Signs Of Serious Depression. Signs Of Serious Strain In Housing Market ?
Q: some of the factors behind the housing boom show signs of
fading, and indicators that traditionally foretell weakness in the
market are emerging.
A:If Japanese land buyers weren't bright enough to complain about low
interest rates in the 80s, what makes you think American ones would be
bright enough to complain about them now?
Japan's declining interest and land tax rates in the
80s were what caused its land price bubble and consequent 12-year (and
counting) depression. By 1989, Japan's prime rate was less than 1%,
it's effective land tax rate (the rate on actual market value) less
than 0.1%, and all the land in Japan was worth four times as much as
all the land in the US
A: Similarly, the decline in US interest rates during the 80s was what made it such a good decade for long bonds. These things are utterly obvious -- unless you refuse to understand them. Sorry, I must have got the prime rate confused with another commonly used rate. The chart you point to clearly shows the prime rate declining through the 80s. The short term prime chart shows a number of entries in the 3% range, so clearly your question 40 lines or so above was, shall we say, ill-informed? This thing with the deflator is very serious business indeed. The various camps brew up whatever "basket of goods" will make their point for them. Ye ole ubiquitous rubber ruler.