As much as the economic landscape looks pretty bleak right now, particularly from my Melbourne window, with business closed, industries in trouble, and unemployment at almost record levels, and this is most economies throughout the world.
Governments are on a Q.E. trail (quantitative easing policy – i.e. printing money) all around the world, no more so that the U.S.
Their bond buying exercise is almost 100 times that of the period after the GFC…
There does not seem to be the concern that we previously held with these Q.E policies that we would see massive devaluation of currency & hyper-inflation like that of the 20’s & 30’s when it was tried.
Yes, it certainly had been tried prior to the GFC. Germany kicked off in the early 20’s after WW1 (they threw everything at the war expecting to win, and when they didn’t, oops, out of money). But within a year, a loaf of bread went from 160 marks to around 200 billion…
But, after the GFC, there did not appear to be the hyper inflation everyone was worried about…or was there?
As I say this, the Dow Jones is almost at the heights of the start of the year; Gold is at a 15 year high; silver almost record; bitcoin is back over $11,000 again…
And the US Residential market is on a tear…
So, what we are seeing here is certainly inflation, but in asset classes.
This can be brought on by two reasons I feel:
People are smarter than we have been painted as, and rather than buy large screen TV’s with all the funds they are getting from stimulus, they are paying down debt, buying shares and assets to increase wealth
If there was to be a period of hyper-inflation, and people were concerned, this would dramatically reduce the worth of the dollar. And the one way to avoid losing value of your money, is to purchase something that will not lose value – i.e. Assets (Gold, silver, houses)
So, I feel we have a two-fold effect. People happy to pay down debt, get themselves into a better financial position with the stimulus packages they are getting.
While others, concerned that the value of the dollar will plummet, are busily buying up all the assets they can, including housing.
Whether this will last or not, is anyone’s guess, but I can just say that now is certainly an amazing time to be investing in Real Estate, especially in the U.S market.
And while this appears to be in contrast to recession economies we are seeing, I have always been one to ‘Make hay while the sun shines!”
So come on, anyone want to come bail some hay with me?