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  1. #501
    Guru Crypto Crude's Avatar
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    Hey bel...

    Bel-"In 2001 you could buy a house for on average ~400 ounces of gold. In todays market the average price is... ~400 ounces of gold. In fact houses are more affordable today than they were 30years ago"

    SC- Rubbish...30 years ago my dad bought his first house for 16000 pounds(think it was pounds will have to ask him tonight) and he earnt 5000 a year on His single earning income as mum looked after us kids at home... house price to income ratio is more than twice now than back 30 years ago...anyway....who on earth compares their house value to ounces of Gold...


    Bel-"PS: CPI Does NOT measure inflation. Repeat untill understood. Inflation = monetary inflation. That's it. Nothing else. Zip nada. Just purely the ammount of $$$ in circulation.
    CPI measures (by fudging figures i might add) items of value in comparison to valueless IOUs. A result influenced by, Inflation (+ fudging of figures "oh you can't call that a price increase, the car now comes with a new type of radio") worker productivity, new sources of supply (Chinese slave labour anyone?)compitition, supply and demand (seasonal, technological etc) OMG the list goes ON!"

    WHAT... CPI DOES measure Inflation...this is from statistics NZ
    quote....."CPI is a statistical tool that Statistics New Zealand produces to track changes in household spending caused by price increases or decreases. The price changes are measured at regular intervals. This change, that causes household spending to rise or fall over time, is often called inflation. Comparing numbers from the CPI allows you to work out the size of price changes, which lets you track the rate of change, or the inflation rate. The CPI is published as a set of tables. It is a series of numbers that represent the price at a set time of a selected 'basket' of goods and services that represents typical household spending.The CPI is often used as a general measure of inflation. It is not an exact record of individual households’ spending, but it gives a good idea of how price increases affect typical household spending, and the change in money’s ‘buying power’ because of inflation.The CPI measures the price of a selected basket of goods and services at regular intervals and records that price. Prices of a wide variety of goods and services are collected for use in a range of price indexes for a variety of economic sectors. A price index measures the change in price of a fixed basket of goods and services between two time periods. This change in prices over time is often called inflation. Price indexes available are the Consumers Price Index (CPI), Capital Goods Price Index, Farm Expenses Price Index, Food Price Index, Labour Cost Index, Overseas Trade Indexes (Prices) and Producers Price Index.
    That's it. Nothing else. Zip nada.



    Bel..."When someone says that the price of there house rose by X ammount of barrels of Oil, bushels of corn, ounces of gold over what they paid because of rezoning, local investments in infastructure and business. THEN i take note and get excited for them"

    Bel do you operate on some type of barter system or something?...
    Barter systems were used back in the stone age when Money wasnot a medium of exchange... it is now 2007!

    Im too confused to answer the other points in your post...
    [8D]
    .^sc


    Nakamoto means of Central origin ...

  2. #502
    Senior Member Halebop's Avatar
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    I'm not going to get into a debate on the makeup of inflation measures or price parity between corn and oil because there isn't much point. Everything is subjective and value depends on the individual.

    But one commodity that does remain pretty consistent is time. We all have the same amount of it each week and without time travel we can't borrow it now and pay later. I can swap my time for a barrel of oil or a bushel of barley but most probably like most others I'll trade it for an electronic transfer of currency. Frankly, although I know money is invariably debased by inflationary pressures, keeping tabs on my online bank account is a hell of a lot easier than having to feed my money hay or dig it out of the side of a hill.

    The thing about time is that it takes two average people swapping their time to buy a house when one person used to be able to do it just as comfortably (or uncomfortably). People say the houses are now bigger, have more features and technology etc but I think the reality is we have simply (and stupidly) swapped 1 persons effort for 2 (i.e. We are spending more time buying that house). The fact that the same amount of oil or gold or barley might buy that house (I'm not sure this is universally true) would just mean we are now swapping 2 peoples effort for those too! I don't really think the secret or "evil" of inflation lies with cash. It lies firmly with us, our aspirations and some pretty dumb yet "rational" decisions we've made as a society.

  3. #503
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    I agree Halebop. But that line of thinking poses some problems for how we traditionally evaluate "value". On the basis of the amount of Labour expended? If so we're coming close to admitting that the Marxist idea (Gasp! Swoon! Run, Run!) that value can be best evaluated by the amount of effort expended has more validity than the idea that value is decided by the market. If not, we have to accept that the basis for the market evaluating value, ie that the people making the decisions are "rational", or "rational enough to decide their own utility" is flawed to an extent which calls into question other assumptions which rely on the basis of this perceived rationality.

    It's an interesting train of thought... as well as exactly why this shift in value has occurred. At the same time, you could argue that there are global and societal shifts taking place which may be signs of a reverse of that trend.
    Undisputed 2006 World Cup Premierleague Champion

  4. #504
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    quote:Originally posted by Halebop


    The thing about time is that it takes two average people swapping their time to buy a house when one person used to be able to do it just as comfortably (or uncomfortably). People say the houses are now bigger, have more features and technology etc but I think the reality is we have simply (and stupidly) swapped 1 persons effort for 2 (i.e. We are spending more time buying that house). The fact that the same amount of oil or gold or barley might buy that house (I'm not sure this is universally true) would just mean we are now swapping 2 peoples effort for those too!

    I broadly agree with the idea of using "time" as a store of value. But if we are taking about "people's time" as a measure of value, then the stock of time has definitely increased over the years as population has grown. The total stock of time is the number of people times their available time. That's why time also has suffered "inflation" and that's why we need more time to exchange it for things.

    quote:Originally posted by Halebop


    I don't really think the secret or "evil" of inflation lies with cash. It lies firmly with us, our aspirations and some pretty dumb yet "rational" decisions we've made as a society.
    If we took NZ as a stand-alone system, then an ill-controlled immigration has been the "rational" decision that increased the available people x time concept.

