What would happen to RE prices if US defaults on its debt?
invite response
2012 Jan 18, 7:23am 1,575 views 2 comments
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tdeloco
2012 Jan 18, 7:34am
Up actually (in numeric terms).
Seriously bad inflation usually follows sovereign default (don't jump to the gun and say Hyperinflation). If you understand what that means, the price in terms of numbers goes up but the value goes down. Kapish?
dunnross
2012 Jan 18, 7:42am
Seriously bad inflation usually follows sovereign default (don't jump to the gun and say Hyperinflation). If you understand what that means, the price in terms of numbers goes up but the value goes down. Kapish?
The problem is that what we are having now is not "inflation" - it's currency crisis, which is quite different from inflation, which is what we had during the K-summer, back in the 70's. Currency crisis, means that people stop giving any trust to the fiat currency, and this happens over a very short period of time. The end game is the default, which means that people would no longer accept your money for houses. However, if you had something of real value, like gold, silver, or even coffee, the price of a house would be very cheap relative to those. Since, people would no longer be able to borrow money to buy a house, a house would have to compete with "real money", which is money derived from "real labor" and not "hyped delusion of appreciation". This money is gold, because gold has no liability, it's not debt money, which is the US dollar. My guess, is, if US defaults, then you would be able to buy any house in a prime fortress location for no more than 30 oz of gold.
"U.S. debt and deficits are running over $1 trillion per annum and amount to over 700% of Federal revenue. And just last week, we learned that the monthly budget deficit climbed to $85.97 billion in December, from $78.13 billion in the same month a year earlier. The only relief from such debt will be a default on the part of the United States." --- Michael Pento 1/18/2012
