By Gareth Vaughan
Whilst the Reserve Bank views the Official Cash Rate (OCR) at its current level of 2% as neutral in that it's neither stimulating nor constraining economic activity, the steep rise in mortgage interest rates over the past year means they are well past a neutral level and are unlikely to rise much further, mortgage broker John Bolton says.
Bolton, founder and executive director of mortgage broker Squirrel Mortgages, spoke to interest.co.nz for the latest episode of the Of Interest Podcast.
While the average bank two-year fixed mortgage rate, typically the most popular term with New Zealand borrowers, bottomed out at about 2.51% in mid-2021, it's now at 5.4%. This type of move leads to big repayment increases, or mortgage shock, for borrowers when they refix their mortgages.
But Bolton says after the sharp rise in mortgage rates, he believes they are starting to peak.
"I don't think they're going much higher. We are going to go into a recession, and I think even in the last week or so you've started to see the swap [rate] market come off a little bit. I think the economy's going to come off quite hard and fast, and you're going to see those longer term swap rates [which influence bank mortgage rate pricing] come back a bit," says Bolton.
"We talk about the OCR being neutral at 2% but we are not neutral, we are way past neutral at the moment. Because the Reserve Bank has talked it up so hard that mortgage rates are already pretty much pricing in every [future] OCR increase. We've tightened incredibly fast. So it's not surprising that has flowed through to the housing market. I mean we shouldn't be surprised."
The Reserve Bank is forecasting the OCR will peak at about 4% by mid-2023. It started increasing the OCR from its record low of 0.25% as recently as October last year.
"The OCR's going to go up but it's already fully priced into mortgage rates, so I think mortgage rates are going to start to stabilise quite quickly. We get this panic that runs through our market and everyone's like '[mortgage] rates could get to 8% or 9%'...Clearly no one could afford that. So I think that panic will start to dissipate when people start to see that interest rates are stabilising, they're not nearly moving as quickly as they have been. And that people just settle into the fact that, 'ok I've got to plan a future that says that mortgage rates are going to be hovering around 5% to 6%.' That's not the end of the world for most people and most people can adjust to that. So that will just gradually work its way through and people will get used to it," Bolton says.
"We're not seeing a lot of [mortgage] distress, I think we're starting to see a little bit. But the distress that we're seeing is probably people that just need to adjust their living expenses. Every generation goes through this."
He does, however, see higher mortgage rates having a broad impact on the economy by reducing the discretionary spending of mortgage holders.
"The thing that I find with the higher mortgage rates is it's going to translate into the real economy really fast because about 60% to 70% of the housing market is fixed on terms of less than a year. So you're going to get a really rapid reduction in discretionary income. When you reduce discretionary income, you're taking it out of hospitality, takeaways, retail, domestic tourism. So we're talking about a whole lot of industries that have been through two years of pain already that are now losing their customer base really, really fast. People just aren't going to be eating out as much, they're not going to be taking those domestic holidays...There's an increasing part of the population that's thinking 'I've got to hunker down for a while'," Bolton says.
In terms of house prices, Bolton estimates they are down between 10% and 15% from last year's peak already.
"The media's going to be reporting that [falling house prices ] for at least another six to 12 months. I think most of the absolute change is already there in the market, [but] it's going to take a while to work its way through in the statistics," says Bolton.
"They [prices] are down 10% to 15% in absolute terms, I don't see them going much further. I think it will stabilise around that level. I think there will be vendors that just take their properties off the market, and there's not a lot of supply out there."
Parts of the market, where there's still a supply-demand imbalance, are still holding up quite well, Bolton says, adding that the house price fall isn't as big a drop as seen in the prices of other assets.
"The S&P 500's down over 20% this year, the Nasdaq's down 30%, crypto's down 60%. The everything bubble's popping, [and] property has probably done comparatively well. Where else do you put your money?"
In the podcast Bolton also talks about bank behaviour, cashbacks being offered to borrowers, the opportunity for non-bank lenders, the impact of December's changes to the Credit Contracts and Consumer Finance Act, comments from Reserve Bank Chief Economist Paul Conway that the tide may have turned on housing being a one-way bet, the residential property development market, and more.
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124 Comments
'The everything bubble's popping and property has probably done comparatively well'
Kinda misleading that this was the text promoting this article when it's really only mentioned in the last paragraph.
Just another "how low will prices drop and how high will rates go" article.
