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August 03, 2005

Gitterdammerung (The Twilight of the Gits) - Or the coming cataclysmic property crash - and its even more cataclysmic consequences

Posted by S. J. Masty

The current global property price boom is the biggest bubble in history - we are headed for a truly cataclysmic property crash. The consequences of the crash will be much greater than they would have been in the past as so many of us have become so dependent on property price inflation. Much of the wealth of much of the middle classes will be wiped out. But the consequences will be even greater than this. Protectionist and illiberal policies will be demanded by newly impoverished electorates, resulting in both the end of globalisation and the gradual erosion of civil liberties. This is the argument of public policy communications expert S J Masty. Needless to say the views in this article are those of S J Masty, not those of the Social Affairs Unit, its Trustees, Advisors or Director. Let's hope he is wrong.

"If stupidity got us into this mess, why can't it get us out?" Will Rogers

Our politicians and media masters pussyfoot about, some opportunistic and others scared half to death - so even titbits of good analysis are few and understated. Still, warning that the housing bubble "may lead to a readjustment" is tantamount to describing the tsunami as a spot of bad weather. It is going to be a crash of apocalyptic proportions with deep geopolitical repercussions.

(If I am right, it also means that the next Conservative Party leader will become Prime Minister even if the party picks a drag queen or a Labrador Retriever. But alongside the crash, even to lifelong Tories, it will feel akin to being given cancer and a free ice cream.)

On 30th June, the US Federal Reserve edged up interest rates to 3.25 percent, their ninth hike in as many months, making no hint that the tightening process is about to stop. Chairman Alan Greenspan, however, denied that there was a housing bubble. This is the equivalent of a spotty teenager in a red blazer interrupting the film playing at your local Cineplex to tell you that, um, the cinema is not on fire, the muffled screaming merely, er, comes from the soundtrack of another movie playing next door, so move quietly toward the exits and pay no attention to the smoke. They are hired to say that. Moreover Mr Greenspan retires in January 2006, in the nick of time.

But The Economist ["In come the waves", The Economist, 18th June 2005, pp 73-75] let the cat out of the bag. On 18th June they reported that housing prices have since 1997 risen by 225% in South Africa, 192% in Ireland, 154% in Britain, 145% in Spain, 114% in Australia, around 73% for America and about the same everywhere that is developed enough to have flush-toilets, apart from Germany, Japan and Hong Kong. It said that the:

total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100 percent of those countries' combined GDPs…it is larger than the global stockmarket bubble in the late 1990s (an increase over five years of 80 percent of GDP) or America's stockmarket bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history.
By comparing the historical relationship between house prices and rents, they calculate that "property is 'overvalued' by 50% or more in Britain" and elsewhere. Now, many so-called investors are buying second or third properties which they have no hope of renting out at anything but a loss, planning to lose money until the property appreciates. This, says The Economist, is one of the classical definitions of an economic bubble. Given the volume, it sounds more like the Hindenburg zeppelin.

Before we look at what happens when (to mix our metaphors) the Four Horsemen come home to roost, let us see how the mess began. Madsen Pirie, president of The Adam Smith Institute, wrote in The Business newspaper a year ago that Gordon Brown's costly stealth taxes and regulations ["How the politicians have privatised Keynesianism", The Business, 8th August 2004]:

…contributed to a poor performance by equities, down by 10.5% since Gordon Brown became Chancellor, against a real (non oil) economic growth of 21.5% over the same period. Housing, by contrast, is up by 125%, making it far more attractive.

Whether intentionally or accidentally, the dot-com bust together with Labour's stealth taxes and regulation drove investors out of shares and into property. This was encouraged by what Financial Times journalist Andrew Bounds called "the near abolition of regulatory controls on lending". This resulted in mere cursory credit checks on applications for mortgages which are now awarded for up to seven times a couple's combined income. All the while, UK individual debt has topped one trillion pounds.

Dr Pirie called this "privatising Keynesianism". Keynes thought that government should spend more to soften a downturn in the business cycle - but whether it borrowed or merely printed inflationary currency, either made the final day of reckoning inevitably worse. Now, Dr Pirie said, government managed to get the private sector to "borrow and spend as governments used to".

