Taxation & Invisibility
Nadeem Walayat has been calling for bull markets in the U.K. and U.S. housing for quite a few years pinning his argument to:
"...an exponential inflation mega-trend which is the primary consequences of perpetual money and debt printing monetization programmes that the government is engaged in, in an attempt to buy votes through high deficit spending, an inflation trend that asset prices are leveraged to and oscillate around..."
I think real estate prices are zooming in London for another reason: TAXATION. Martin Armstrong makes the observation that:
Unlike the USA, Britain does not tax worldwide income. The rich have flocked to London by the boat and plane load and this is driving property prices way up and you see more high end cars everywhere – many with Arab plates.
And in the U.S. it's Corporate Law that provides INVISIBILITY as New York Magazine's Andrew Rice observes: "Manhattan Condos Are The New Swiss Bank Accounts For The World's Super-Rich"
Behind a New York City deed, there may be a Delaware LLC, which may be managed by a shell company in the British Virgin Islands, which may be owned by a trust in the Isle of Man, which may have a bank account in Liechtenstein managed by the private banker in Geneva. The true owner behind the structure might be known only to the banker. “It will be in some file, but not necessarily a computer file,” says Markus Meinzer, a senior analyst at the nonprofit Tax Justice Network. “It could be a black book.” If an investor wants to sell the property, he doesn’t have to transfer the deed—an act that would create a public paper trail. He can just shift ownership of the holding company.
U.S. Dollar & Wage Trend
The top half of this mashup is the U.S. CPI for 200 years.
Inflationists are still waiting for a big surge in prices and while they might be determined to bid up prices of real estate, collector cars and discretionary baubles bangles and beads, general price inflation is in a 1%-3% per year range in both Canada and the U.S.
In the U.S. we are seeing uptick moves to the top of the CPI range along with what appears to be a solid uptrend in wages since 2012. The wage trend also fits nicely with a definite uptrend in the USD/CAD ratio that's been on since 2011. A stronger USD helps American wage earners buy more stuff which encourages employers to hire more people.
On the Canadian side, CAD wages rose along with the strong CAD$ out of the 2009 pit of gloom and by 2011 according to the charts above, the gears shifted and as Canadian wages continued to accelerate, U.S. wages slumped until the USD/CAD ratio hit its last low in late 2012. Now for the past year the US$ has been in a solid uptrend and U.S. wages have been moving up as well with higher highs and higher lows.
A lot of global debt is priced in US$ and so the demand for US$ may not be anywhere near exhausted.
Canadian wages seem to be forming a cap (? on chart above) and in a range that might correct. If the USD/CAD ratio continues to climb the wall of worry, it is going to change a lot of portfolio construction globally and locally as Canadian real estate value perception falls against a rising U.S. dollar.
We know that overpriced Canadian real estate is a negative yield generator (case study). If the Currency markets sell the Loonie and rush to the senior currency (the US$), get ready for real estate markdowns in a Canadian neighborhhood near you.
Vancouver is the giant, and I have drawn a couple of lines on the chart where I think we will see a lot of action.
Hyperinflation is very poorly understood by modern economists.
Cullen Roche's research has shown that this is likely due to the lack of evidence showing direct connections between economic environments and consistency in prior cases of hyperinflation.
The widely held belief is that government debt and deficits (aka, “money printing”) lead to hyperinflation. But Cullen's research shows that hyperinflation is not merely the result of “money printing” or an expansion of the money supply and in fact tends to occur around very specific and severe exogenous economic circumstances which lead to an increase in the money supply ultimately leading to hyperinflation.
Hyperinflation is not merely high inflation or a collapse in confidence, but is actually due to severe exogenous shocks with very real and provable transmission mechanisms. Historically, these events tend to be:
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'