Thursday, September 07, 2006

Pop Goes The House Bubble

For a long time, a lot of people have been saying the housing bubble will pop - I'm just one of many.

The problem is that all of the money the governments of the world created to stop the collapse of equities and deflation flowed into real estate.
The housing collapse is like the feared end of a huge Ponzi scheme. Real estate is such a huge market, there is no next market I can see that will allow a new even larger bubble to replace this one.

Commodities may benefit if economies manage to keep growing, an unlikely prospect.

The money may flow into the one huge market left - currencies. Precious metals may increase relative to fiat currencies - at least holding their value while dollars, yen, and euros drop.

The flood of money may be offset by the loss of value in real estate - but there will probably still be way too much cash slopping around the world.

When you read that next article about inflation being caused by business or workers - don't believe it. Inflation is too much money - created by politicians and their appointees.

The battle is on.

The war between collapsing economies and real estate fighting against governments eager to keep spending money they don't have will not end well.

What will happen when the inflating hurricane surge of loose cash hits the flood waters of selective deflation is not yet apparent. However this is probably not good news for the stock market.

A time to increase hedges may be at hand.


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