And then I go through the global position of governments printing money and being broke and the financial system being rigged
Gee, no, really? Huh. Hoocoodanode? I wonder what that could do to the nominal price of real estate.
Your right Austin. I mean whocouldanode? Trouble is that the warning signs are so far removed from everybody’s radar, they never notice.
Even if they did notice, they would need some grounding in economics to understand the implications.
And it happens slowly over time so with everything that is happening in a persons life, it is the furthest thing from a persons mind.
I was talking with my wife the other day over dinner about the issues. My 10 year old son, asked what I was talking about.
I pulled a $10 note out of my wallet the other day, scrunched it up and asked him how much it is worth?
He said it was worth $10. No its not worth anything I replied. It has no function to do anything else apart from a medium of exchange and has no other intrinsic value to do anything else.
But as long other people think its worth $10, then its worth $10 to exchange for goods and services.
So when did the rot really set in? 1971 with the collapse of the Bretton Woods system.
I read it as a couple of paragraphs in economics text books in 1976 and thereafter.
Why was it important. Quite simply politicians learnt that like all fiat currencies in the past, they could just print money to gain favour and votes.
It made borrowing easier, they could run deficits and run up huge loans. All the time kicking the can down the road.
But they had one Achilles heal. Inflation!
Some of us remember inflation in the late 70's and 80's.
Inflation rises, then interest rates must rise. That smashes property prices, and did do in the late 80's.
Even Geezers admits his properties lost 40% in value when the late 80's recession hit and interest rates were at 17%
How many times have you seen somebody on this board say. There is no inflation so they wont raise interest rates?
When supposedly 83% (somebody can run away and come back with the exact figure) of an average persons disposable income is spent on property in Vancouver because your property values have doubled over the last decade tells me you have an inflation issue. But it was never reflected in the CPI. So wages never went up, but property prices could and not affect inflation nor interest.
And why is that?
Because in the mid 90's, the central bankers of the world (G20, G8) agreed to change the definition of what constituted inflation.
No more problems like they had in the 80's!
Now the stage was set. Unlimited ability to print money, changing house prices that wouldn’t feed into interest rates, it was party time!
Lot more to discuss on how this relates to gold and ill get to that shortly Austin.
Now it is a beautiful sunny winters day here - I’m going to go and do 70km on the bike. Getting those legs in tone to ski in beautiful BC at xmas.
Geezer: "What if somebody listened to Taipan and doesnt buy".
Well, they will thank their lucky stars, that they arent one of the thousands of miserable souls who cant sell their properties in 2013!