German powerhouse struggling

Generali

buglawton wrote: »

Insofar as the one with the surplus calls the shots, it's a good thing.

That's just a fiction.

China and Germany (surplus countries) are highly reliant on deficit countries to keep going. Germany only calls the shots in Greece because they're both in the Euro and Germany thinks it runs the Euro.

The fact is that running a large surplus is as precarious a position as running a big deficit as China and Germany are about to find out. There economies can only survive as long as the deficit countries are prepared to buy things from them. If deficit countries can't or won't, the Chinese and German models are in a bad place with falling external demand and not enough internal demand.

The lack of demand in Germany and China shows how precarious their economy is.

padington

So what's your London price predication over the next five years Generali given this dynamic ?

Generali

padington wrote: »

So what's your London price predication over the next five years Generali given this dynamic ?

I don't have one. It does seem reasonable to think that a load of this money chasing yield is going to end up in property one way or another though.

padington

Generali wrote: »

I don't have one. It does seem reasonable to think that a load of this money chasing yield is going to end up in property one way or another though.

Wouldn't it chase the best yield it can and go up north rather than London though ?

Thrugelmir

Generali wrote: »

I wasn't specifically talking about the UK.

Everyone seems to think that having a surplus is a good thing. Who should countries have a surplus with?

I think it's more complex than just surpluses. Countries have to be run in a financially prudent manner. At the moment the tail (i.e. politicians) wags the dog. This is what we are going to spend. Without knowing how it will be funded. Other than in growth.

Keynesian post war economics appear to have run their course. Inflation is now an illusion of wealth.

Generali

padington wrote: »

Wouldn't it chase the best yield it can and go up north rather than London though ?

In theory. In practice people want yield plus price stability (prices that won't go down) and house prices in those ex-industrial northern towns look quite volatile to me.

There is probably scope for a residential BTL fund in the UK with yield coming from 'The North' and price stability from 'the South'. If you gave it a REIT structure it would be quite tax efficient, albeit with the disadvantage that you'd have to pay out a big chunk of the income of the fund each year - 90% from memory.

buglawton

Generali wrote: »

That's just a fiction.

China and Germany (surplus countries) are highly reliant on deficit countries to keep ..... The lack of demand in Germany and China shows how precarious their economy is.

First time ever I've heard of an opinion (definition: something that does not claim to be a fact) being called fiction. That does does sound like a desperate response!

Being a debtor country can lead to being a bankrupt country, not a nice place to be if, as happened with Argentinia for example, courts try to seize your assets abroad.
http://en.m.wikipedia.org/wiki/Argentine_debt_restructuring

Still, believing that's it's more virtuous to owe than to lend is an interesting, and very British viewpoint.

ruggedtoast

There is such a thing as hubris, and it wouldnt take much to knock the London property market into a bit of it.

I hope something happens. We are fast entering a world where a normal English person has no hope of ever tasting life in their capital city, other than as some kind of non person serf who can share a bedsit with ten other low wage workers to service the rich.

Generali

buglawton wrote: »

First time ever I've heard of an opinion (definition: something that does not claim to be a fact) being called fiction. That does does sound like a desperate response!

Being a debtor country can lead to being a bankrupt country, not a nice place to be if, as happened with Argentinia for example, courts try to seize your assets abroad.
http://en.m.wikipedia.org/wiki/Argentine_debt_restructuring

Still, believing that's it's more virtuous to owe than to lend is an interesting, and very British viewpoint.

Perhaps I should have used the phrase 'common fallacy' in place of the phrase 'a fiction'. I thought that they are commonly used synonyms but clearly not.

I think you're confusing debt and trade. The Germans run a trade surplus. The only way they can run that trade surplus is to buy non-trade items such as assets from the trade (not debt) deficit nations. The German model requires that the finance other countries buying from them by recycling the surplus through asset purchases. Nothing to do with debt.

HAMISH_MCTAVISH

Generali wrote: »

The German model

Is completely unsustainable.

They do not consume enough to support their own economic model, so are reliant upon the excessive consumption of others.

When others cannot afford to consume, Germany must finance their consumption one way or another (via debt or asset purchases), or the German economic model fails.

I've pointed this out on many occasions.

Deficit and surplus countries are two sides of the same coin.