The Weimar Nightmare in Review

[Master Shake]

From Jesse's Cafe.

http://jessescrossroadscafe.blogspot...inflation.html

[zoog]

Re: The Weimar Nightmare in Review

From Jesse's Cafe.

http://jessescrossroadscafe.blogspot...inflation.html

For more of Bart's Weimar charts:

http://www.nowandfutures.com/weimar.html

[radon]

Re: The Weimar Nightmare in Review

For more of Bart's Weimar charts:

http://www.nowandfutures.com/weimar.html

Anyone who thinks real estate will somehow save their bacon during hyperinflation should take a good hard look at table 6.

[Quincy K]

Re: The Weimar Nightmare in Review

Anyone who thinks real estate will somehow save their bacon during hyperinflation should take a good hard look at table 6.

If I remember correctly, landlords where not allowed to charge rent during the Weimar hyperinflation. It was not allowed by the government.

During a hyperinflationary episode, you want to be holding any and all hard assets, and that includes real estate.

[touchring]

Re: The Weimar Nightmare in Review

If I remember correctly, landlords where not allowed to charge rent during the Weimar hyperinflation. It was not allowed by the government.

During a hyperinflationary episode, you want to be holding any and all hard assets, and that includes real estate.

what use is real estate if you can't charge rent?

[Master Shake]

Re: The Weimar Nightmare in Review

what use is real estate if you can't charge rent?

That's his point; it's not likely the US government would prohibit the charging of rent. Therefore, the Weimar stats are skewed.

OTOH, was there a big real estate bubble in Weimar Germany prior to the collapse?

[radon]

Re: The Weimar Nightmare in Review

If I remember correctly, landlords where not allowed to charge rent during the Weimar hyperinflation. It was not allowed by the government.

During a hyperinflationary episode, you want to be holding any and all hard assets, and that includes real estate.

Real estate is an illiquid depreciating asset that is/was highly leveraged. Once the cheap fixed interest loans disappear the price "investors" will be able to pay for a property will fall dramatically. This is money you will lose in real terms if you want, or are forced, to sell.

If rent control makes a politically popular appearance during hyperinflation that asset will have negative cash flow since you cannot raise rent to cover costs. How much would a property like that be worth in your opinion? I know how much I'd be willing to pay to assume that liability.

I'd hate to be forced to put a new roof on something only to spend more on the shingles than I did on the building. You'd be better off buying the shingles and throwing them under a tarp somewhere. No real estate for me thanks.

[zoog]

Re: The Weimar Nightmare in Review

what use is real estate if you can't charge rent?

That's his point; it's not likely the US government would prohibit the charging of rent. Therefore, the Weimar stats are skewed.

OTOH, was there a big real estate bubble in Weimar Germany prior to the collapse?

As far as I know there was no German real estate bubble prior to their hyperinflationary period.

Also, note the relationship between real estate and the Rentenmark:

The Rentenmark replaced the Papiermark. Due to the economic crises in Germany after the Great War there was no gold available to back the currency. Therefore the Rentenbank, which issued the Rentenmark, mortgaged land and industrial goods worth 3.2 billion Rentenmark to back the new currency.

[radon]

Re: The Weimar Nightmare in Review

That's his point; it's not likely the US government would prohibit the charging of rent. Therefore, the Weimar stats are skewed.

OTOH, was there a big real estate bubble in Weimar Germany prior to the collapse?

They don't have to prohibit the charging of rent. They just have to keep you, as a landlord, from raising it. In hyperinflation it is basically the same thing. I would expect a resurgence of rent control in response to the rapidly rising rents. It would be enormously popular in places like The Peoples Republic of Massachusetts. Its not just the Feds who can ruin your investment.

[Quincy K]

Re: The Weimar Nightmare in Review

Real estate is an illiquid depreciating asset that is/was highly leveraged. Once the cheap fixed interest loans disappear the price "investors" will be able to pay for a property will fall dramatically. This is money you will lose in real terms if you want, or are forced, to sell.

If rent control makes a politically popular appearance during hyperinflation that asset will have negative cash flow since you cannot raise rent to cover costs. How much would a property like that be worth in your opinion? I know how much I'd be willing to pay to assume that liability.

