House prices to rise by 16 per cent in three years

Economists predict, sorry guess

The only matter of consequence in this equation is. When did these so-called economists ever get it right in this guessing game? According to the Centre for Economics and Business Research, property prices are expected to rise by 2.2 per cent next year as unemployment increases. Jobless figures will rise on the back of public sector cuts and household incomes will remain under pressure, they reckon.

 But they expect low interest rates, further quantitative easing from the Bank of England and the ongoing housing shortage to offer some support to the market. House prices are likely to be 16 per cent above their current level by the end of 2014.

 In your dreams baby, more QE or quantitative easing as they prefer to call it. Will if you need examples, only result in an expansion of the wheelbarrow trade, as people go shopping for a loaf of bread with a barrow full of government sponsored IoUs. Shades of the Weimar Republic and more recently in President Mugabe’s ‘Zim’.

 In case you missed it, the President of the World Bank is now openly calling for a debate about returning to the Gold Standard as a way of applying monetary disciplines. The bank’s president since 2007 reckons a successor is needed to the system of floating currencies that has held sway since the Bretton Woods fixed exchange rate regime broke down, in 1971 and a debate should take place to formulate a successor.

 Why did it breakdown you might well ask? Well it happened like this, France and Switzerland were ganging up on the USA to demand gold bullion in exchange for their Yankee dollars. Whether the Federal Reserve actually held sufficient gold reserves to accommodate this act of sabotage, is a moot point. But president at the time Richard Nixon refused to honour the pledge then printed on every US dollar note. This note is ‘exchangeable for gold at the Federal Reserve’.

 It wasn’t and they didn’t, so every country was free to run their currencies in whatever way they chose and a free for all developed. It will continue for as long as respective governments can get away with it. But it has to end somewhere, so it’s either wheelbarrows full of readies for a loaf of bread or shovel swinging.

Watch this space, I’ll be back!

Tom.

P.S. More about shovel swinging the next time around.