits of land to developers are unsustainable. Something productive needs to be done as well. Until the Spanish economy becomes genuinely more productive (which isn’t necessarily the same as returning to “growth”) we should forget about house prices going anywhere but down.

  • #108901
    Profile photo of Chopera
    Chopera
    Participant

    From a bank’s point of view, the problem wasn’t the bubble it was the crash. A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. And in doing all it can to lend money the banking system is designed to keep increasing the amount of credit in circulation and create credit bubbles. To counter this you need a strong and independent central bank or government that is prepared to make it harder for banks to lend when there is too much credit in circulation. Unfortunately the Bank of Spain doesn’t have the power to do this, and the various Spanish governments have been complicit with the banks. This is what needs to change, one way or another. Once you control credit booms then you can control house prices and then you can prevent the rampant speculation and oversupply that comes with them.

    They have also got to understand that the Spanish economy still has to rebalance away from real estate. Economies based around governments and councils selling bits of land to developers are unsustainable. Something productive needs to be done as well. Until the Spanish economy becomes genuinely more productive (which isn’t necessarily the same as returning to “growth”) we should forget about house prices going anywhere but down.

  • #109103
    Profile photo of katy
    katy
    Spectator

    Give them a link to this forum :mrgreen:

  • #108903
    Profile photo of katy
    katy
    Spectator

    Give them a link to this forum :mrgreen:

  • #109104
    Profile photo of Anonymous
    Anonymous
    Participant

    @mark wrote:

    Quiet day in the forum!

    Tomorrow I’m participating in a holiday-home sector conference in Madrid attended by Pilar Martínez – Spain’s Director of Housing for the national government in Madrid. I’m moderating the first session which looks at how the sector ended up where it is, what mistakes were made, and what lessons need to be learnt. We expect all the main players of the sector to be there, along with top management from all the banks’ real estate divisions. The objective is to understand what was done well and badly, and come up with some concrete ideas to improve the sector and help it recover.

    It will be interesting to see what comes out of it.

    I might try and do some live posting from the event…..

    Mark
    http://www.viviendavacacional.com/

    Some hints:

    – decrease by at least 50% the price of undesirable properties. Be prepared to sell crappy 2 apartments from undesirable areas for a song. There is no good to hold million property for many years to come.

    – decrease by at least 25% the price of more desirable properties. Make sure that the ratio price/income is less than 3.

    – try to create a more transparent way that the foreign buyers can understand and eliminate the need to hire lawyer to buy properties.

    The mistakes made are not repairable, the coast is wrecked in many areas.

  • #108904
    Profile photo of Anonymous
    Anonymous
    Participant

    @mark wrote:

    Quiet day in the forum!

    Tomorrow I’m participating in a holiday-home sector conference in Madrid attended by Pilar Martínez – Spain’s Director of Housing for the national government in Madrid. I’m moderating the first session which looks at how the sector ended up where it is, what mistakes were made, and what lessons need to be learnt. We expect all the main players of the sector to be there, along with top management from all the banks’ real estate divisions. The objective is to understand what was done well and badly, and come up with some concrete ideas to improve the sector and help it recover.

    It will be interesting to see what comes out of it.

    I might try and do some live posting from the event…..

    Mark
    http://www.viviendavacacional.com/

    Some hints:

    – decrease by at least 50% the price of undesirable properties. Be prepared to sell crappy 2 apartments from undesirable areas for a song. There is no good to hold million property for many years to come.

    – decrease by at least 25% the price of more desirable properties. Make sure that the ratio price/income is less than 3.

    – try to create a more transparent way that the foreign buyers can understand and eliminate the need to hire lawyer to buy properties.

    The mistakes made are not repairable, the coast is wrecked in many areas.

  • #109106
    Profile photo of Anonymous
    Anonymous
    Participant

    The majority of the issus are of a Banking nature. The Government cannot force the Banks to sell the properties at an price that is X.

    What the Government can do is bring more fair taxation i.e.simplyfying the taxation of rentals of properties, exemption of Capital gains & inheritance tax for non residents. These changes will resolve various other issues.

  • #108906
    Profile photo of Anonymous
    Anonymous
    Participant

    The majority of the issus are of a Banking nature. The Government cannot force the Banks to sell the properties at an price that is X.

    What the Government can do is bring more fair taxation i.e.simplyfying the taxation of rentals of properties, exemption of Capital gains & inheritance tax for non residents. These changes will resolve various other issues.

  • #109108
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    The majority of the issus are of a Banking nature. The Government cannot force the Banks to sell the properties at an price that is X.

