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Dear Europe: Here's Who You Can Blame For Soaring Home Prices

Tyler Durden's picture




 

Yesterday we read with great amusement a piece in which Bloomberg explained how "Sweden has flirted on and off with deflation over the past five years. Governor Stefan Ingves and his colleagues have unleashed unprecedented stimulus to get price growth back toward the 2 percent target, cutting rates to negative and buying government bonds."

It showed the following chart of Swedish "inflation" to justify its claim:

We found this funny because just a day prior profiling Sweden and its -0.35% interest rate, the same Bloomberg looked at fellow NIRPinian Denmark, which has an even more negative rate of -0.75%, where inflation is also supposedly negative, and yet where it found the following paradox:

"Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro."

This is all properties, not just luxury triplex apartments in downtown Copenhagen. This is the very definition of a housing bubble, and others have realized it.

The Danish regulator this month warned Danske Bank against pursuing a growth strategy in Sweden as the housing market there shows signs of imbalances. Price developments are now “highly distressing,” Klas Danielsson, the chief executive officer of Sweden’s state mortgage bank, SBAB, said on Thursday.

And here is even Bank of America also admitting what is so glaringly obvious, "economist" has become a synonym for idiot:

House prices have continued to rise amid negative rates in Denmark and Sweden. In the case of Denmark, house price gains appear to have accelerated this year.

But.. but... deflation:

 

Oh wait, that deflation of course excludes the hyper-inflation of such "irrelevant" assets as housing, rent and financial assets (and in the US, tuition, food, and medical costs). Remember: the only prices that matter to central bankers in their quest to see who can push rates to -100% first, are the ones that they themselves decide matter, and nothing else, such as the hedonically adjusted MSRPs of 85 inch LED TVs, which supposedly consumers buy 3 times a day. Sadly, one can't live under a TV (if they keep getting bigger, that may be possible soon).

So congratulations Europe: you find yourself in the unenviable position of having "tumbling prices" offset by home price hyperinflation. Why? The answer is shown in the yellow line in the charts below.

So thank you central bankers: if your mission was to crush the middle class and destroy the economy, burying it under tens of trillions of debt form which there is no escape, you succeeded.

 

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Fri, 10/30/2015 - 13:17 | 6731497 Troy Ounce
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Schmecovery

Fri, 10/30/2015 - 13:24 | 6731522 Bring the Gold
Bring the Gold's picture

Destroying and enslaving everyone but the top 0.0000001% has always been the goal of Central Banking. They manipulate prices and use pre- hyper inflationary confetti to buy real assets.

Fri, 10/30/2015 - 13:18 | 6731499 Lady Jessica
Lady Jessica's picture

There's a reason the word "mortgage" contains the word "death".

Fri, 10/30/2015 - 13:19 | 6731505 Jason T
Jason T's picture

deflationary trend can't be stopped.  socialism will fail spectactularly .. and just in time as majority of kids born in these social Euro countries are bastard children where state replaced Dad as role models. 

 

Fri, 10/30/2015 - 13:19 | 6731506 madcows
madcows's picture

Same here in Merica.

It's funny.  They're afraid the asset may fall in price (Deflation), but they completely ignore the fact that the asset has expolded in price (inflation).  HOW IS IT THAT A HOUSE CAN COUNT TOWARDS DEFLATION, BUT NOT INFLATION!  Fucking Stupid is right.

Fri, 10/30/2015 - 13:24 | 6731525 Lady Jessica
Lady Jessica's picture

Because that is the way WE want it to be, debt peon! [Whiplash sounds].

Fri, 10/30/2015 - 13:25 | 6731531 Bernard_2011
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What I find amazing is that Bloomberg was able to calculate that "inflation" was a precise -0.96% in the year 1348 (not to mention all the other years way back in the foggy haze of time).  Using what basket of goods/services and what data set?

 

GIVE ME A BREAK!!!

Fri, 10/30/2015 - 13:40 | 6731592 Bay of Pigs
Bay of Pigs's picture

That particular chart is the very definition of Full Retard.

Sat, 10/31/2015 - 05:25 | 6733532 katagorikal
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Black Death to Kill Property Bubble!

Your swelling buboes will not be the only things bursting next year ... Economists predict many vacant properties when 30% of the population are wiped out ... Real estate agents expect offices to close with many layoffs ...

Sponsored feature: Meet Doug Casey - the only man to make money during the Mongol invasions - and get your Plague Investment Protection Kit today.

                  Svenska Dagbladet (Stockholm), 1348

Fri, 10/30/2015 - 13:48 | 6731618 kevinearick
kevinearick's picture

trickle down inflation in the FILO bankruptcy queue ... what are those kids up to...it's not just the aggregate demographics...

Fri, 10/30/2015 - 13:58 | 6731670 Quintus
Quintus's picture

Anyone else remember when THE argument against putting money into Precious Metals was that 'They don't pay any interest'.  Happy days.  So when banks start charging to take deposits we should all buy Gold, right? Right?