Yes Squirrel probably very worried about an OCR over 3, considering they have lent to clients that could not meet the banks criteria for safe lending. I personally would not feel comfortable right now placing funds with Squirrel, just my own opinion. They would have preferred an OCR under 2, and rising house prices. They now have neither. I do agree with his honest comment on how far house prices are down at present, and that the 10 yr swap has retreated quite a bit in the last week. I see a neutral OCR as 2.5 to 2.75.
How could the OCR be neutral at 2.5% when the economy is already tanking now, at an OCR of 2.0%? Our economy, unfortunately, is property driven.
Any attempt to control the current inflation monster is illusionary. The perfect storm of supply shortages caused by COVID and by trade embargos combined with massive money printing in New Zealand under the current government, with freebies for all.
The best way forward would be to ride the inflation wave until it subdues in a few years. Trying to control it via tightening will crash our economy.
If you cannot understand that the current inflation pulse is largely cost push from closed borders, energy and supply chain disruption then you need to do some reading. Raising interest rates now is like braking after the accident. If interest rates are raised another 2% they will be negative within 2 years and Orr should be in jail. I would say we are borderline already at terminal nose dive velocity already, utter incompetence from central banks who all seek refuge in their collective incomptence.
You could put the OCR up 5% tomorrow and inflation will not budge, why is that so hard to understand?
Those calling for a much higher OCR either have a vested interest or have a recession fetish. The current hikes haven't even taken full effect yet, there is generally a 6 month lag,
If you really want lower inflation faster then scrap the ETS, lower fuel duty, reduce GST, lower State expenditure.
yes a 6% mortgage rate should be enough, and cannot change the fact that oil is $120. I think we put the mortgage rates at 6%, and just roll with the punches from there. Hopefully the OCR can settle back to 2.75 in 18 months. Shame there is not a Gorbachev in Russia, the world would be a different place right now.
Demand will be dampened and prices will fall accordingly. Yes, that probably means recession but as with the 1970's a supply side shock that is allowed to embed inflationary expectations is a worse outcome (stagflation) in the minds of the central bankers. It comes back to the view that ultimately monetary policy is all about price levels and any excessive monetary stimulus will lead to inflation rather than real growth, in the long run.
Corrections are just a normal function of capital markets, both required and healthy.
Weve overshot sustainable. Time to correct.
What perma bulls don't get is that it is normal and inevitable. Not a fetish.
The issue is people who expect exponential yoy growth fueled by cheap credit without consequences.
Just accept that markets are cyclical and plan accordingly.
Not only cost push but also the inflation v unemployment linkage may alas be broken:
https://www.ineteconomics.org/perspectives/blog/the-fed-tackles-kalecki
but central banks will fine as you say.
te Kooti,
I am really interested in this debate and not just theoretically. I have sold a small property and settlement is in Sept. At 77 and now with cancer, I am more and more conservative in my investment outlook. I will consider 5/10 government stock for a proportion of the cash-say 25%- and am watching these rates closely.
I have long been of the view that rates will or more correctly, should not, go as high as many believe. However, given Orr's record of pushing them too low, he may well do exactly the same in reverse. Along with a few non government bonds, I will add to my equity portfolio with a small number of the best dividend stocks and for the first time, become a money lender to my family. I once played Shylock in a school play and now i will get to do it for real!
LL I'm no financial advisor or oracle and do not know enough of your personal situation to give advice. I will say that I think deposit rates >4% for 2 to 3 years offer a decent return for the risk adverse, or buy an annuity, if they go much higher the economy is cactus if it's not already. Stick to the big 4 banks and Kiwi Bank. If I were you, I would also look to pick up some banks stocks if they start to trade down to 85% of book. They pay good dividends and you should see some capital growth on the rebound.
I hope the diagnosis is not too sinister and wish you all the best.
Te Kooti,
Thanks for your good wishes. The diagnosis was awful; stage 4 with spread to lungs and liver. No op. possible, but a combination of two(unfunded) drugs offered hope and their effect has been truly amazing. Two subsequent scans have shown a marked reduction in the primary tumour and the disappearance of most on the spots on my lungs. Pretty lucky so far. It's an interesting journey mentally and i am still adjusting to it. I have had to give up tramping and i miss that a lot, but I am adjusting to simply living with cancer.
I am not aware of annuities being available here and would be very wary of them. I saw how far the rates fell in the UK as long-term interest rates fell. They were always linked to long-term government stock. I have kept away from bank stocks for some time, but may well add one to my portfolio. I have always been motivated by dividends, not growth. The most important part of a balance sheet to me is the cashflow.