    What the Government can do is bring more fair taxation i.e.simplyfying the taxation of rentals of properties, exemption of Capital gains & inheritance tax for non residents. These changes will resolve various other issues.

    The government is bailing out the banks. Banks have property portfolios of much more than half a trillion Euros. Many of these properties won’t sell unless a 50% discount is applied.

    A €30bn recapitalisation is offered which really is peanuts as compared to the half a trillion (30/500=6%).

  • #108908
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    The majority of the issus are of a Banking nature. The Government cannot force the Banks to sell the properties at an price that is X.

    What the Government can do is bring more fair taxation i.e.simplyfying the taxation of rentals of properties, exemption of Capital gains & inheritance tax for non residents. These changes will resolve various other issues.

    The government is bailing out the banks. Banks have property portfolios of much more than half a trillion Euros. Many of these properties won’t sell unless a 50% discount is applied.

    A €30bn recapitalisation is offered which really is peanuts as compared to the half a trillion (30/500=6%).

  • #109110
    Profile photo of peterhun
    peterhun
    Participant

    “A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. “
    As I understand it, a bank lends you money based on your own asset.So it isn’t ‘other people’s money’ its a the borrowers own money that they have to repay.

    At no point do banks actually take money from anyone else, they just assume the risk and take the profit. The money comes from thin air.

  • #108910
    Profile photo of peterhun
    peterhun
    Participant

    “A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. “
    As I understand it, a bank lends you money based on your own asset.So it isn’t ‘other people’s money’ its a the borrowers own money that they have to repay.

    At no point do banks actually take money from anyone else, they just assume the risk and take the profit. The money comes from thin air.

  • #109112
    Profile photo of Chopera
    Chopera
    Participant

    @peterhun wrote:

    “A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. “
    As I understand it, a bank lends you money based on your own asset.So it isn’t ‘other people’s money’ its a the borrowers own money that they have to repay.

    At no point do banks actually take money from anyone else, they just assume the risk and take the profit. The money comes from thin air.

    My point was that the money the bank lends you is not the bank’s money – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks). I guess the money does come from thin air in the same way that if I write an IOU for say €100 and people use that IOU as if it were money then I have effectively created €100 and added it to the money supply. The banks make a calculated gamble that they can keep on borrowing and writing IOUs.

  • #108912
    Profile photo of Chopera
    Chopera
    Participant

    @peterhun wrote:

    “A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. “
    As I understand it, a bank lends you money based on your own asset.So it isn’t ‘other people’s money’ its a the borrowers own money that they have to repay.

    At no point do banks actually take money from anyone else, they just assume the risk and take the profit. The money comes from thin air.

    My point was that the money the bank lends you is not the bank’s money – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks). I guess the money does come from thin air in the same way that if I write an IOU for say €100 and people use that IOU as if it were money then I have effectively created €100 and added it to the money supply. The banks make a calculated gamble that they can keep on borrowing and writing IOUs.

  • #109114
    Profile photo of logan
    logan
    Participant

    @mark wrote:

    The objective is to understand what was done well and badly, and come up with some concrete ideas to improve the sector and help it recover.

    What a laugh Mark You might as well watch some clowns in the circus ring performing. The simple answer to the above objective is NADA. I have never yet attended a conference that achieved jack s**t.
    I suggest you spend your day in the Prado. Far more enlightening.

  • #108914
    Profile photo of logan
    logan
    Participant

    @mark wrote:

    The objective is to understand what was done well and badly, and come up with some concrete ideas to improve the sector and help it recover.

    What a laugh Mark You might as well watch some clowns in the circus ring performing. The simple answer to the above objective is NADA. I have never yet attended a conference that achieved jack s**t.
    I suggest you spend your day in the Prado. Far more enlightening.

  • #109116
    Profile photo of peterhun
    peterhun
    Participant

    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

  • #108916
    Profile photo of peterhun
    peterhun
    Participant

    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

  • #109117
    Profile photo of Chopera
    Chopera
    Participant

    @peterhun wrote:

    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

    When you or me, or a company, or another bank, or any financial entity places money into a bank account they are lending money to that bank. And while that bank does put a certain amount of that money aside in order to remain liquid, most of that money is placed into an account with another bank – i.e. your bank lends out your money to another bank, and so on. Every time a part of that money gets lent on it appears on the books of more and more banks and therefore the amount of (broad) money in circulation increases. That is how fractional reserve banking works. By starting off with say €100 of cash (narrow money) being placed into a bank account, the banks are able to create several times that amount in credit (boad money). Eventually some of that credit is lent out to people as loans. While it seems like the money is created from nowhere it is in fact the same €100 appearing simultaneously on the books of multiple banks as IOUs.