I'd hate to be forced to put a new roof on something only to spend more on the shingles than I did on the building. You'd be better off buying the shingles and throwing them under a tarp somewhere. No real estate for me thanks.

I don't think that we are on the same page here. Hyperinflationary episodes are rather brief and fierce periods, not something that is prolonged. A new currency is generally the end result, something that the World Bank, USG and the IMF already have ready to roll out if this all goes to shit. The majority of people are just trying to retain their wealth as opposed to profiting from a hyperinflationary period.

If you are sitting on a fully-paid off SFR with it's own water supply, solar equivalent and a years worth of canned food in a rural environment...

you are in an excellent position if the US where to hyperinflate.

And you don't want to be in a foreign country with your assets. Emminent domain will be commonplace against Americans.

Just ask Solis after they physically(with guns) stole his building(s) in Russia.

[Kadriana]

Re: The Weimar Nightmare in Review

I don't think that we are on the same page here. Hyperinflationary episodes are rather brief and fierce periods, not something that is prolonged. A new currency is generally the end result, something that the World Bank, USG and the IMF already have ready to roll out if this all goes to shit. The majority of people are just trying to retain their wealth as opposed to profiting from a hyperinflationary period.

If you are sitting on a fully-paid off SFR with it's own water supply, solar equivalent and a years worth of canned food in a rural environment...

you are in an excellent position if the US where to hyperinflate.

And you don't want to be in a foreign country with your assets. Emminent domain will be commonplace against Americans.

Just ask Solis after they physically(with guns) stole his building(s) in Russia.

I was thinking something similar. According to that chart, the highest cost is food. If you can provide the majority of your food and have your own power source, then I think owning your own real estate would be much better than having an apartment and less freedom. The big concern I would see is property taxes and possible repairs but I will take a busted roof over trying to figure out where to get food.

[Beavus]

Re: The Weimar Nightmare in Review

Something I plan on enjoying with realestate. Paying off my half million dollar home at 4% Fixed, with increased wages over the next 30 years. I may still be negative equity for a long time, but I will be paying the debt back with dollars that are eisier to come by (raises, tax breaks, flex spend plans).

We will not be able to get such inexpensive money in a few years when interest rates go back up. Get the money now while the gettin is good! If you can...

[zoog]

Re: The Weimar Nightmare in Review

Something I plan on enjoying with realestate. Paying off my half million dollar home at 4% Fixed, with increased wages over the next 30 years. I may still be negative equity for a long time, but I will be paying the debt back with dollars that are eisier to come by (raises, tax breaks, flex spend plans).

We will not be able to get such inexpensive money in a few years when interest rates go back up. Get the money now while the gettin is good! If you can...

Can you really be certain that wages will rise? Sure, over a 30-year period it's probable, but not guaranteed. What if your wages are cut to one quarter first and then slowly rise from there?:eek:

[goadam1]

Re: The Weimar Nightmare in Review

I am going to enjoy not having any debt, spread my risk around and go about my life with hyper inflation below my chances of being hit by a cab

[radon]

Re: The Weimar Nightmare in Review

I don't think that we are on the same page here.

Probably not, I'm saying that the leverage used to sustain high real estate is prices is disappearing and that hyperinflation would accelerate this process. This makes real estate a poor vehicle to preserve wealth. It is even worse when you think of the political risk and the difficulty selling it should it become necessary.

If you are sitting on a fully-paid off SFR with it's own water supply, solar equivalent and a years worth of canned food in a rural environment...

you are in an excellent position if the US where to hyperinflate.

Your own residence doesn't generate income unless you're renting your basement; furthermore, you have to pay taxes and make repairs. This makes it a liability in my mind not an investment. Being self sufficient is a good way to minimize such liabilities. But by the end of hyperinflation your house will be worth a fraction in real terms of what you payed for it. Anyway, paying off your mortgage doesn't make any sense if you really think hyperinflation is coming. You can pay it off later with a goat and a couple of chickens.

And you don't want to be in a foreign country with your assets. Emminent domain will be commonplace against Americans.

It may become common in America against Americans. Don't forget to pay your taxes.

Just ask Solis after they physically(with guns) stole his building(s) in Russia.

Sounds like another argument against investment in real estate to me. If you really think the rule of law and property rights will go in the crapper why on earth would you invest in something whose value depends entirely on those two things.