The Fed might change its mind and rush to support asset markets again. But that seems unlikely today. If it doesn’t, then debt, divorce and death will force an increasing number of people to sell their home. And if buyers continue to disappear, then sellers will have to continue cutting prices in order to try and achieve a sale, as the bubble finally bursts.
Chemicals and the Economy
The world’s real estate bubbles start to burst, as central banks pivot to focus on inflation
Problems in the housing market aren’t just confined to the US, UK, Germany and China. The average house price/income ratio is now back to the highest level since records began. And the problem for homeowners is that potential buyers are already starting to disappear as mortgage rates rise – and affordability reduces.
Baby boomers’ spending decline has hit demand and inflation
The Financial Times has kindly printed my letter below, wondering why the US Federal Reserve still fails to appreciate the impact of the ageing BabyBoomers on the economy Sir, It was surprising to read that the US Federal Reserve is still puzzled by today’s persistently low levels of inflation, given that the impact of the ageing […]
Ageing boomers are no longer spending
The Financial Times has kindly printed my letter below, suggesting that President Trump’s focus on tax cuts is misplaced, given the headwinds created for spending and economic growth by today’s ageing US BabyBoomers. Sir, Gillian Tett provides an excellent analysis of the wishful thinking that seems to dominate US economic policy today (“Trump tested as […]
US homeownership equals all-time low as demand patterns change
It is is 10 years since the US subprime bubble began to burst, with disastrous results for the US and global economy. The US Federal Reserve had created the bubble in the belief that higher house prices would boost the economy. It then made a bad situation into a disaster by refusing to accept that […]
China’s lending problems begin to worry wider world – too late
Suddenly, people are starting to talk about China and the risks it creates for the global economy. There is a lifecycle to the way that such issues develop in the general consciousness, as John Mauldin has observed. And so this development suggests that we are now well along the process, as highlighted in the chart above: […]
Housing debt challenges the American Dream
The US housing market collapse has wiped out $6tn in wealth since it began in 2006. But even today, little is being done to solve the critical issue – that homeowners took on too much debt, which will never be repaid. As a result, the situation continues to get worse, not better. And some influential […]
US wages continue to stagnate
The US Fed’s move to launch its QE2 Lifeboat continues its policy of focusing on measures to boost liquidity. Yet as the blog has long argued, today’s problems are based on a lack of solvency not liquidity. Therefore it worries that the Fed’s efforts are likely to miss the mark, again. The above slide, based […]
No news on Obama’s plans for Fannie and Freddie
Its nearly 18 months since the US government nationalised the 2 home loan giants, Fannie Mae and Freddie Mac, at the start of the September 2008 financial crisis. Today, their current obligations amount to $3.7trn – larger that the total UK economy. And the Wall Street Journal notes that their cumulative losses on home loans […]
Insolvent US banks can’t lend
Many US policymakers are still in denial about the underlying causes of the downturn. They argue it is due to a lack of liquidity, and are thus encouraging ‘hot money’ to flood into financial markets. But the new ‘bubbles’ created by this wishful thinking, such as today’s $80/bbl oil prices, are making the underlying problem […]