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.
What’s so funny? Is this an argument? Please send the champagne chilled.
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?
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.
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,
Good point. We’ll keep Twittering to see how it goes.
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,
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!
for The Daily Reckoning Australia