The massive wave of inflation caused by years of ultra-low interest rates and money printing by a free-give-away government cannot be controlled. If the OCR is raised further, we will have a great economic depression.
If you see this is an invite for "popcorn", in your words, then I don't quite know what to say to this. In case you are short on the housing market (owning no house), the market is only apparently going your way. In reality, in an economic depression, it is very hard to obtain a mortgage even after house price drops of 50% or more. Nobody really benefits from depression.
So I don't really know what you mean with your cynical popcorn comment. We are at the brink of a massive crisis, the OCR should have never been lowered to 0.25% and especially not raised sharply after that (as people are now caught in a liquidity trap).
The best way forward would be to allow inflation to run its course, devaluing our massive debt bubble over several years, with an OCR around 1% or so. Then, after years of high inflation, would come the Volcker moment where the OCR could be steeply raised. Right now, the result of OCR hikes is great economic hardship.
Your proposal for hyper inflation for a decade would have rioting in the streets, as the poorest are hit hardest by inflation.
As assets have ballooned with the endless stimulous and rampant buying up of everything, without regard for the normal cost of money- this is what the central banks must now rein in. Inflation is public enemy no 1.
Volcker moment is now, Taylor rule moment is now.
Popcorn is a reference to sitting and watching the inevitable reset unfold. Yes it will be a mess.
The over leveraged cannot mentally entertain a reset, because its not in their interest to do so. Debt speculation has been so one way for so long speculators think a reset can never happen - aka the "denial" phase. Fact is many home owners are not leveraged, and a large chunk of NZ owns houses with no mortgage. That groups interest is clearly in avoiding high inflation become the established norm. Any inflationary spiral will be especially devastating to the retired, the low waged, the unemployed, and Govt workers (teachers, police etc) as they all have a fixed income.
Most of the RE debt in NZ is held by a small group. The leveraged are taking risk, huge risk, and have enjoyed many years of profit and speculative gain. Should the rest of NZ, especially the fixed income section, be punished for the leveraged to be bailed out through high inflation?
I say no. As will the renters, the fixed income workers, and the unleveraged home owners. I'm betting this is a bigger group next election than the leveraged speculator.
How will raising interest rates control inflation that is mainly driven by supply shocks? Unless I live in a parallel universe I do not see the masses spending up large.
I do believe that rates will go higher however, and the argument that John Bolton makes that they wont go too high because 'people cant afford it' does not convince me.
I think you are light, prices went up massively since start of 2019.... look at RVs back then, we will see average 30-35% and that means lots of examples way more and some way less...... Turangi went up about 45% in that period, now not too much sold for high 6's but thats the current expectation, we going back to high 3's real fast.... AKL in big trouble especially new builds .....
My bad, I'd been following your comments because you were one of the few to call a drop this year early on. I hadn't seen the 20% overall prediction, I was just going on this. It wasn't meant as a criticism by the way, more as an acknowledgement that it's OK to change direction when the situation changes. If more of us could do this we wouldn't be in so much shit. Inertia is strong.
by HouseMouse | 31st Dec 21, 1:01pm
As I have posted before, I prefer to forecast in scenarios, but to restate my predictions of the more likely outcomes:
- OCR to peak at no more than 1.5-1.75 by August
- House prices down by 5-10% across the year, sales fairly sickly throughout the year
- Rents- flattish, slightly up perhaps
- Residential construction to start slumping by October
- Agriculture steady
- Tourism: remains in doldrums, education slightly picks up
- hospo and retail; fits and starts - overall a somewhat negative year
- Unemployment rises to circa 5.0 - 5.5% by year's end
- OCR cuts commence by November
- sharemarket slightly up by year's end
Oh I didn’t take it as criticism :)
And I was obviously wrong on the OCR, I didn’t expect inflation to be this persistent and certainly didn’t predict the war ( which has added significant inflationary pressures) I l think it will go to circa 3.5, but I also think it will be cut back quite a bit from mid 2023
"The OCR's going to go up, but it's already fully priced into mortgage rates"
Fair enough.
So the RBNZ could raise the OCR to 3.9% this coming review and mortgage rates won't move, because they've priced that in?
Let's hope they do, and get it out of the way.
Australia, on the other hand, appear to be just waking up to what's coming down the road.
One of the country’s biggest banks has hiked its fixed mortgage rates by a massive 1.1 per cent.The move by NAB, comes just a day after Commonwealth Bank increased its fixed mortgage rates by 1.4 per cent, and only a few days before the next Reserve Bank board meeting.