    This is not the same as “creating money from nowhere” which is what you seem to be suggesting. If banks could do this there simply wouldn’t have been a credit crunch (there’d be hyperinflation instead)

  • #108917
    Profile photo of Chopera
    Chopera
    Participant

    @peterhun wrote:

    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

    When you or me, or a company, or another bank, or any financial entity places money into a bank account they are lending money to that bank. And while that bank does put a certain amount of that money aside in order to remain liquid, most of that money is placed into an account with another bank – i.e. your bank lends out your money to another bank, and so on. Every time a part of that money gets lent on it appears on the books of more and more banks and therefore the amount of (broad) money in circulation increases. That is how fractional reserve banking works. By starting off with say €100 of cash (narrow money) being placed into a bank account, the banks are able to create several times that amount in credit (boad money). Eventually some of that credit is lent out to people as loans. While it seems like the money is created from nowhere it is in fact the same €100 appearing simultaneously on the books of multiple banks as IOUs.

    This is not the same as “creating money from nowhere” which is what you seem to be suggesting. If banks could do this there simply wouldn’t have been a credit crunch (there’d be hyperinflation instead)

  • #109120
    Profile photo of Anonymous
    Anonymous
    Participant

    @chopera wrote:

    @peterhun wrote:
    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

    When you or me, or a company, or another bank, or any financial entity places money into a bank account they are lending money to that bank. And while that bank does put a certain amount of that money aside in order to remain liquid, most of that money is placed into an account with another bank – i.e. your bank lends out your money to another bank, and so on. Every time a part of that money gets lent on it appears on the books of more and more banks and therefore the amount of (broad) money in circulation increases. That is how fractional reserve banking works. By starting off with say €100 of cash (narrow money) being placed into a bank account, the banks are able to create several times that amount in credit (boad money). Eventually some of that credit is lent out to people as loans. While it seems like the money is created from nowhere it is in fact the same €100 appearing simultaneously on the books of multiple banks as IOUs.

    This is not the same as “creating money from nowhere” which is what you seem to be suggesting. If banks could do this there simply wouldn’t have been a credit crunch (there’d be hyperinflation instead)

    The hyperinflation is comming you just wait and see. The inflation could most easily be see on the rise of real estate prices the last 10-20 years. The credit crunch happened because none wanted to be stuck with worthless assets. The owners of the banks where simply to greedy otherwise this could have gone of forever. Not that this was any real wealth just more FIAT-money in circulation. Money these days are created in the same instance as the banks approves new loans.

  • #108920
    Profile photo of Anonymous
    Anonymous
    Participant

    @chopera wrote:

    @peterhun wrote:
    – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks).

    Well, no banks don’t borrow the money from somewhere else. It hasn’t come from anywhere, its is literally created when you take out a loan.

    When you or me, or a company, or another bank, or any financial entity places money into a bank account they are lending money to that bank. And while that bank does put a certain amount of that money aside in order to remain liquid, most of that money is placed into an account with another bank – i.e. your bank lends out your money to another bank, and so on. Every time a part of that money gets lent on it appears on the books of more and more banks and therefore the amount of (broad) money in circulation increases. That is how fractional reserve banking works. By starting off with say €100 of cash (narrow money) being placed into a bank account, the banks are able to create several times that amount in credit (boad money). Eventually some of that credit is lent out to people as loans. While it seems like the money is created from nowhere it is in fact the same €100 appearing simultaneously on the books of multiple banks as IOUs.

    This is not the same as “creating money from nowhere” which is what you seem to be suggesting. If banks could do this there simply wouldn’t have been a credit crunch (there’d be hyperinflation instead)

    The hyperinflation is comming you just wait and see. The inflation could most easily be see on the rise of real estate prices the last 10-20 years. The credit crunch happened because none wanted to be stuck with worthless assets. The owners of the banks where simply to greedy otherwise this could have gone of forever. Not that this was any real wealth just more FIAT-money in circulation. Money these days are created in the same instance as the banks approves new loans.

  • #109122
    Profile photo of Chopera
    Chopera
    Participant

    @Ardun wrote:

    The hyperinflation is comming you just wait and see. The inflation could most easily be see on the rise of real estate prices the last 10-20 years. The credit crunch happened because none wanted to be stuck with worthless assets. The owners of the banks where simply to greedy otherwise this could have gone of forever. Not that this was any real wealth just more FIAT-money in circulation. Money these days are created in the same instance as the banks approves new loans.

