Some reader mail on climate change?
"Amusing that someone who professes to be adroit on money matters can be naive on climate change. No doubt the coal miners will be sending in crates of champagne.
Chris
NZ
What's so funny? Is this an argument? Please send the champagne chilled.
Dear DR,
Thank you for your valued contribution in countering the whitewash that the mainstream media/financial sector feeds us. With regards to the issue of housing I feel as if I am caught on the horns of a dilemma. Right now it seems would be a very good time to sell my 'first home buyer' category house in a buoyant market; obviously whatever we might replace it with would be at a similarly buoyant price as well though. You say that we are at the eve of a deflationary, housing "perfect storm", if this is so then a defensive strategy is obviously the way to go.
However, you also warn of a fiat currency, inflationary tsunami that is about to ravage our lifestyles. I'm not criticising these claims but if my house is overvalued then won't hyperinflation offset the loss in 'dollar' terms? It seems to me therefore that if we are going to take the lead from Zimbabwe then the sooner I can fix my mortgage at a low rate the better? Comments please?
Jon L.
Nowra NSW
Short answer? The benefit of having your mortgage debt wiped out via hyperinflation does not outweigh the huge decline in living standards that the inflation brings. We'd also be suspicious that house prices would actually inflate as much as other tangible goods in a hyper-inflation. From past instances, you've seen big price increases in goods which have limited supply and high demand (food, energy, precious metals).
In the States, there's plenty of housing supply. In Australia? That's more debateable. Figures we've cited before from National Housing Supply Council show that there are around 830,000 unoccupied dwellings in Australia. That was ten percent of the nation's total housing stock at the time.
To keep it simple though: we'd suggest that buying a home is not a hedge against inflation. A hyper-inflation does not send all prices up uniformly. Real things that people need and that can't be produced easily rise in value (vodka, petrol, cigarettes). Paper assets or things bought with debt probably don't.
The main point is that nothing is really good-nothing at all-about an economy that experiences hyperinflation. It distorts prices so much that economic activity becomes surreal. That's a qualitative decline in your standard of living. It's something you survive. It's not something many people prosper from.
Hi Guys,
Long time reader, first time writer. I happen to agree with most of what you write, and really appreciate the alternative point of view, but I have to question your comment on communication.
Twitter, Facebook and all the rest give us new ways to say the same things, to the same people as well as new things to new people. These additional streams of communication can appear to be noise: imprecise, superficial and useless. The problem as I see it, however, is not the excess information, but an inadequate filtering mechanism; filter the noise, and useful communication can occur, and can be captured.
Good luck with your venture into Twitter, I will be following.
Thanks again for the great read.
All the best,
Alex
Good point. We'll keep Twittering to see how it goes.
Hi,
As an avid aviator and enthralled reader of your daily thoughts, I was amused enough with the spelling error in your latest reckoning to laugh out loud. I hope you appreciate the humorous side.
The adage that god created economic forecasters to make meteorologists look good resonated with me on this one!
"--Now weather people began selling bonds because they thought stocks were a better bet, or for some other reason, we can't say. "
Have a great day,
Regards,
Rob
Oops. Sorry. We don't catch 'em all. But we can definitely appreciate the humour. Have a great weekend! And remember, we'll be sending out a trial version of a weekend edition of the Daily Reckoning this weekend. Hopefully it will be error free!
Dan Denning
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- Reader Mail: Oil, Energy, Growth, Future of the Planet and More
- World Economy Faces Hyperinflation or Deflation?
- Messages from Copenhagen Climate Change Conference
- Why Inflation Or Hyperinflation Lies in Wait for the U.S.
- When Fear Takes Over: The Prospect of Hyperinflation
About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
Comment by Pete on 1 May 2009:
A weekend edition! Rock on!
Comment by Hoss on 1 May 2009:
800,000 unoccupied houses eh? What's the bet none of those are around the beaches in the major cities. Location location location fellas.
Comment by John on 2 May 2009:
Hoss,
yeah you're right because having a holiday home near a beach (that remains unoccupied for most of the year) is a concept that no one has ever thought of before.
Comment by Greg Atkinson on 2 May 2009:
Dan is being a little selective in his use of the unoccupied dwellings data he keeps mentioning. If he wants to quote from report I suggest he includes what the National Housing Council says about unoccupied dwellings:
"There is little information available on the utilisation of these vacant dwellings. Specific purposes include vacant stock awaiting sale, demolition or replacement, and holiday homes"
So some of these homes are not available for people to move in.. for example a holiday house might be empty for much of the year, but it does not mean it is available to house another family. A house about to be demolished is also probably not a great place to move into either.
The report also states:
"The proportion of unoccupied dwellings in 2006 also varied significantly between different parts of Australia – for example, the proportion was 4.95 per cent in outer western Sydney and 11.2 per cent for the Gold Coast, supporting the assumption that a large proportion of vacant dwellings are holiday homes."
Again..they homes might be empty, but they are not available to hose new immigrants etc.
You can find more details here: Projections of the demand-supply gap
This link provides a little more information than the link Dan supplied
I would also add that the data is from 2006...3 years ago. I suspect things have moved around a bit since then.