Monday, May 17, 2010

In answer to Chad...

I think Chad's point in the last post's comment section was that inflation was rampant from money-printing CBs and zero rates therefore Gold, which is limited and Vancouver RE which is also limited should be priced against each other. At least I think that was his point.

And he said that gold was indicating inflation.

Well the graph above shows inflation for the US. Even if assume some manipulation, there is no inflation.... and apart from China, I think the chart would look the same for most large economies.

Meanwhile here is gold over the same period:$GOLD&p=D&yr=3&mn=0&dy=0&id=p52154258457

Not much of a correllation.

The only thing we should measure Vancouver RE against is:

1) Local earnings

2) The cost of carrying debt

3) Government incentives to buy

4) Add in a % for Out-of-Province buyers. eg Albertan retirees and Asian buyers who may not show up in the earnings stats.

1) is way off the charts. 2) is as low as it can get. 3) the government is coming to it's senses after helping drive us into this bubble. 4) who knows?

I do think the end game for all this debt, and we are amongst the most indebted in the world, is high inflation to wash it away. However we are some way from that.