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  1. #1
    Join Date
    Feb 2015
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    310

    Default Hello 2018 - what can Possibly go Wrong


  2. #2
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    13,884

    Default You What?

    I struggle to grasp what's really being meant in the sea of jargon that such pieces contain. But I'll stab a guess, based on this snippet:
    Real economies have been artificially propped up by distorted asset prices, and slow-moving normalization will only prolong this dependency. Yet when central banksí balance sheets finally start to shrink, asset-dependent economies will once again be in peril.
    I speculate that the prices of land and buildings is what's meant by distorted asset prices.

    But just what is an asset-dependent economy?

    Sounds a bit like the borrowing binge[s] of the past, based on the "inflationary numbers attached to the prices" of land and buildings. I use that expression in quotes because increasing/ed value is just a mirage when set against the purchasing power of the currency used in any pertinent valuation.

    Is an asset-dependent economy one in which over-valued land & buildings are used as collateral to borrow money to buy things to keep an economy running?

    And what the hell's a real economy?

    As opposed to a unreal/false/imaginary one?

    And which sort has NZ got?

    Based on the gNats record of - what they describe as prudent financial management - by increasing taxpayer debt from 18 to 80 billion dollars in their nine years in office, perhaps NZ's economy is a fantasy one?
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  3. #3

    Default

    The gist of these articles is usually that anyone who is highly leveraged and dependent on the status quo continuing is exposed.
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  4. #4
    Join Date
    Oct 2013
    Posts
    1,574

    Default

    Quote Originally Posted by Perry View Post
    And what the hell's a real economy?
    Not a phrase I've heard used before, but I'd imagine it's a distinction between real/nominal, as you do when looking at inflation adjusting future projections.

    The 'nominal economy' might be worth $50B GDP this year, and $120B GDP in 10 years time, but if inflation is 10% each year that's only $46.3B and we've actually gone backwards. In the context of this article, the 'nominal economy' might be worth $750B of gross assets at the moment, but the underlying 'real economy' is only worth $400B because of all this debt-inflation.

    All just my take on some jargon-filled economic mumbo jumbo. Could well be wrong.
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  5. #5
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,926

    Default

    I found it very hard to read as well.

    Like this: "potentially destabilizing global saving arbitrage"

    And this: "Yet when central banks’ balance sheets finally start to shrink, asset-dependent economies will once again be in peril. "

    How and when do central banks' balance sheets shrink? I thought they only grew?
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  6. #6
    Join Date
    Sep 2008
    Posts
    7,244

    Default

    i think

    if you read it again and replace "asset based economy"

    with "spending based on the appreciation of assets (real estate, shares etc)

    it makes better sense

    ie people are looking at the new council valuations, sharemarket etc + buying new cars, boats, more eating out, foreign holidays, craft beers etc

    based not on the money they have earned at "work"

    but on the rise in value of their assets..........in this case, housing or shares

    "real economy" - being the traditional economy - spending based on work done, objects produced, pay rises given etc

    in the old days you were advised not to base your spending habits around the amount of overtime you were getting as the overtime would inevitable stop at some stage and you'd be left with spending habits you couldn't afford, and more time to blow your now limited budget
    Last edited by eri; 07-01-2018 at 05:02 PM.
    have you defeated them?
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  7. #7
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    13,884

    Default

    It seems moot to observe that - if that's the case - why didn't the author bloody-well say so?
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  8. #8
    Join Date
    Sep 2008
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    7,244

    Default

    Last edited by eri; 07-01-2018 at 09:36 PM.
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  9. #9
    Join Date
    Oct 2013
    Posts
    1,574

    Default

    Quote Originally Posted by Davo36 View Post
    How and when do central banks' balance sheets shrink? I thought they only grew?
    It is assumed that the quantitative easing of the last decade is going to be reversed at some point. Trillions of dollars that were created out of nowhere are going to disappear. I'd imagine it'll take a lot longer to unwind than it did to inflate - that is, if it ever unwinds.
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  10. #10
    Join Date
    Aug 2003
    Posts
    7,369

    Default

    Yes doom and gloom is predicted elsewhere too - I was reading online 'Trump Recession' a given either in 2018 or 2019. New Tax Bill may be the overriding trigger - here's an opinion on how the New Tax Bill will affect the RE Industry. Basically any recent growth in values to be wiped out.

    cheers,

    Donna
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