Depression in the USA - Deflation verus Inflation

[Aaron]

Bill's wording that "the public will realise something is amiss" is what got me. Asset price inflation has been a big thing since the late 1980s and targeted inflation came in. Even more so after 2007/08 and QE etc. It sounded more to me that Bill was concerned that if the share market didn't crash while people were losing jobs etc i.e. while the public suffer the owners of the economy are still sweet. The public might get ****ty about it.

I imagine a capital gains tax would be across the board not just shares. Anyway residential property owners already have a 5 year bright line test, maybe it could be extended to shares and commercial property? I was looking at the falls in the property companies and thought that Precinct Properties or Property For Industry aren't going to get affected by online shopping like KPG but then I was talking to a mate who works in a bank and has been working from home. The big cheeses have found it to be successful with software applications like Microsoft team they were talking about reducing the number of buildings needed. Could also be why Bill Gates doesn't want people getting together until there is a vaccine. His business must be doing really well. I should actually look at Microsoft, although buying US shares is expensive with ASB Securities.

[Bjauck]

Maybe - but English chose not to mention real estate. Too many National supporters having a more substantial investment in a rental property?

Along with bright line, There are plenty of other instances where capital gains, even unrealised gains, are included as income. And why should those who can afford home ownership not also be subject to a brightline test or net imputed rent tax? After all if they had invested their equity into shares or a business instead, the befnefit or income therefrom is taxed.

I understand where he is coming from. However despite the recent bounce back in shares, prices are down about 20% from their peak, some even more, plus many companies have cancelled dividends. So the pain is being shared by the long term shareholders. Traders may be a different matter.

Of course English was part of a government that happily oversaw rapidly rising real estate values putting home ownership out of reach for so many more. I guess that was acceptable to him. And no mention by English that real estate ownership is being concentrated in the hands of a smaller percentage who pass it down to their inheritors. Why should this be any less outrageous than low inflation and quantitative easing inflating share prices. It is not as though that asset class alone was the beneficiary of those policies, when so much extra wealth in NZ actually accrued to the owners of land.

[SBQ]

Bill's wording that "the public will realise something is amiss" is what got me. Asset price inflation has been a big thing since the late 1980s and targeted inflation came in. Even more so after 2007/08 and QE etc. It sounded more to me that Bill was concerned that if the share market didn't crash while people were losing jobs etc i.e. while the public suffer the owners of the economy are still sweet. The public might get ****ty about it.

I imagine a capital gains tax would be across the board not just shares. Anyway residential property owners already have a 5 year bright line test, maybe it could be extended to shares and commercial property? I was looking at the falls in the property companies and thought that Precinct Properties or Property For Industry aren't going to get affected by online shopping like KPG but then I was talking to a mate who works in a bank and has been working from home. The big cheeses have found it to be successful with software applications like Microsoft team they were talking about reducing the number of buildings needed. Could also be why Bill Gates doesn't want people getting together until there is a vaccine. His business must be doing really well. I should actually look at Microsoft, although buying US shares is expensive with ASB Securities.

After all, it was Bill English that brought in Kiwi Saver to NZ (if I recall correctly). From a NZ perspective, how many of the very rich invest in shares as their bulk majority of their wealth? Not many because the NZX doesn't have the size and liquidity ; the ultra rich that I know in NZ have it all in real estate. Why? Because even with a brightline test of 5 years, no one would dare to sell a house within that period and like any financial advisor that advises clients about investing in the sharemarket, they say the same thing... invest for the LONG TERM. Now let's compare the tax laws in other places such as US and Canada where such 'brightline tests' aren't talked about. If you bought the house for the intention of investing, then you MUST pay the tax on the capital gain. Why is it in NZ we have such slack tax laws that cator towards the ultra rich (who hold their wealth in this asset class) ??? and here we have Bill English saying otherwise.

As for depression in the USA? My $ is betting on the US recovery. Many can pick holes out on their unequal health care, or their mediocre education system, the proof is in the past 100 years, you would be wrong betting against the US. Just in the past 20+ years living in NZ i've seen my US friends experiencing higher standards of living while to my NZ friends, we've seen the a lower standard of living. Good example is the quality of NZ houses.

[Jerry]

The standard of living in the States is very variable. Look in the cities at squalid apartments. My US friends also live well, but they live in California; look at St Louis and New Orleans. It's the number of people unemployed that suddenly won't afford the mortgage that will be a problem. We have a kinder attitude here in NZ, less cut-throat hardball.

[fungus pudding]

The standard of living in the States is very variable. Look in the cities at squalid apartments. My US friends also live well, but they live in California; look at St Louis and New Orleans. It's the number of people unemployed that suddenly won't afford the mortgage that will be a problem. We have a kinder attitude here in NZ, less cut-throat hardball.

The States have a CGT and has a wide disparity of wealth. India which has a massive gap between rich and poor also has a CGT. NZ taxes real estate gains made by traders, but exempts investors.

[Aaron]

Maybe this was what Bill was referring to.
https://www.zerohedge.com/markets/de...market-anymore

Central Banks will eventually take over financial markets. The Federal Reserve is talking about buying ETFs(stocks) they have already backstopped the credit market. All due to an economic theory that says if asset prices stay high people will feel wealthier and spend more. Trickle down economics?(bull**it) More like protecting those with wealth from bad decisions or ever having to make a loss. Maybe Bill realises that we will all wake up to this one day and say no more, let bad investments fail and overleveraged good investments transfer to someone who will manage them better. Let the free market decide through pricing capital(interest rates) on a free market. This current system is wrong. All the doomsayers said after 2008/09 that the next bailout would need to be larger and it has been a lot larger. A what point does something break?

SBQ your memory doesn't serve you well Kiwisaver was brought in by Labour and Michael Cullen.

[JBmurc]

Yes bail out the super rich crush the middle class forget the poor is the mantra of those in power in times of financial crises

[Bjauck]

I guess if asset prices collapse in America, the UK and elsewhere, then all the overseas funds investing in NZX listed shares will suddenly find there are cheaper opportunities closer to home. Then having so little capital left to help rebuild companies and the economy will make having so much of NZ household wealth in residential land not look so smart?

[Bjauck]

...
SBQ your memory doesn't serve you well Kiwisaver was brought in by Labour and Michael Cullen.

National dislikes the super fund and KiwiSaver. They stopped contributing to the fund and have tried to make kiwisaver less effective. Basically they would have preferred NZ housing to remain the de facto scheme for those who could afford it, with the poorer cohorts relying on charity or the NZ state.

[Aaron]

Maybe this was what Bill was referring to.
Admittedly Zero Hedge is "out there" and you might want to check some of the authors credentials before taking anything to heart.

https://www.marketwatch.com/story/wh...?mod=home-page

https://www.zerohedge.com/personal-f...ho-fed-helping

https://www.zerohedge.com/markets/on...ize-everything

https://www.zerohedge.com/markets/ti...t-happens-then


Also this is the US and the Federal Reserve Bank not NZ although we seem to be headed down the same path.

Asset price inflation at any cost.