With the economy pumping balloon-juice, government could borrow more than ever at lower cost. So government kept schtum until virtually anybody outside of Wormwood Scrubs could get a mortgage, and many an otherwise honest couple were encouraged to lie, exaggerating income in order to buy a first home. According to Mr Bounds last August ["Escape from high-cost Britain", Financial Times, 27th August 2004]:

The cost of an average house in London (according to Halifax bank) is about £245,000. Such is the ripple effect from the capital that even a similar abode anywhere else in south-east England costs £216,000. That is almost 10 times the average wage. In this part of the country, nurses share rooms in decaying houses with their colleagues, graduates take any job they can get to reduce their debts and policemen commute two hours a day to get to work.

Yet for some years now, at little wine-and-cheese affairs far from luckless and underpaid nurses or policemen, seemingly intelligent, middle-class English people assume moronic grins and glazed looks that I had only seen before on Hari Krishnas, while they explain how their lacklustre two-bedroom flat, by the time that they retire, will equal the gross domestic product of Brazil.

I sometimes ask how this could be – after all, Britain has acquired no vast fleet of new products or services, no army of new customers to justify this rapid expansion. Almost too blissed-out to articulate, they wave their hands airily, waffling about the Hong Kong Chinese craving escape, or the Russian plutocrats needing luxury pads in which to house their floozies. Or else they do a little dance step and tell you that Britain is so desperately hip, so completely and utterly the only place to be, dahling, that everyone will pay anything to live here. Really? In Mile End? While Hubris babbles, I hear Nemesis sharpening her claws.

For government, it must feel too good to stop. Inflated housing prices and inflated salaries lead to increased tax revenues and cheaper, easier government borrowing. Local councils also profit, as the owners of Volkswagon-class properties are made to pay Bentley-class rates. But didn't anyone catch even a faint whiff of inflation here? Apparently not, and just to make sure, some years ago this Labour Government took housing off the index of price fluctuations by which inflation is calculated – in other words, the passengers don't know how fast you're driving if first you smash the speedometer.

Responsible leadership would have brought vast political risk. If at any time over the past five years government had acknowledged this off-the-books inflation, they would have needed to increase interest rates which would have ended the party before, rather than after, the 2005 General Election. It also might have more swiftly precipitated the disaster that now looks to be about six to twelve months away.

Our Baby-Boomer greedy gits mortgaged their homes to buy second properties then mortgaged those to move up or to buy even more. This drove prices higher, forcing youngsters to pay more than they can afford in order to climb onto the so-called "property wagon". For different reasons, each became indebted to the hilt, over-mortgaged and "maxed out" on their credit cards – the Boomers out of avarice, and the kids out of cruel necessity.

If prior to the election, interest rates had climbed, so too would bankruptcies and Labour knew it. Being over-mortgaged and caught short by a hundred quid a month is no better than needing ten thousand. And as we will soon see, these sorts of bankruptcies are contagious.

But the day of reckoning was far from anyone's mind, and government helped keep it there. Property-owners were too besotted with greed and free money, plotting what little bijoux they would next snaffle up in France, Spain or Croatia or, for the British lower middle-classes, Bulgaria. The Laws of Gravity had been repealed, money was free and it would remain so forever, while the politicians were as giddy as the fools that they purported to represent. Being in government, the nominal Left shut up and kept spending, while supporters of the much stupider Right (one cannot call such imprudent, gullible people conservatives) decided that debt, over-consumption and sheer vulgarity were perhaps virtues after all.

Kipling predicted the outcome in his poem, The Gods of the Copybook Headings, referring to the platitudes that Victorian children were made to write while learning penmanship – "if you don't work you die", or "stick to the devil you know". Cyclically seduced by what he calls "the gods of the marketplace", fools ever abandon common sense for the attractions of materialist make-believe and always pay dearly:

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return.

So what happens next? Even The Economist, hoping to cheat the hangman, half-heartedly writes that perhaps the bubble will deflate slowly. They dare not say how slowly it would need to deflate. The economy grew by, say, 21% over a decade while property prices inflated by 154% - so if property prices froze tomorrow, how many decades would it take for economic growth to catch up? How fast can your pig grow wings?

So property prices have begun to deflate, and by sometime after January the decline should become too large and too rapid to ignore. Assets shrink, and as people go bankrupt and lose their homes, the state must spend more to support them. From where will that money come as the tax-base constricts?

At first government will try to borrow more, but there will be less money available to borrow - individuals and corporations will be worth less as property prices fall. In order to make gilts more appealing - in order to make lending to government a more competitive option in a shrinking market - government can raise interest rates but that will cause more families to default on their mortgages, resulting in more homes repossessed and more people made homeless. It will also result in more business failures and an ever smaller tax base for government.