Unsurprisingly Bolton made no mention of the killing in commissions he made last year loading up FHB’s with 95% debt
https://www.stuff.co.nz/business/126088195/house-price-drop-may-test-ho…
5% deposit
15% @ 15% interest rate
80% interest only with non-bank lender
The 80% was with non-bank lending Resimac which will now cost them 7.54% as they are forced to refix as a bank won’t touch them
https://www.resimac.co.nz/home-loans/fixed-rates
All of these loans will now be in serious negative equity $100k+ or worse
It was madness that it was allowed to happen… all for the good ship ‘capital gains’ which was sailing off towards the iceberg called inflation
Look like a scam that the RBNZ should never have let happen. Predatory imho....yet Juicy, Juicy commisions.
Sucking in punters who were filled with FOMO and given the Sweet initial deals.......how could this go wrong???? Well it has and is still to play out.
Looks like a carbon copy, kind of, of the 2005-2008 USA mortgage clusterfudge, when the ARM mortgages got the masses loaded up with with debt grenades, into the USA market. The initial, low teaser rates reset somewhat higher.....BOOM GFC. We learn nothing!
Just 3% of the USA mortgage market defaulted in 2008, and this tripped the cantagion wire, leading to a calamatis implosion.
I wonder what % of the NZ market will be unable to pay legal commitments over the next 12 months? Should we get the Big Short Mike Burry, to run the numbers on NZ.....?
Yes - should be compulsory viewing for any would be FHB.
Plus to you point, the big recent rise is the US mortgage rates with largely affect the new US new buyers mainly, as many take the gold std: 30yr fixed rate deal available there.
Most kiwi take the 1 or 2 year reset deal ....... do the maths on that - NZ is stuffed and Big Short style resets are about to send the shivers through the household purse.
Yes, linklater… it’s astonishing risk management
But I’m not surprised. FHBs have been sold FOMO and housing for too long as a get rich quick scheme, by too many vested parties.
It was only sustainable in a period of consistently falling interest rates, which created rising asset prices and the everything bubble mentioned.
As it’s all unwinding now, most are about to learn some very tough life lessons.
Any that bought in the last 2 years are likely to have already lost their deposit…. And we’re only six months in.
Sadly no broker explains to them that they repay less than 10% principle in their first 5 years.
If they did, no FHB would buy now with a further 10%+ fall almost guaranteed.
Basic financial management and risk needs to be taught in schools.
Only if you’re lucky you might know someone that has been bucked off in a few of life’s rodeos to give you insights.
"The OCR's going to go up but it's already fully priced into mortgage rates" Haven't we heard that before? I mean we have still 2% to reach the OCR target and the mortgage rates have tracked closely the ocr rate for the past year, so I would say no, the ocr increase are not fully priced into mortgage rates. Maybe for the next quarter.
You can’t fix a bubble house price’s in New Zealand are so over valued, In Auckland 3 bedroom house on small section cost is 12 x average wage couples annual income. The house prices will continue to fall until the average wage couple can afford to purchase a house to live in.
so you thinking a 3-4 multiple of income to debt? a correction of that level, I would not be looking at term deposits as safe, I would move cash into Government stock..... Remember how long ago David Hiscoe said it would all end in tears and how far the market has come since..... so a correction to these multiples implies huge negitive equity for some very large mortgages, these would have to be supported by either very low interest rates.... or if they turn bad the banks would need supporting. We could be in for a Japan like lost few decades..... Zombie banks, there is a huge ammount of Agri debt that could turn bad if a Global Recession destroys demand for exports...
IT Guy,
Well, I looked at the new Demogaphia housing study and then went back to when they started in I think 2004. Then the Auckland multiple was 5.90%. As long as nothing major happens before we have Deposit Insurance-to be enacted pre election next year, then up to $100,000 it won't matter whether it's a TD or directly held in government stock.
This mortgage hawker looks as independent as the many other ferever property spruikers, that are wheeled out weekly to tell the already Very High DTI home owners (or the next greater fool 8x DTI + buyer) to keep the music playing and swap the seats..... as the ship creaks and lists further.....
These mortgage sellers only make money when turnover happens and with sellers still expecting ridiculous prices......he is cajoling the now shy, reluctant and already fully financially stretched buyers.....to "step up now folks", "Dont delay".
Like asking the local butcher - : "ïs meat good for me?"
Property has done comparatively well if you bought for cash, if you leveraged up with a mortgage then maybe not so well...not to mention on the ongoing increasing cost of that leverage.
