The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

Global Real Estate Bubbles Burst

The big international cities like London, Singapore, Hong Kong, and New York, are all witnessing a big decline in luxury sales and thus prices. Hong Kong sales are down 40% from the prior year, while London sales are down 26%.

The above confirms that we are seeing a global debt implosion. It’s not “because” of lower oil prices, or commodity prices, or the China crises. The source of it is a collapsing debt pyramid. The huge quantitative easings (QE) by central banks only slowed the collapse, and actually enabled the creation of new debt used for highly- leveraged speculations with very cheap money.

In the US, more people were renting the past several years rather than buying. However, recent data shows that the soaring rents and declining mortgage rates are now pushing younger people into buying. Property taxes are rising, making that a more risky decision. It only takes a recession, loss of job, and lack of savings to have soaring foreclosures.

Municipalities and their out-of-touch politicians easily hike property taxes to pay for their wasteful projects. Soon they may kill the “golden goose,” namely the taxpayers.

The middle-class in the US is being decimated. Soon we will only have the poor — who are on some type of welfare — and the rich. Hard working employees will decide ever more that they can make more money being on welfare than by getting up early in the morning and going to work.

As the creator of the Austrian School of free market economics,  Ludwig von Mises, wrote many years ago: when a bubble created by governmental cheap money policies collapses, and then the central banks try to inflate it again, it only ends in even a bigger collapse later. We are paraphrasing.

We are now in that second phase of the secular economic bear market. Stay tune,  it could be a doozy.