INFLATION

[Bel]

We all know it's coming but the question is what are we going to do about?

A: Create a world wide movement that will overthrow the central banks and corrupt politicians of the world to bring sense to the madness of creating money out of thin air.
Or....
B: Start spending now and buy items that will hold there resale value once the coming years of turmoil has settled?
-Oil? (great fundamentals)
-Gold? (historic hedge, other than that...?)
-Silver?
-Land? (overpriced already, to purchase will likely require debt)

Forget the bird flu, inflation will be the pandemic that will sweep the old world away.

[duncan macgregor]

Then on the other hand inflation is mans best friend. I know lots of people that got rich by understanding inflation in the property market.
macdunk

[Bel]

Lets just say that your friends made a million dollars cash in the property market after selling everything off but in the year to come it costs a million dollars to buy a loaf of bread.

The year after that the new Government will exchange 1 old million dollars for a new $1 note.

How much money has your friends made now?

[Bel]

What if the money we are using currently to purchase land, shares, commodities and doo dads is already worthless but we just don't know it yet?
Plausible?

If thats the case are we all not best to spend now and have zero cash?

Debate and information needed pleaseeeee

[duncan macgregor]

quote:Originally posted by Bel

Lets just say that your friends made a million dollars cash in the property market after selling everything off but in the year to come it costs a million dollars to buy a loaf of bread.

The year after that the new Government will exchange 1 old million dollars for a new $1 note.

How much money has your friends made now?

Over the years one property buys another then another with inflation increasing the value of the property allowing them to refinance to have the next property self funding. Inflation is what makes it all work but then most people cant see that being rail track thinkers.
macdunk

[Bel]

But my whole point was, what if the purchasing power of the dollar goes down greater than the value of the property having gone up by?

[Halebop]

Duncan I think we all have our own private rail tracks. The town your track is going to is obviously sign posted "Property".

Bel I don't think the scenario of hyper inflation is a strong one. Inflation blowing out could happen. But most reserve bankers today grew up on an education of "crank up the rates until activity is killed". Even if inflation got away to double digits, we'd see 15% or 18% interest rates, a bad recession (including mortgagee sales for those leveraged property owners) and inflation killed. There aren't many bankers who'd be prepared to print money instead despite any political will to do so. If doing nothing else of use Mugabe is providing a salutory lesson on the "benefits" of that.

[duncan macgregor]

quote:Originally posted by Bel

But my whole point was, what if the purchasing power of the dollar goes down greater than the value of the property having gone up by?

You miss the point, forget what the dollar is worth, it after all is only a promise to pay. Let me do a simple little example giving up all the benifits of doubt to your argument.
Let us presume that property has increased its value over the years by a paltry 8pc. My exp its 10pc on average.
Then let us presume the size of the deposit required to make that property self funding through rent is 20 pc. my exp its 10pc.
Then stop and think how long it will take for that first property to get refinanced at the new value, and withdraw your initial deposit.
You then have a self funded property and can buy the next one.
The only people that worry about inflation are the people that sit with their money in the bank, making property investors rich. What most people forget is property keeps pace with inflation the rent is a bonus. Wake up to yourself start useing the banks money.
macdunk

[Bel]

"Wake up to yourself start useing the banks money."

You mean the paper and ink money generated from fractional reserve banking? Whats the tangible source and backing of that money again?

But lets say Hyper inflation is avoided by massive hikes in interest rates. Either the banks can pass it on to you or (fixed)they fold (unless propped up by Governments). How long can you afford to be earning 10% from rent on a property while paying 18% to the bank?

Theres no doubt that your scenario works perfectly... as long as the prices keep rising. What happens if the price stagnates or worse, drops?

Has my doom and gloom scenario ever happened before?

[Bel]

Lets say you take $50K in capital gains from a property and use it to finance a second property.

What would the bank do or request from you if your original property loses that $50K in book value?