By this point, someone will notice that government carries a lot of hidden debt from various public-private-partnership deals where business build hospitals, for example, which government acquires over time. Clever accounting has kept these from being listed as formal government debt, but the money is owed nonetheless. As economic contraction begins, British individuals carry £1 trillion in debt, more than ever before, while housing is inflated to effectively 20% of GDP, and government is on an historic spending spree owing considerably more than appears on paper, with social spending requirements set to increase as markets crumble.

Government could then economise by sacking part of its workforce, but that entails enormous political cost as well as money. A private company can sack workers at little cost to itself, but every government worker made redundant receives benefits for which government must also pay. So government makes small savings by downsizing but generates enormous political unpopularity.

It is quite the dilemma. In cases such as this, every time that government gulps for economic oxygen it asphyxiates more people and accelerates the collapse, again increasing its own need for oxygen, further accelerating the process. Caught in a cleft-stick, government either exacerbates the crash by raising interest to permit borrowing, or it suffers inadequate funding and cannibalises its political base by sacking its own workers. What can be done? Government will inflate the money supply – printing currency is its only politically acceptable way out.

This is the stage in the melodrama when our hero has moved from an annual glass of cooking sherry through flagons of methylated spirits and keeps heading for the harder stuff. This is the economic equivalent of free-basing, the end of the trail.

Government's drug-of-choice in the 1960s and 1970s was printing paper money to pay its bills. This lowered the value of money already in circulation. So while keeping both hands in clear view and away from tax policy, government could pick your pocket and clean out your savings account, one percentage point at a time. This is why, by the time that Ronald Reagan turfed out Jimmy Carter in 1980, US inflation and interest rates were well into double-digits. This is how President Robert Mugabe has financed his political thugs by liquidating the savings of every family in Zimbabwe. This is what ruined the Weimar economy and gave Hitler his big chance.

Here it becomes politically interesting, but first bear in mind the difference between today's greedy git versus someone hit by the Crash of '29. Our forbearers maybe lived it up too much in the Roaring Twenties, but they had also survived the trenches of the Somme, so they were better accustomed to hardship than today's spoilt Baby Boomer who suffers anxiety attacks while stuck in traffic. Will the gits buckle down and work three shifts a day as my grandfather did? Or throw all their toys out of the cot and turn nasty? No prizes for guessing.

The first casualty of the crash will be globalisation. Eight months after the Crash of '29, needing to find foreign scapegoats to blame for America's economic pain, the US Congress launched a trade war via the protectionist Smoot-Hawley Act. This is credited by Nobel Laureate Milton Friedman and others with deepening and extending the Depression in America, much longer and harsher than it lasted in Europe. This time, with the global economy much more interwoven than before, a US-China trade war will not let Europe escape and the casualties will be everywhere. In Washington the first rumbles of a potentially anti-China trade war are already being felt, and if the economy goes for a Burton then China is the obvious target, though trade wars hurt everyone and help nobody.

Presently China, intimidated by American threats into recently relaxing the value of the yuan to the dollar, will of course now have less purchasing power with which to borrow – less money with which to prop up America's profligacy. So the US Congress has foolishly reduced the trade-deficit a little and hastened its own day of reckoning a lot.

On both sides of the Atlantic there will be plenty of political fallout when the crash comes. First, Labour will be rusticated for another generation, but what political policies will replace humiliated and gastritic New Labour?

Angry, resentful, selfish people are easy meat for illiberal politicians. We need not consider how the Bush Administration may capitalise on this (although re-reading Mussolini might help), so let us look closer to home. Britons of the depressed '30s and wartime '40s were a tolerant people, reluctant to ban anything that might inconvenience someone else. We are not like that now. Government then was well-educated and, to some degree mindful of traditional rights – now a year doesn't pass without government cooking up another reason to, say, restrict or abolish trial by jury. And nobody objects.

The biggest economic losers, initially, will be the young - with less liquid capital, with less ability to withstand higher interest rates and ride out the storm. Those such as nurses and policemen, mortgaged to the hilt, will be the first to go to the wall. But the young grow older and come to rule, when they will be asked to pay for all us far more numerous greedy old gits who refused to save, originally expecting our (eventually repossessed) portfolio of overly-mortgaged, overpriced properties to support us in old age. What mercy should paunchy BMW drivers and sagging Starbucks moms expect from today's sullen 20-somethings, once we have made the bankrupt young stockbrokers lose their tiny, overpriced flats and the hooded chavs queue for soup?

