To ease or not to ease? Is no longer a question.

Posted by Mark on 8th Oct 2010
In anticipation of Messrs Bernanke and King cracking up the printing presses almost all asset classes are rallying.

-Gold is up as a hedge against the "enevitable" ensuing hyper inflation.

-Bonds are up as we will in any case slip into a Japan style deflationary spiral (plus all of those new dollars and pounds will be used to buy them). And....

-Shares are up, because that's what happened last time; although net new investment is dwarfed by money going into the above.

Clearly this will end badly as only one scenario can play out.

But what of property?

Even discounting the precipitous lurch of -3.6% in the Halifax price index last month, the trend for house prices is clearly down and the consensus in the world of commercial property is that a double dip of some sort is inevitable.

So how will a further £50bn or so swilling around the investment coffers of banks and institutions effect us?  The correct answer wins a multi-million pound fortune and as much gold as he/she can eat.

Frankly I haven't got a clue.

But the following might be possible:

-People buy into property as a hard asset hedge against inflation.

-Funds get a higher weighting into property in a search for yield.

-The banks have so much cash they start lending to any fat middle aged bloke who has renovated a flat before. Again.

Or maybe none of the above.

-In a response to inflation, interest rates shoot up and the vast amount of LTV busted loans default on interest payments too; we get a crash that makes 2008 look like tea party.

-A deflationary spiral undermines further rental growth and property is shunned for a decade as an asset class.

-The banks divi the excess capital amongst themselves in the form of huge bonuses and the industry has a second systemic crash in 2015 as a result of a moral and physical implosion brought on by an excess of hookers and cocaine.

Or maybe none of the above.

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