For many years now Canadian Real Estate has been booming. Year after year the massive quantitative easing experiment around the world has caused this. Trillions of interest low or even free money has been pumped into Real Estate around the world. From Sydney to Vancouver, Real Estate has been exploding in price.
Investors from around the globe have been speculating and earning billions on Real Estate. Houses, Condos and Townhouses have been driven into a massive housing bubble. And now the party is over.
The Worlds greatest Bubble
There have been many bubbles throughout history. From Tulips to Tech, bubbles have been formed. Greed is the driver and the desire to make a whole ton of cash through speculation. And that is what bubbles are. Pure speculation that the item inside that bubble will keep going up and up in value.
Of course history has proven that bubbles burst. There has never been a bubble of speculation that has not burst at some point. We have now entered the great unwinding of the massive Real Estate Bubble. One questions looms, will it explode or slowly fizzle into an ever depreciating asset class for years to come.
No One knows
Will the bubble just pop or slowly fizz is the question. Either way it will be ugly for thousands of new home buyers and even longer buyers. The longer buyers will see their equity slowly dwindle and the newer home buyers will be underwater.
Usually when a bubble pops it pops and drops below it’s long term medium price. A good example would be the Tech Stocks of the late nineties. Stocks went down well below their long term average and many companies closed their doors. That could be a foretelling of what lies in store for Real Estate around the world.
This Bubble is Bad
The Real Estate bubble this time around could be the worst in history. Why? Quantitative easing has cause bubbles in stocks, car loans, speculation and junk bonds. Corporations from around the world have pumped up stocks and bonds. Now they are crashing along with Real Estate.
They can’t raise interest rates to high or the bubbles will all crash at once! When was the last time every thing crashed together? Was it the great depression? Maybe. What exactly causes a depression anyway? Isn’t it when everything starts to get cheaper, or is it when the money dries up.
Deflation or Inflation
No one knows what is going to happen with this great experiment. Trillions of dollars have been created and now the governments around the world can’t take them back. Try as they might just a few interest rate hikes are cracking the edges of these massive bubbles.
Now they are thinking of just stopping the interest rate hikes. There are still trillions sloshing around looking for a home. Will they go back into the stock market. Will they go back into bonds. No, they can’t do that with all this money. Why? If they don’t get rid of all this dough there is going to be inflation! Lot’s of inflation that they will not be able to stop.
What does higher inflation mean? It means runaway interest rates to try and stop it. This is what is called behind the curve. The good old US Fed always says we gotta stay ahead of the curve. What would runaway interest rates do to an imploding Real Estate market! What about deflation? Prices keep dropping. Well I guess it would almost certainly stop inflation.
So if you can’t raise interest rates because the entire worlds Real Estate and Stock markets will come crashing down. And you can’t lower interest rates because you ran out of fiscal ammo just what can you do? The only thing I can see is print a whole lot more money. Just keep printing and printing and printing. Oh my God are we in trouble.
Editor Zoomers News