| This is a common misconception that originated from the inflation in the 70s and 80s where wages increased with the inflation. Actually the inflation WAS salary inflation (caused by rising interest rate when most money was not debt) much different from todays energy inflation (and debt as money). If your salary does not increase with the inflation, you don't get the additional 4.5% in salary and then you are NOT getting 2% real returns. Combine that with all energy costs going up and you have a real problem because the governements cannot raise interest rates (without crashing everything), that leaves banks to compensate for energy (which you cannot print) which means people are going to get hurt (the interest spread, the difference between what a bank pays to the central bank and what you pay to the bank, is going to grow until things get out of hand). My prediction is that house prices cannot increase more than general inflation now since the margin of the central banks is now permanently zero (we have had official zero interest rate for some time, but not for the banks, only last year did the central banks remove the spread for banks to borrow money from or hold money at the central bank, but now they cannot increase the incentive to borrow ever again for this civilization) this means the debt collateral (it's not an asset if you have debt on it) wont be able to appreciate either! And energy inflation is VERY deflationary for housing because you need to buy heat, water and food before you pay rent/interest. One easy way to see this trainwreck in motion is to watch the state of houses that need repairs, the second you cannot borrow to repair a house the music stops. In fact, that you can borrow to do maintenance in the first place should have been enough warning. We're living through the biggest margin call possible right now (a margin call on money itself, or as you should call it "housing backed debt" because thats 99% of it) and there is nothing anyone can do about it! The end game is that there is a split between debt money and non-debt money in terms of what interest rate they have, and again the spread will increase until things get out of hand, they allready are; in some countries you pay negative rates on your savings above a certain amount and at the same time the loan rates will increase in the other direction! Spreads and margins! |