    I take it you are referring to QE – which in theory allows a bank to approve a loan and sell it to the central bank, which uses “printed” money to buy it. This is indeed creating money from nothing, however so far it hasn’t happened in Spain (well, not in this way at least) and I’m not sure to what extent it takes place elsewhere. My take on QE is that it is attempting to counter the deflationary effects of the credit crunch (the removal of broad money from the system) with the inflationary effects of introducing more cash (narrow money) into the system (along with keeping bond yields and interest rates low). So far I haven’t seen any evidence that it creates hyperinflation: the US and the UK have been doing it for 4 years, and Japan (to an extent) for decades now. In the UK at least it seems to be propping up over-inflated house prices when in an ideal world they should have crashed by now. If QE keeps on going forever without any fundamental reform of the financial system then it may lead to high inflation. It was meant to buy time while this reform took place, not be a solution in itself. But so far there hasn’t been any reform.

  • #108922
    Profile photo of Chopera
    Chopera
    Participant

    @Ardun wrote:

    The hyperinflation is comming you just wait and see. The inflation could most easily be see on the rise of real estate prices the last 10-20 years. The credit crunch happened because none wanted to be stuck with worthless assets. The owners of the banks where simply to greedy otherwise this could have gone of forever. Not that this was any real wealth just more FIAT-money in circulation. Money these days are created in the same instance as the banks approves new loans.

    I take it you are referring to QE – which in theory allows a bank to approve a loan and sell it to the central bank, which uses “printed” money to buy it. This is indeed creating money from nothing, however so far it hasn’t happened in Spain (well, not in this way at least) and I’m not sure to what extent it takes place elsewhere. My take on QE is that it is attempting to counter the deflationary effects of the credit crunch (the removal of broad money from the system) with the inflationary effects of introducing more cash (narrow money) into the system (along with keeping bond yields and interest rates low). So far I haven’t seen any evidence that it creates hyperinflation: the US and the UK have been doing it for 4 years, and Japan (to an extent) for decades now. In the UK at least it seems to be propping up over-inflated house prices when in an ideal world they should have crashed by now. If QE keeps on going forever without any fundamental reform of the financial system then it may lead to high inflation. It was meant to buy time while this reform took place, not be a solution in itself. But so far there hasn’t been any reform.

  • #109123
    Profile photo of logan
    logan
    Participant

    Chopera.
    I think that the money created by QE has not actually entered the broad money supply. That’s the reason it’s not yet had any impact on inflation. QE is designed simply to keep UK bonds yields low enough for the treasury to balance the budget and see it through the crisis.
    I agree with Ardun in that hyperinflation is waiting around the corner, particularly in US and UK once the crisis stabilises.
    Counter measures may well not be enough. However personally I look forward to it. Asset values will increase and so will capital returns. Debt will devalue substantially. The true value of assets of course will then depend which currency they are in.
    Maybe then we can all return to some capital growth. I wish. 🙄

  • #108923
    Profile photo of logan
    logan
    Participant

    Chopera.
    I think that the money created by QE has not actually entered the broad money supply. That’s the reason it’s not yet had any impact on inflation. QE is designed simply to keep UK bonds yields low enough for the treasury to balance the budget and see it through the crisis.
    I agree with Ardun in that hyperinflation is waiting around the corner, particularly in US and UK once the crisis stabilises.
    Counter measures may well not be enough. However personally I look forward to it. Asset values will increase and so will capital returns. Debt will devalue substantially. The true value of assets of course will then depend which currency they are in.
    Maybe then we can all return to some capital growth. I wish. 🙄

  • #109124
    Profile photo of Chopera
    Chopera
    Participant

    @logan wrote:

    Chopera.
    I think that the money created by QE has not actually entered the broad money supply. That’s the reason it’s not yet had any impact on inflation. QE is designed simply to keep UK bonds yields low enough for the treasury to balance the budget and see it through the crisis.
    I agree with Ardun in that hyperinflation is waiting around the corner, particularly in US and UK once the crisis stabilises.
    Counter measures may well not be enough. However personally I look forward to it. Asset values will increase and so will capital returns. Debt will devalue substantially. The true value of assets of course will then depend which currency they are in.
    Maybe then we can all return to some capital growth. I wish. 🙄

    When things pick up the BoE says it will start selling all the debt it is currently holding back onto the market, and then destroy the money it receives for it, therefore removing it from the system. I guess we’ll have to wait and see if that’s what really happens. I’m not sure what people mean by hyper-inflation. I don’t consider say 20% to be hyper-inflation, that’s just high inflation and while not desirable, is perfectly manageable. I consider hyperinflation to occur when there is a complete loss of confidence in a particular currency, and prices in that currency start doubling every month. This scenario must be avoided at all costs.

