…The world will soon experience how false and dangerous global growth has been since it is standing on a foundation of paper money. As this foundation collapses in coming years, the world will realise that all the assets that have been inflated to bubble levels will lose most of their value. [Indeed,]…if we look at what could happen to house prices in real money (gold)…the risk is such that buying a house today is likely to be a very costly and perhaps ruining experience.
The comments above and below are excerpts from an article by Egon von Greyerz (GoldSwitzerland.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.
An average house in the US costs around $265,000 today. Not that you get much for $265,000 but that is the average. Measured in gold that becomes 7 kilos or 225 ounces.
…My forecast for gold in coming years is at least $10,000 in today’s money. In hyperinflationary money, it will be many times higher. At the same time, I expect that the inflated housing bubble fuelled by credit will collapse. House prices will go down by at least 75% and probably by as much as 90%.
A 75% fall in house prices is very realistic and a likely minimum fall. At that level with gold at $10,000 a house doesn’t cost 7 kg or 225 ozt but 0.2 kg or 7 ozt. so, in gold, the price is now down 97% and costing 3% of what it cost in 2016. This sounds totally unrealistic but it has been the experience in countries with hyperinflationary depression like the Weimar Republic.
Let’s also look at a fall in house prices of 90%. Even more unrealistic many would say, but let’s just remember that an average house in 1916 was under 1% of what it costs today at $2,000 against $265,000 now so ,in a credit collapse combined with interest rates at 15-20%, high unemployment and substantial economic contraction, a 90% fall could easily happen.
For someone who believes that this scenario is a possibility, which of course will be very few, he would be able to buy a house for 1%, in say 2021, of what he would pay today, if he held his money in gold. It sounds unreal but the risk is such that buying a house today is likely to be a very costly and perhaps ruining experience.
Disclosure: The above article was edited ([ ]) and abridged (…) by the editorial team at munKNEE.com (Your Key to Making Money!) to provide a fast and easy read.
What do you think about the above article? Have your say in the Comment Section below.
Related Articles from the munKNEE Vault:
In the next 5 years most people will lose 75-90% of their wealth and some 100% but investors needn’t lose most of their money if they took a few measures to protect their fortune…
Over long periods the inflation-adjusted price of homes in the U.S. has tended to increase by a little more than 1% per year. That doesn’t mean owning a home is a good way to make a 1% real return on your money though. This article explains why.
In a long-term strategy which employs both investments, there is a case for putting an over-weight on housing, and an under-weight on gold, given current relative price levels unless one is specifically investing for financial crisis.
- “Like” this article on Facebook
- Have your say on Twitter
- Register to receive our free tri-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner).
- Every day, 7 days a week, I scan hundreds of financial articles, identify the best, and then repost abbreviated versions of them on munKNEE.com.
- I have been doing so for 9 years now and have posted 4,500 articles to date (see archives on Gold & Silver, Investing, Economic & Financial matters and some interesting Miscellaneous articles.)
- The newsletter is free so, what the hell, sign up for it in top right hand corner, try it out and, if you don’t like it, unsubscribe. It’s that easy.