One hates to think. But we are vastly different than our pre-war elders, less aware of our traditional rights, less interested in our responsibilities, and less chary of granting extraordinary powers to a state with increasingly few compunctions. Now, around the corner bounces the biggest economic bubble in history.
© s j masty 2005

S J Masty advises foreign governments on public policy communications.


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Comments

This was just what I needed to read the very day I met a mortgage broker to discuss my forthcoming plunge into first-time-buyer-land. If I procrastinate another two years and property prices soar majestically onward and upward, I'm suing, Mr Masty.

Posted by: Seamus Sweeney at August 3, 2005 06:40 PM
•••
As economic contraction begins, British individuals carry £1bn in debt, more than ever before, while housing is inflated

Should that not read £1 trillion?

Posted by: Thersites at August 3, 2005 07:08 PM
•••

Great piece. There is one thing the author is wary of mentioning and that is the prospect of more war.
For me that is the likeliest outcome of the bubble bursting and I'm not sure if the author avoids the mention of it because he doesn't believe it or because he doesn't want to be too alarmist . But he did make a reference to Mussolini so perhaps he was hinting at the possibility of yet more conflict.

I believe the wars of 2001 and 2003 were directly as a result of the stockmarket collapse of 2000 onwards.

The DJIA was at 7700 and falling on the eve of the Iraq war and miraculously put on 3000 points in just over a year. They called it the Baghdad Bounce. The FTSE went from 3300 (and falling) to 5000 in the same period.

So brace yourselves for more war as that is the ideal reflationary tool allowing governments to pump lots of fresh money into the economy.

I hope he is right that the economic
fallout will see Labour out of power for a generation or even finsihed as a political force.
However I have doubts and wouldnt be surprised if they entrench themselves in power by some means as yet unrevealed.

It is curious he should mention Mussolini with regards to America and I wouldn't dispute that reading for a second. However when it comes to finding a modern equivalent of the current Labour government we could do worse than looking at Communist China.
Rigid social control by the state and harsh punishment of deviators on one hand allied with a freewheeling capitalism on the other hand.

That is the reality of Communist China and is increasingly the reality of UK life today.

I cannot bring myself to compare Labour with Mussolini or other fascists because they are clearly not racist so I am more inclined to draw comparisons with a country that I am very sure Mr Blair secretly admires a lot.

Posted by: sam mccartin at August 4, 2005 12:04 AM
•••

Thersites, yes I meant one trillion [now corrected], thanks for catching it.

MrMcCartin, what interesting remarks! I had not thought of war, and when the Athenian economy went flat after the security money from the neighbours had all been spent on public works projects, Pericles talked them into a war with Sparta -- that they lost. It is a danger. And your point on China is fascinating. There a kind of slave Homo Economicus permitted by his owners all the creature comforts that he can manufacture so long as stays far away from power. It is an interesting kind of Neofascism because it gives the vast majority the only things that they want -- in the case of the growing undereducated middle class, food and sex and toys. It would work fine here.

Posted by: s masty at August 4, 2005 09:06 AM
•••

This is the best article on the state of the economy I have ever read!

I will print it out and frame it, this is pure profecy and I will save in my legacy for my descedents.

Well done S Masty, please write more!

Posted by: Luisa at August 4, 2005 12:45 PM
•••

An extremely insightful look at the precarious position much of our population is unwittingly in. Do people ever learn? There really is no safe investment that guarantees massive returns. By the point it looks like a one way bet, the potential rewards are less and the risks higher as you are much closer to the peak.

I still can't believe the number of people who do not regard the level of public and private debt as a massive problem for years to come. You can have now and pay tomorrow, but remember that tomorrow you will pay and not have. Tomorrow is not far away now.

Posted by: Paul at August 4, 2005 01:39 PM
•••

Broadly in agreement but government in the UK at least doesn't control interest rates, MPC does! Maybe the UK interest rates are going to be influenced by the international picture. UK interest rates will only rise in the situation where the MPC sees fit to raise them. Despite today's quarter point downward move, I believe that most analysts would say that rates are due to be on an upswing in the cycle - which could support the S Masty argument. That said, they are likely to move as slowly up as they did down.