    God - Please give us just one more bubble....

  5. #505
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    I think Halebop was approaching the topic from a broader perspective... for instance, what basket of goods we now perceive as being "necessities" vs that of a few decades ago. You could argue that specific types and improvements for a given level of Housing has also been given a value over and above the function it serves when compared with the same "basket" of housing from a few decades ago as well.
    Undisputed 2006 World Cup Premierleague Champion

  6. #506
    Guru Crypto Crude's Avatar
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    for those that are interested in what ive done while waiting on the sidelines for the property sector to decline...

    This week I reconfigured my share portfolio...
    to now only include two stocks....ASX....
    85% NWE....
    15% URA....
    also...Getting back into NZOG next week....
    [8D]
    .^sc
    Nakamoto means of Central origin ...

  7. #507
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    You guys have all seemed to miss my point. I understand that when truthfully i was simply ranting to you guys rather than simply debating.

    I'll give it a crack.

    1. CPI measures prices in NZ dollars. Not inflation. To say otherwise is stating that you have no understanding as to what money is and what inflation is. Sorry but it's true.

    2. Money is valueless. But its worth is in it's convenience. When i go to a farmer and give him an IOU/Money for one of his cows i'm getting an item of value in return for a promise to, say; work for one day in return at some future point.

    Now this is a great system, in fact money is one of human kinds best inventions.

    But here is my point, that IOU wasn't written by me. It's not me who's in control of that IOU.

    That IOU was written by a third party. The reserve bank of NZ. So what happens when the government creates an additional IOU? Now we have one days work represented by 2 IOU's. And if you think that the government doesn't print off as many IOU's as it can get away with your wrong.

    If that farmer had of held onto that IOU he would of only received half a days work. The government gets the other half days work for free.

    So what does the poor farmer do? He starts selling his cow for 2 IOU's. The market is NOT dumb, it ALWAYS reacts to the introduction of monetary inflation. And the first place it shows up in is commodites including housing but its not a even nor timely introduction.

    In this scenario can you honestly say that the VALUE of the cow has doubled?

  8. #508
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    Property and gold are both hedges against monetary inflation. ( i figured if i spelled out the full term people won't be getting the term inflation confused with the RBNZ concoted proganda price inflation as measured by the CPI) You can't print them out like you can IOU's.

    While the spread between wages and mortgages has recently widened this is because that monetary inflation effects commodites first and wages last. But at least you don't have to take out 3 mortages to buy a home unlike 30 years ago.

  9. #509
    Senior Member Halebop's Avatar
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    Bel I'm not debating the meaning of inflation or cash. I'm happy with both the proxy of CPI as a guide of inflationary pressures and receiving cash in lieu of good and services. Anyone with a critical eye can discern neither is perfect but beyond tweaking which won't provide a "solution" there aren't any realistic alternatives either.

    I was just discussing that inflation is very real, however it is measured, when a particular good (a house) requires the efforts of 2 people for 20 years rather than 1. Without even trying to use money to measure value, house prices appear very "inflated". As a society we have indentured an extra person to the banks for years, with the true cost arguably being reduced birth rates. I don't even try to apply a cash value to that time, other than knowing it has roughly doubled.

    In this instance, the inflation runs counter to various other types of inflation because increased trade with low wage countries, manufacturing and distribution efficiencies and technological advances has in many instances debased the New Zealand dollar value of a lot of commodities rather than raised them. I can purchase higher spec computers, big screen TVs, Cell Phones etc for a fraction of their previous real cost despite higher current prices for their inputs (Ceramics, Steel, Plastics etc).

    In terms of inflation and money though, contrary to popular opinion, house prices tend to underperform during inflationary periods. So the link between hard assets, inflation and cash is hardly perfect either. Chart dates back to 1964, all the Baby Boomers are now on board...


  10. #510
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    new survey out says that 75% of the average income per week is spent on mortgage payments.... 5 years ago the figure was 40%....

    from Halebops graph a few assumptions can be made from 1964 onwards...

    1...clearly shows that after any period of house price growth, is followed by a period of falling prices...
    2... the larger the period of rising prices the larger the period of falling prices...
    3... in periods of bigger percentage gains followed by period of bigger percentage losses...
    in periods of smaller percentage gains followed by periods of smaller percentage losses...
    4... High inflation is bad for property price growth...
    5...the current cycle has characteristics similar to the cycle between say 1992 and 1997.. (currently with more growth, and sustained for a longer period)... where there is the initial peak and then falling positive growth followed by a rebound... the following period, (just after 1997) of falling prices wasnt a massive sell off but a sustained period of small losses....
    maybe we could expect something quite similar, but with slightly larger losses...


    Recently I know of a few people in their early 20's just getting into housing for the first time...
    It is obvious to me that theres the whole 'social status' of "yeah i got a house"...
    and the assumption that housing brings you financial savvyiness
    there aint nothing smart about buying in the current market... smells like 1987 but in a housing sense....
    being smart would be like holding a few shares waiting for market to fall with a high (but not certain) degree that the market will fall at some stage...

    I am not concerned, most likely going overseas regardless of what happens with property prices...
    Of course I can make it regardless of what property does!
    30yrs, one house, 52yrs old man ... yeah right....
    with 15% falling prices over a period of 4 years, 220-250k for a house (in chch)... 100k deposit...
    im looking at 12-14yr loan max... in 5yrs int rates will be alot lower aswell...
    why would I want it any other way!
    become smart or buy a house and turn into an old fart...[]
    [8D]
    .^sc
    Nakamoto means of Central origin ...

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