Debate House Prices


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Deflation risk ... Gone?

Taken from WIKI


Systemic reasons for deflation in Japan can be said to include:
  • Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, many loans went unpaid. The banks could try to collect on the collateral (land), but due to reduced real estate values, this would not pay off the loan. Banks have delayed the decision to collect on the collateral, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks make even more loans to these companies that are used to service the debt they already have. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy.
  • Insolvent banks: Banks with a large percentage of their loans which are "non-performing" (loans for which payments are not being made), but have not yet written them off. These banks cannot lend more money until they increase their cash reserves to cover the bad loans. Thus the quantity of loans are reduced and less funds are available for economic growth.
  • Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. People also save by owning real estate.
Im hoping we have avoided it... but have we...?

If rates get increased any time soon, I do fear us following suit and rates being low for many years to come! With a heavy dose of deflation
Plan
1) Get most competitive Lifetime Mortgage (Done)
2) Make healthy savings, spend wisely (Doing)
3) Ensure healthy pension fund - (Doing)
4) Ensure house is nice, suitable, safe, and located - (Done)
5) Keep everyone happy, healthy and entertained (Done, Doing, Going to do)
This discussion has been closed.
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