Fri, 10/30/2015 - 13:59 | 6731677 Batman11
Batman11's picture

Many years ago when Alan Greenspan first proposed using monetary policy to control economies, the critics said this was far too broad a brush.

After the dot.com crash Alan Greenspan loosened monetary policy to get the economy going again. The broad brush effect stoked a housing boom.

When he tightened interest rates, to cool down the economy, the broad brush effect burst the housing bubble. The teaser rate mortgages unfortunately introduced enough of a delay so that cause and effect were too far apart to see the consequences of interest rate rises as they were occurring.

The end result 2008.

With this total failure of monetary policy to control an economy and a clear demonstration of the broad brush effect behind us, everyone decided to use the same idea after 2008.

Interest rates are at rock bottom around the globe, with trillions of QE pumped into the global economy.

The broad brush effect has blown bubbles everywhere.

Fri, 10/30/2015 - 14:08 | 6731720 Dr. Bonzo
Dr. Bonzo's picture

This is such a good write-up, commentary is superfluous. Houses and rents--usually about 20,30~50% of anyone's monthly expenditure--go up 40-50% but "inflation" stays at 2%. Those costs are fairy dust money. Doesn't really count.

Yes, fuck you citizens very much.

Fri, 10/30/2015 - 14:33 | 6731839 Mike Masr
Mike Masr's picture

What moron would want to buy a home in Sweden, Germany, Denmark, Austria, Croatia etc? By this time next year the minerets will be going off every few hours calling everyone to prayers. Not to mention the jiyza tax all of us infidels will have to pay. Our women will be wearing hijabs and the weekly excitment will be someone get stoned to death or beheaded for angering allah by drinking a beer.

Fri, 10/30/2015 - 15:31 | 6732087 orelius
orelius's picture

That is also my guess. As a matter of fact I believe there are lots of properties hitting the market as we speak. There are villages in Germany that had their population doubled if not tripled overnight, thanks to setting up migrant camps, and the locals are in minority. Whou would want to live there? I think this will put a tremendous pressure on home prices in Germany in regions that have significant migrant populations as of lately.

Fri, 10/30/2015 - 21:28 | 6733047 BlussMann
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Or your European home might be confiscated by the government to house the new "national treasures".  This is happening in Germany - I read where German families were canceling vacations for fear of not having a home when they returned, it being given to a Darkie of some variety.

Fri, 10/30/2015 - 14:57 | 6731931 nakki
nakki's picture

But the experts tell me that the "wealth effect" is supposed to make me "feel" wealthier. Silly me I thought just like a trade it was all paper wealth until I was out. You know where you acctually have to sell your assets to book a profit.

Better hope rates never rise or those 40% gains will turn into 60% losses. We all know that will never happen (rates rising) until it does.

Then again why not take out a home equity loan on my house take a vacation , because I deserve it. In the end we can just all default, sorry restructure our debt just like the big boys do.

 

Fri, 10/30/2015 - 15:04 | 6731979 MoonSun
MoonSun's picture

I remember that in the 2008 crisis, the ECB said that they should have taken into account the prices of real estate and the stock market. It is true that inflation in the supermarket was contained at 2%, but real estate and stock market inflation was extremely high and it was totally ignored.

They are committing the same mistake now, so I think it must be deliberate.

Fri, 10/30/2015 - 15:08 | 6731998 outlaw.guru
outlaw.guru's picture

This is absolutly deranged and all caused by a single monetary system. I believe that the runaway inflation in the core assets needs to be countered with more currencies because otherwise it gets lumped with the same money used to pay groceries.

We need three types of money.

1) Exchange money for the current year production/services (lets say issued by energy producers based on features),

2) Store value money (lets say issued by government based on total technosphere/economy value),

3) Risk based money (issued by banks where the market determines the amount of risk based currency).

 

Sun, 11/01/2015 - 12:06 | 6737061 Lockesmith
Lockesmith's picture

Or how about getting your filthy nose out of other peoples' business instead of dictating what currency they must use and which crusty government disservices they be forced to pay for at gunpoint?

Fri, 10/30/2015 - 15:38 | 6732108 Mike Masr
Mike Masr's picture
Swedish politician says country ‘facing collapse’ due to mass influx of refugees Published time: 30 Oct, 2015 14:22 https://www.rt.com/news/320158-sweden-refugees-collapse-catastrophe/
Fri, 10/30/2015 - 21:18 | 6733015 BlussMann
BlussMann's picture

Gee, I wonder if importing unlimited numbers of Niggers and Dune Coons to be supported in luxery, forever, by the poor dumbshit Swedes has anything to do with a collapsing economy ?

Fri, 10/30/2015 - 21:13 | 6733001 honestann
honestann's picture

Simple choice:  Either humans end central banks, or central banks will end humans.  Take your pick.

Sat, 10/31/2015 - 11:49 | 6734331 DavidC
DavidC's picture

"Sadly, one can't live under a TV (if they keep getting bigger, that may be possible soon)".

It's the wisdom of comments like that which keep me reading ZH!

DavidC

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