Where else would you put your money? Well a TD for starters has done much much better than any bubble asset this year.
This article is very much , move along now nothing to see here . The comment 60-70% of housing market is on terms of less than a year is incorrect. This is on the mortgages sector only which is not the whole housing sector most homes are freehold. So the 60-70% is on mortgages households only probably more like 20%of the market .
net migration loss and retiring baby boomers liquidating for their retirement may be a problem. Demographics play a big part in this and I'm not sure we can kick this can down the road any further. The US has a similar problem in equities as their boomers had invested more in that sector than the nzrs who go all in property.
Take out all those that rushed out and fixed for 3 to 5 years. I believe that rising rates will have little effect on the vast majority of holders now. FHB have been squeezed out to a degree but again it will take years to flow through. What really matters now is wage rises and where rates will be in 3 years time. The can is still being kicked down the road.
He's right of course. The current and forecast OCR shape market and mortgage rates, mortgage rates impact house prices (confidence) and disposable income, and we live in a consumer economy where spending and confidence matters... a lot.
What is also obvious is that inflation will come down when the causal factors stop.
Hiking the OCR will crash the economy... But we will still be paying over $3 a litre for petrol, local govt rates will still go up 8%, rents by 3% to 4%, etc etc.
You forget pricing is only part of the equation of business, quantity sold matters also.
what happens when people travel less in cars, buy less goods, drink less coffee etc..
it’s funny how people still think there’s a way out with out a ‘cleansing’.. for f-sake that thinking landed us here in the first place!
Even though John has a steady line of patter, I find the commentary of ticket clippers not particularly credible and believable. Even thought his outlook could be entirely right. For ex, he talks about NZ banks being 'conservative' and defends them while ignoring that NZ has arguably one of the largest housing bubbles in the world.
Agreed and the property bubble is deflating in our banking owners own backyard as well...... the key to this is making sure there is money to lend to people once things get back to 3-4 multiples of income.... you have to provide the base. Remember we can print and lend if we have to and its looking that way
Agreed and the property bubble is deflating in our banking owners own backyard as well...
Right. No disrespect to John, but another thing that the industry people never seem to grasp is the relationship between the property bubble and other sectors of the economy. Now, I have harped on about this before but the bubble and consumption components of the economy are inextricably linked. They never address it because I don't think they have the ability to understand the interconnectedness to any great level. It never goes beyond cliches like people 'tightening their belts'. It's all very superficial (similarly from the RBNZ and the govt).
So I think they are either not that clever as they appear (the steady line of patter is surface stuff) or they deliberately ignore the bigger picture.
Yes, this is the underlying problem on a larger scale - we have a privately owned (the FED is privately owned) global financial system which creates money out of thin air via lending (FIAT money), and the word reserve currency is the USD to which every nation is practically tied (via Bretton Woods). This system enables its owners to lend FIAT money for interest, working like a vacuum cleaner with regard to the global population's productivity.
It is also very procyclical - credit is expanded in times of boom and limited in times of bust - this leads to intense boom & bust cycles. We can see this now, as banks have just last week stopped lending to home buyers with less than 10% equity.
"..there's not a lot of supply out there"
...
Total housing stock up 89.5% since June 2021.
I think some of this is going to age as well as a few of his quotes from 2021,eg
“You have to say that if there were price falls, most of the price drop would be in the middle to upper end of the market not among entry level first-home buyers,”
Agreed… he’s making the massive assumption that FHB’s won’t work out it’s cheaper to rent than buy in a flat or falling market.
Any FHB that bought a $1m home with a squirrel launchpad offer of 90%+ debt will now be paying circa $80k+ a year in interest…. plus, rates, insurance, maintenance etc.
The FOMO has gone for investors, it doesn’t stack up any longer.
When FHB’s work out they are in a better financial position to rent (and save a greater deposit) with no risk, and sit on the sidelines until the market has clearly stabilised (a prolonged period of no further falls) the market is toast.
Unlike other asset class, property market is slow to react when retracing / falling so YES till now is doing reasonably well with only 10% to 15% on average but to say that is the worst and not to except further fall from here is......
What happened to experts who predicted to start with that we may see negative interest rate, when that didn't happened it was said that interest rate will not rise till 2024 and when it started to rise, now forecasting that will peak between 6% to 7% .....than it will be between 7% to 8%........
Even a dead clock is correct sometime.
