Written by Jeff Nielson Saturday, 11 October 2014 14:50
For the majority of Western populations; real estate is considered to be the ultimate “hard asset”, and thus the most-desirable financial shelter in times of economic peril/uncertainty. Ironically, it is precisely this attribute (and attitude) which makes real estate the ultimate wealth-trap – at the hands of unscrupulous bankers/governments.
First readers need to familiarize themselves with some of the economic dynamics associated with real estate. As a finite, hard asset (there is only so much usable land in the world), supply is limited. It is because of this limited supply that people trust real estate to preserve its value, and thus preserve their wealth. But the implicit assumption in this equation is that we have legitimate, properly functioning markets and economies.
As regular readers understand; nothing could be further from the truth. Our markets are literally nothing more than rigged casinos. Our economies are literally nothing more than (ridiculously unstable) Ponzi-schemes. This can be seen clearly, simply by comparing the present economic/market insanity with normal, historic conditions.
Under normal economic conditions (with legitimate markets), there are specific economic dynamics which help to ensure that real estate values do not get over-inflated, turning a financial shelter into an asset-bubble – and a wealth-trap. In times of “high inflation”, which is one of the principal fear-factors which make people look toward real estate; the tendency is for people to flock into real estate markets, thus driving prices up to unsustainable, dangerous levels.
However, in times of high inflation; all legitimate governments raise interest rates. Raising interest rates is the most-effective blunt-force monetary tool in dampening prices, in any/all markets. Thus the push into real estate driven by high inflation is countered by the pull of higher interest rates, driving people away from real estate, due (mostly) to significantly higher mortgage costs.
It is here we see the irredeemable corruption of the governments of the Western bloc. As prices spiral higher today in the two most-important price categories – food and housing – these corrupt governments tell us that inflation is near zero. Indeed, these shameless liars now have the audacity to claim that inflation is “too low” (something which is economically impossible).
It is because of this Great Inflation Lie that these puppet-governments claim to be justified in keeping interest rates permanently frozen at near-zero levels. Here readers need to understand the insane recklessness of near-zero interest rates, and why we have never, ever seen such monetary insanity at any time in the previous history of Western nations.
Near-zero interest rates translate into free money for the Big Banks, who are the recipients/conduits for all the “capital” entering our capitalist system. Such “free money” represents an inexhaustible supply of cheap credit. This is nothing less than rocket fuel for any credit-based economic system like our own.
In even semi-functional economies; near-zero interest rates would quickly trigger an economic boom that was so explosive that our economies would begin growing too fast. The problem here is our markets. Such rapid, rabid economic growth always triggers even more-dramatic explosions in our markets. Prices catapult higher, turning virtually all markets into exponentially soaring, out-of-control, asset bubbles.
But what do we see in our own economies? Barely perceptible twitches of life, where “economic growth” can only be feigned with the most-egregious perversion of economic statistics. Having been mismanaged to the point of utter ruin; even near-zero interest rates can no longer coax any life into these zombie-economies.
But such reckless/insane interest rates can produce (and have produced) no shortage of asset-bubbles, and (in particular) real estate bubbles. Simultaneously (and for the first/only time in history) we have the two, ultimate drivers of real estate bubbles: high inflation and (ultra) low interest rates.
Written by Jeff Nielson Monday, 06 October 2014 13:06
In 2013; a chain of events led to what was (at the time) the greatest stampede into gold in human history. It began with the Cyprus Steal, the West’s first “bail-in”. This led to the realization (by the Smart Money) that no paper assets were safe any longer, within any Western financial institution or market.
In turn, this led to an unprecedented stampede out of the banksters’ paper-called-gold “products”, primarily their ultra-fraudulent bullion-ETF’s. With the paper-called-gold market being 100 times larger than the real (physical) gold market; this naturally caused a plunge in the official price of gold.
It was at this point that the stampede into (physical) gold began. Some of this demand was from the West: sellers of these vast quantities of paper-called-gold suddenly saw the wisdom in holding real bullion: having physical custody of their asset, and thus zero counterparty risk.
Most of the demand, however, came from the East. With the price of gold falling roughly 30%, from already depressed levels; this was nothing less than a “dinner chime” for Pavlov’s dogs. Unlike the serf-populations of Western nations; appreciation (and understanding) of precious metals has not been blunted by roughly 30 years of relentless anti-gold (and anti-silver) propaganda.
With this Eastern understanding; the world had already been witnessing a relentless transfer of the world’s bullion holdings from West to East. Thus like women flocking to a shoe-store sale; this “30% off” on the price of gold in 2013 led to a spike in Asian demand beyond anything previously seen.
As indicated in a previous commentary in June of last year; at that time both China and India were on a pace to import roughly 2,000 tonnes of gold – surpassing any previous total for either nation. China, indeed, ended 2013 with net imports exceeding 2,000 tonnes, according to gold analyst (and China specialist) Koos Jansen.
Gold demand in India was temporarily derailed, however; as India imposed (what was at one point) a near-total embargo on (legal) gold imports into that nation. This draconian measure was a capitulation to blackmail from the One Bank, which had caused a “currency crisis” in India by attacking the value of the rupee in (rigged) global FX markets. The bankers made it explicitly clear that nothing less than a dramatic drop in gold imports would/could rescue the rupee from these currency market attacks.
Official imports into India plunged dramatically, and India ended the year having imported considerably less than 2,000 tonnes. A precise number is not possible; as the legal restrictions on gold imports into India reignited gold smuggling into that country. Indeed, the Indian government had spent years previously “liberalizing” its gold market, precisely in order to stem blackmarket flows across its porous borders.
As gold-smuggling exploded, and it became more and more obvious that a legal ban on importing gold could not stop the flow of bullion into that nation; the bankers themselves capitulated, and allowed India’s government to restore official gold imports to somewhere close to “normal” (i.e. pre-2013 levels). However, making it easier to legally import gold into India has not resulted in a drop-off in smuggling. Indeed, recent reports indicate that gold-smuggling into India is accelerating further.
Now, as more bankster manipulation has caused a (relatively) modest further retreat in bullion prices (roughly a 5% recent drop in the price of gold, and 10% for silver); we see indications of gold demand into China and India returning to that torrid pace of 2013 – just as the beginning of the seven-month “gold season” in India looms before us.