  • #108924
    Profile photo of Chopera
    Chopera
    Participant

    @logan wrote:

    Chopera.
    I think that the money created by QE has not actually entered the broad money supply. That’s the reason it’s not yet had any impact on inflation. QE is designed simply to keep UK bonds yields low enough for the treasury to balance the budget and see it through the crisis.
    I agree with Ardun in that hyperinflation is waiting around the corner, particularly in US and UK once the crisis stabilises.
    Counter measures may well not be enough. However personally I look forward to it. Asset values will increase and so will capital returns. Debt will devalue substantially. The true value of assets of course will then depend which currency they are in.
    Maybe then we can all return to some capital growth. I wish. 🙄

    When things pick up the BoE says it will start selling all the debt it is currently holding back onto the market, and then destroy the money it receives for it, therefore removing it from the system. I guess we’ll have to wait and see if that’s what really happens. I’m not sure what people mean by hyper-inflation. I don’t consider say 20% to be hyper-inflation, that’s just high inflation and while not desirable, is perfectly manageable. I consider hyperinflation to occur when there is a complete loss of confidence in a particular currency, and prices in that currency start doubling every month. This scenario must be avoided at all costs.

  • #109126
    Profile photo of logan
    logan
    Participant

    History shows that after a recession economies enjoy a surge in growth and consumer demand. It’s a bit like letting a frustrated dog off the leash. Central banks will struggle to cope with that rising demand, interest rates will rise and rise. Currencies will soar in value.
    The only factor which may prevent that happening is current levels of private debt. However that debt will eventually be devalued as inflation runs rampant.
    Bring it on.
    I can remember double digit inflation the UK economy went haywire eventually but it created opportunity.

  • #108926
    Profile photo of logan
    logan
    Participant

    History shows that after a recession economies enjoy a surge in growth and consumer demand. It’s a bit like letting a frustrated dog off the leash. Central banks will struggle to cope with that rising demand, interest rates will rise and rise. Currencies will soar in value.
    The only factor which may prevent that happening is current levels of private debt. However that debt will eventually be devalued as inflation runs rampant.
    Bring it on.
    I can remember double digit inflation the UK economy went haywire eventually but it created opportunity.

  • #109127
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    Anonymous
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    @chopera wrote:

    . I don’t consider say 20% to be hyper-inflation, that’s just high inflation and while not desirable, is perfectly manageable. I consider hyperinflation to occur when there is a complete loss of confidence in a particular currency, and prices in that currency start doubling every month. This scenario must be avoided at all costs.

    20% inflation means about 15-20% interest rate for mortgages. This rate will bankrupt about half of the families due to the mortgage payments.

    The era of high houses prices has made much harder to survive interest rates more than 5%.

  • #108927
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    Anonymous
    Participant

    @chopera wrote:

    . I don’t consider say 20% to be hyper-inflation, that’s just high inflation and while not desirable, is perfectly manageable. I consider hyperinflation to occur when there is a complete loss of confidence in a particular currency, and prices in that currency start doubling every month. This scenario must be avoided at all costs.

    20% inflation means about 15-20% interest rate for mortgages. This rate will bankrupt about half of the families due to the mortgage payments.

    The era of high houses prices has made much harder to survive interest rates more than 5%.

  • #109128
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    Chopera
    Participant

    @flosmichael wrote:

    20% inflation means about 15-20% interest rate for mortgages. This rate will bankrupt about half of the families due to the mortgage payments.

    The era of high houses prices has made much harder to survive interest rates more than 5%.

    It depends on what type of inflation it is. If it is monetary inflation (which is what I think we’re contemplating) then it should be accompanied by wage increases and asset price increases. As Logan says, it’ll help devalue the debt along with cash savings. The losers would be those on fixed incomes, such as pensioners on fixed annuity rates, but they should have paid off their mortgages anyway.

  • #108928
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    Chopera
    Participant

    @flosmichael wrote:

    20% inflation means about 15-20% interest rate for mortgages. This rate will bankrupt about half of the families due to the mortgage payments.

    The era of high houses prices has made much harder to survive interest rates more than 5%.

    It depends on what type of inflation it is. If it is monetary inflation (which is what I think we’re contemplating) then it should be accompanied by wage increases and asset price increases. As Logan says, it’ll help devalue the debt along with cash savings. The losers would be those on fixed incomes, such as pensioners on fixed annuity rates, but they should have paid off their mortgages anyway.

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