Yes. But then, he sensationalizes with an extreme case of "crypto" as a benchmark to illustrate how well housing has performed. The following is a reminder of DCA'ing monthly into BTC as of today. And why the narrative of ticket clippers needs to be kept in perspective.
Past 6 months -- -4%
Past 1 Year -- -8%
P2Y -- +57%
P3Y -- 163%
P4Y -- 300%
P5Y--+366%
Lot of misdirection out there, lot of hope and wishful thinking, major interference in the market, manipulation and rumor.
Introduction of the LVR impacted the market creating the expectation that as a first home buyer you would need to save longer, once this was understood FHB's adjusted and budgeted accordingly, those expecting to enter the market...say today.... are not, why? The LVR was temporarily removed during the "pandemic" allowing them to enter early or increase their purchasing power, creating a rush and allowing prices to skyrocket.
Now the LVR has been reinstated and increased in severity, reducing the ability of slow FHB's to enter the market.
House prices will fall back to pre rush levels, 2020/2021. Then depending on immigration (turmoil in Europe as climate change agenda starts to go into overdrive, civil unrest in the US, mistakenly NZ could be seen as a save haven??)
At the moment property prices are being pushed down by media, which should be a warning sign, sooner or later the general public will catch on, a 3brm townhouse with 20sqm backyard is being represented as being comparable to a 3 brm freestanding house on 800 sqm.
The only question in my mind is "will the government allow normal people to live on a 600 sqm section with a free standing house and retain ownership down through the generations?"
If the government is benevolent and solely relies on manipulation and passive coercion to move people into "climate friendly" housing and doesn't institute laws allow the use of force ---in the name of "the greater good" --- we will see.
What we do know is the government expects and plans on 422,000 new homes in Auckland within 20 years, building up, not out. Currently there are 540,000 dwelling, hmm? 3waters includes same nitrogen and water ways restrictions that The Netherlands is currently "discussing", who is the housing for? maybe farmers and associated refugees from small town?
Who can call this market? It's all over the show. Something about prostitutes panties comes to mind.
My call is that mortgage rates are getting close to their peak. I think most can live with them at 5-6%. Reason I say this is if they go too much higher, the banks themselves will be furiously fidgeting, while watching their security drop by the day. Remember two-thirds of their business is residential.
These guys are pretty powerful out there in money land & have been known to tell govts what to do in the past.
It's only a matter of time, literally, until something similar is enacted here to solve all of our problems.
Downing Street is exploring the idea of trying to tackle the housing crisis with ultra-long mortgages of up to 50 years that could pass between generations, allowing more people to build up equity rather than pay rent. A longer mortgage period would allow people to borrow larger sums, with the possibility of passing the debt on.
There are some quite big differences in sales prices for those that actually sell compared to the homes and QV estimates in Tauranga. This place sold for 1,26M
RV 1.34M
Homes 1.5M
QV 1.44M
https://homes.co.nz/address/papamoa/papamoa-beach/10-matene-place/p2b5a
https://www.qv.co.nz/property-search/property-details/2400095/
"I think there will be vendors that just take their properties off the market, and there's not a lot of supply out there."
We need men in suits and smartly dressed women to help us think in the right way.
And there was an ad on investing, that stocks go up and down.
Don't worry.
None of the recently printed money is exiting the economy, right? It's still put there, just borrowing it costs more right now.
And it will still be there in future when things ease. So a normal credit cycle with 50% more money available than usual?
Bit of a mindset shift.
None of the recently printed money is exiting the economy, right? It's still put there, just borrowing it costs more right now.
Well the only way broad money exits the economy is when it is extinguished.
Interesting to note that broad money to base money in the U.S. is 3.7x. In Japan, it is 1.8x. Japanese households and businesses have been paying down debt. Nevertrheless, everyone points the finger at Japanese QE.
The expert on the "Everything Bubble", which we are certainly now recovering from..... is the longterm investor and very solid economic historian Harry Dent. Michelle's not a bad interviewer either!
I use the Kitco site for its metals info and charts.....it has the occasional news "gold nugget" as this certainly is.
Worth paying good money for this 1/2 hours of wisdom!
He covers every asset class, Shares, Metals, Property. How the Central Banks has kept the music playing since 2008 (when we should have totally crashed) with stimulus and the Boomer Demographics situation- going against all assets.
Enjoy.
https://www.kitco.com/news/video/show/VRIC-2022/4025/2022-05-18/Gold-wi…
Crash, Asset prices/yields reasonable again, and the new, green shoots emerge of a "real economy".
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