October 29, 2012 at 9:41 am #57123
High house prices is a classic sign of inflationary pressures in the economy and is an indication that there is too much money circulating in the economy which is causing a depreciation in the purchasing power of money resulting in property prices rising.
When the economic and housing bubble finally bursts in the UK it will reveal the inflationary pressures that have built up in the economy during the boom and all the inflationary excess will have to be painfully squeezed out of the economy until every last drop of inflation has been squeezed from the economy before an another recovery or boom can begin.
The Bank of England is running out of ammunition to stimulate the economy. Interest rates are close to zero and it has embarked on a money printing exercise called Quantitative Easing (QE). The UK economy and housing market is one gigantic Ponzi scheme or Pyramid selling scam that continually needs more stimulus to keep it going but eventually the QE will have to come to a stop and once the financial stimulus comes to an end the entire UK economic and housing Ponzi Scheme will finally come to an end and a devastating recession will be required to roll back the boom.
In the year 2015 Britain will become bankrupt resulting in a sharp fall in the value of the Pound and interest rates rising. However, rising interest rates will not be enough to contain the rising inflation as a result of the devaluation of the Pound and a severe contraction of the money supply will be required, resulting in a devastating recession, in order to restore the purchasing power of money and return the economy back to a normal equilibrium.
The Bank of England will be forced to take money out of the economy to contain the rising inflation since inflation is a monetary phenomenon that is an indication of the inflationary increase in the money supply during the boom. Eventually so much money will have to be removed from the economy resulting in little money in the economy that people will be forced to use barter or another means of exchange apart from money in order to acquire goods and services.
2015 will see the triple whammy of the United States going bankrupt, the United Kingdom going bankrupt and Spain going Bankrupt. 2015 is going to be an interesting year. When Britain finally enters a capitalist slump in 2015 it will mean that the economic boom that started in 1996 will have lasted twenty years which will mean that there will have to be a twenty year long economic bust or slump in order to unwind the twenty year long boom.
In the meantime low interest rates and rising inflation is making it very difficult for anybody who has savings. Before the credit crunch and sub-prime crisis of 2008 the STR’s were bragging about their STR fund money and asking on forums like the one at housepricecrash.co.uk about where to put their STR fund money but since the credit crunch interest rates have dropped to practically zero and this has so far lasted for four years and low interest rates will continue until 2015 when inflation begins to rise. Low interest rates and rising inflation is absolutely devastating for anybody who has savings because the interest that savers are earning is so low that their savings cannot rise fast enough to keep up with inflation which means that inflation is eroding away the value of peoples savings. The STR’s who made money from the property boom will see their money losing purchasing power over time. Since the dramatic drop in interest rates in 2008 you no longer see the STR’s talking about where to invest their STR fund money on forums like the one at housepricecrash.co.uk because the rate of interest is so derisively low that it cannot keep up with the real life inflation rate that is running at ten percent as opposed to the much fiddled and manipulated CPI and RPI figures of two to three percent.
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