It is interesting to debate what triggers will cause a readjustment in house prices. Surely it follows supply and demand. Prices will only fall when the sellers have no choice but to sell, due to circumstances or 'fear' of falling property prices. I think this process has started already but it takes a long time to feed through into property values, as in other periods of property price fall.

Posted by: bedlington at August 4, 2005 01:58 PM
•••

As a 32 year old prospective first time buyer who's stayed out of the market for 5 long years I found this very interesting - but perhaps too alarmist

I too think house prices will collapse (say >25% drop in 2 years) - but don't think wider fallout will be so bad.

This is because house prices have increased rapidly in value due to a relatively small number of sales (look at upmystreet.com) - so for many people all that will happen is that their housing asset will have appreciated and then depreciated.

For those that sold and bought the same is true (with the small affect of the inflated price difference increasing their mortgage)

So as always that leaves the buy to letters and first time buyers - the affect here depends on how many can keep there heads above water with large debts in a recession - I would imagine it will be similar to the last housing crash

As stated the government will have lower tax receipts - but they seem ok going well into the red to fund this (Gordens economic cycle may need another few years/decade adding to it). Also saving rates should increase as people stop saying "my house is my pension". And because people will have had their fingers burned with risky investments - large parts will go into government bonds - which should help keep interest rates down.

It's 4.5 yrs till next election so we could well be turning the corner by then - and the Labour party leadership are consummate politicians (possibly only Maggie with her well timed falklands war - could hold a torch to Blair) - so they may well remain in power (especially as there will be a global recession to blame).

sound reasonable?

Posted by: jw at August 4, 2005 01:58 PM
•••

Great piece.

Interest rate dropped a tad today. It's starting in earnest.

Posted by: Olly at August 4, 2005 02:18 PM
•••

I wrote a similar article related to this that you might find interesting:

http://www.pyrosoft.co.uk/2005/07/property-developers-struggling-to-sell.html

Posted by: Paul at August 4, 2005 02:25 PM
•••

Great article. I've been thinking along the same lines for quite a while. It's clear that most are expecting a housing bubble bust rather than a credit bubble bust that will take down housing merely as a side-effect.

What's comning is that the state won't be able to support both those on welfare and those in retirement. My bet is that the retired will win the political fight and everyone of working age who can even crawl will have to work.

As for printing money to get out of the problem. It's the classic response to the deflation following a credit bubble and this has certainly destroyed more economies, and even currencies, than has deflation, which is at least a self-limiting phenomenon. We only need to look at what happened to the middle class in Argentina for the end of that story. Sadly though, the author is probably right: the greedy and overborrowed masses won't have the stomach to work through a few years of deflation and so it's time to rent, buy gold, and take a front row seat for the most spectacular crash in global history.

This is also bang on concerning the politicians. The last credit bubble of anywhere near this size was England's South Seas Bubble. Afterwards it was discovered that at least a third of MP's; halfgf the House of Lords and most of the Royal Family had been bought and paid for by the South Seas Company. Can it be merelly coincidence that MSP's are today accused of using their Parliamentary allowances to speculate in Edinburgh's property bubble? What's yet to be revealed about Westminster MP's?

As Warren Buffet said: it's only when the tide goes out that we discover who's been swimming naked.

Posted by: Mike Holmes at August 4, 2005 03:15 PM
•••

yeah, I have to say I pretty much agree with the whole article. The sh*t is going to hit the fan, and soon. I just hope the sensible few can ride out the storm. Brace yourselves people.

Posted by: Chris at August 4, 2005 03:26 PM
•••

Firstly, I will declare my interest, as a first time buyer, who believes in cycles and biding my time.

This is a most constructive and well balanced article providing the facts. Along with the Economist's reports on the global housing market, this is the most bearish article I have read (not including data/information found at www.housepricecrash.co.uk ), since the bubble went 'pop' last year. Not that this has been acknowledeged by the majority of the population.

This perception is due to the media and vested interests colluding and spinning the data to make the public believe that the market is fine and simply entering a phase of stagnation (at the top of a peak for goodness sake) and will gently fall, allowing wage inflation to catch up with house prices!! My view is that the soft landing scenario, is a near impossibility and that there "is more chance of finding Elvis on the moon" (John Wrigglesorth stated this in relation to a crash happening).

