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warlock5 · 11-08-2004, 09:38 AM

Here is an even scarier article:

"So what is the cause of the low interest rates responsible for the current unsustainable situation?"

"The answer is the massive purchases of U.S. government bonds by Asian central banks, particularly the Bank of China and the Bank of Japan. During the first half of this year foreign central banks bought more than $201 billion of U.S. assets, $180 billion of which was U.S. government bonds. This means that foreign central banks financed more than 60% of the U.S. current account deficit and nearly the entire increase in government debt."

"It might seem strange that they are so interested in buying such low-yielding securities as U.S. government bonds. But the reason why they do it is because they want to avoid a sharp increase in the value of their currencies against the dollar, which would deal a heavy blow against their export industries."

"But this is in itself an unsustainable situation. Their increasing purchases of U.S. assets make them increasingly vulnerable to heavy losses if the dollar falls, but the increasing U.S. current account deficit forces them to increase their purchases to prevent their currencies from rising. The longer this unsustainable process is allowed to continue the heavier losses that will be inflicted on both sides."

"Only if either Asian countries accept a sharp appreciation of their currencies or if the U.S. adopts a much tighter monetary and/or fiscal policies can the situation be prevented from getting worse. But as both solutions would create temporary downturns in the world economy, it is doubtful that the politicians in either Asia or the United States will be willing to face up to them."

"The conclusion is that Alan Greenspan and George W. Bush did not prevent the stock market bubble of the late 1990s from turning into a crisis. They only postponed it."

full article - http://www.mises.org/fullstory.aspx?Id=1670

That article talks about real estate prices too.

I think being completely negative about investments is counterproductive, but I also believe people should make sure they are anticipating a bit of risk in real estate just as they would with the stock market.

I'm no expert, but I see two other things, besides the other articles, that are bad for real estate right not:

The first, and most obvious, is the interest rates. They are going to go higher and quite a few people won't be able to afford their mortgage payments.

The second, the growing number of retiring people who won't want or be able to live in large homes anymore. (in other words: retirement homes/apartments might be a smarter investment right now.)

Anyone else have any ideas about this? I can't be the only person thinking this way, there was someone recently who posted a picture of a very nice home that he had sold and added the comment that he suspected the housing market was going to go lower so he was "downgrading" on his next home purchase.

11-08-2004, 09:38 AM
warlock5 Confirmed User Join Date: Jan 2004 Location: Uranus Posts: 2,808	Here is an even scarier article: "So what is the cause of the low interest rates responsible for the current unsustainable situation?" "The answer is the massive purchases of U.S. government bonds by Asian central banks, particularly the Bank of China and the Bank of Japan. During the first half of this year foreign central banks bought more than $201 billion of U.S. assets, $180 billion of which was U.S. government bonds. This means that foreign central banks financed more than 60% of the U.S. current account deficit and nearly the entire increase in government debt." "It might seem strange that they are so interested in buying such low-yielding securities as U.S. government bonds. But the reason why they do it is because they want to avoid a sharp increase in the value of their currencies against the dollar, which would deal a heavy blow against their export industries." "But this is in itself an unsustainable situation. Their increasing purchases of U.S. assets make them increasingly vulnerable to heavy losses if the dollar falls, but the increasing U.S. current account deficit forces them to increase their purchases to prevent their currencies from rising. The longer this unsustainable process is allowed to continue the heavier losses that will be inflicted on both sides." "Only if either Asian countries accept a sharp appreciation of their currencies or if the U.S. adopts a much tighter monetary and/or fiscal policies can the situation be prevented from getting worse. But as both solutions would create temporary downturns in the world economy, it is doubtful that the politicians in either Asia or the United States will be willing to face up to them." "The conclusion is that Alan Greenspan and George W. Bush did not prevent the stock market bubble of the late 1990s from turning into a crisis. They only postponed it." full article - http://www.mises.org/fullstory.aspx?Id=1670 That article talks about real estate prices too. I think being completely negative about investments is counterproductive, but I also believe people should make sure they are anticipating a bit of risk in real estate just as they would with the stock market. I'm no expert, but I see two other things, besides the other articles, that are bad for real estate right not: The first, and most obvious, is the interest rates. They are going to go higher and quite a few people won't be able to afford their mortgage payments. The second, the growing number of retiring people who won't want or be able to live in large homes anymore. (in other words: retirement homes/apartments might be a smarter investment right now.) Anyone else have any ideas about this? I can't be the only person thinking this way, there was someone recently who posted a picture of a very nice home that he had sold and added the comment that he suspected the housing market was going to go lower so he was "downgrading" on his next home purchase.