HPI has been falling for 13 months according to Hometrack. It's London index reflects house price deflation and Nationwide and Halifax indices are likely to join the show by recording absolutely no growth for 2005, even after seasonal adjustments are applied. I believe house prices will undergo a significant correction, which has already begun, and I do not think that the author's prediction of 50% falls is unrealistic. Why is it that homeowners welcome rampant house price inflation but can not comprehend large falls in value?

Property is not a one way bet as the majority of the British population commonly believe but moves in cycles (including up and DOWN!) and we have entered the downward phase, which I predict will be far more reaching and severe than the last housing downturn (1989 - 1995).

In any event, high house prices as a symbol of wealth are mainly illusionary as only a few sellers actually benefit i.e people trading down, moving to a cheaper area or selling up. Otherwise, one is just paying far more (after taking account of real inflation) for the same thing. The added problem this time is that we are currently in a low inflationary environment.

With regards to the general state of the economy, the very fundamentals that Wrigglesworth (Hometrack) Ellis (Hallifax or Nationwide) et al quote as underpinning the housing market are starting to crumble:

Repossessions are increasing

Bankruptcies are increasing

Unemployment is increasing

The other factors that will determine the path of house prices are related to the following:

Mortgage approvals have plummeted

Mortgage Equity Withdrawals (MEW) are down

The 'credit crunch' has started. Egg APR on credit cards has increased from 13.9% to 14.9%

The banks have started to report increased debt provision.

Developers are offering incentives such as paying stamp duty, giving cashback to shift properties

Many homeowners are coming to the end of historically low 2 year fixed rate mortgages

Many people have interest only mortgages (renting from the lender)

Many have lied to buy (self certification mortgages)

BTL yields in London are low and some landlords are having to subsidise their 'investment'/tenants

It is cheaper to rent than buy in many regions. That is right. Renting is not always 'dead money'

There is little or no capital appreciation

There are a glut of rental properties / new properties, which will depress prices.

Property for sale is outstripping demand

Volumes (properties for sale) have dropped off a cliff

The 'need' to jump onto the housing ladder has evaporated as prices are no longer increasing

First time buyers are priced out of the market

House prices to earnings ratios are at historical levels

Secured lending (mortgages) payments combined with unsecured lending (credit cards, loans etc) payments are equal to or higher than the percentage at the time of the last correction

Today interest rates were reduced by 0.25%. This will not halt the house price slide that has started in earnest. As for a trigger, the market collapsed under is own weight as all asset bubbles do.

I look foward to the Land Registry data Q2 2005 which is released on August 8th.

Posted by: Buffer Bear at August 5, 2005 12:13 AM
•••

This a a fantastic article!.. really great work. You deserve some sort of prise for this one.
I read 30 or so articles a night and this one is at the least the article of the month.

Posted by: Ryanonthebeach at August 5, 2005 05:45 AM
•••

Fantastic article.

Would appreciate more advice for a non-house owning person with savings.

Is the best advice to buy gold, rent, stock up on tinned food and brace yourself ?

Posted by: stuart at August 5, 2005 10:09 AM
•••

stuart, i hope i have not given the impression that i've bought a gun and a mountain of freeze-dried dinners and moved to idaho! but if my pessimism is deserved, stay liquid for now. when the house prices bottom out, buy property. and/or if inflation starts in earnest get as much gold as one is permitted to own (it varies from country to country). gold prices reached somewhere around $820 an ounce 20-25 years ago, if memory serves, around double what it is now, and that was without a big implosion. this is not genius, and as you can tell i am not an economist.

Posted by: s masty at August 5, 2005 04:20 PM
•••

As an interesting kicker, you may have noticed that the price of oil has recently been rising a lot. It is possible that we are approaching a point at which demand for oil outstrips supply. What this means is that, aside from a few fluctuations for recessions/depressions, the amount of energy able to run the global economy will go into a terminal decline [see www.powerswitch.org.uk for fuller details]. I suppose that that could count as the bursting of the biggest bubble ever.


Peter.

Posted by: Peter Hiett at August 8, 2005 04:17 PM
•••

This may seem like a silly question but why can't we just print loads of currency and swap it with other coubtries for the things we need. I mean, they seem really keen to get it. Then we could just cancel that currency and start afresh with a new one. They will try and buy things off us with the old currency but it will be invalid.

Just wondering!

Posted by: deano at August 8, 2005 06:06 PM
•••

Well, well, well. Who would have guessed it?!

Rob. March 2009

Posted by: Rob at March 27, 2009 02:08 PM
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