The QT show started less than a year ago. German home prices -11%, ECB assets -19%.
By Wolf Richter for WOLF STREET.
The chart shows Germany’s price index for existing homes (red, left scale), released today by the German statistical agency Destatis, and the ECB’s balance sheet (purple, right scale) in trillions of euros. It shows the reality of QE: it causes rampant home price inflation; and when QT kicks in, home prices decline.
In 2008, the ECB started going haywire, cutting interest rates and printing money, first in reaction to the Global Financial Crisis, then in reaction to the Eurozone Debt Crisis, then in reaction to no crisis, and then super-massively in reaction to the pandemic. The ECB pushed its short-term deposit rate into the negative in 2016 and it stayed negative until July 2022.
The ECB’s massive QE pushed down longer-term interest rates of all kinds, along with mortgage rates, and home prices in Germany more than doubled in 12 years, while the ECB’s balance sheet multiplied by a factor of nine, from €1 trillion to nearly €9 trillion. They peaked at the same time last summer, and both have now dropped sharply. We’ll get into the details in a moment.
Prices of existing homes in Germany, after having more than doubled in 12 years since 2010, dropped by 1.2% in Q2 from the prior quarter, the fourth consecutive quarter in a row of declines. From the peak in Q2 2022, the index has dropped by 10.7%, the worst and only major decline in the data going back to 2000, according to the German statistical agency Destatis today. These are used single-family houses, duplexes, and condos.
Between 2010 and Q2 2022, the index has soared by 104%, including a crazy spike during the money-printing pandemic. The index has now unwound only a little more than the final year of gains.
Prices dropped the most in Germany’s largest metro areas – Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, und Düsseldorf – with prices of condos dropping 9.8% and prices of single-family houses and duplexes dropping 12.6% year-over-year. In less densely populated areas, prices also fell, but not as much, according to Destatis.
Prices of new homes peaked one quarter behind existing homes, in Q3 2022, and the drop is now picking up momentum. In Q2, the index plunged 3.0% from Q1, which brought the drop from the peak in Q3 2022 to 5.8%, according to Destatis today. These are new single-family houses, duplexes, and condos.
Between 2010 and the peak in 2022, prices had spiked by 87%.
Germany’s surge in home prices, starting in 2010, was clearly driven by the crazed monetary policy of the ECB at the time that included eventually negative interest rates and gigantic QE, which took the form of bond purchases and massive loan programs to banks that banks could use to buy assets with or do whatever.
In the summer of 2022, the ECB’s balance sheet peaked, and in the fall, the ECB started QT. From the peak, total assets have now dropped by €1.7 trillion, or by 19%, to €7.14 trillion, while German home prices have dropped around 11%.
Now that there is rampant inflation in Europe that turns out to be difficult to control, there have already been calls by ECB governors to speed up the roll-off of the bond portfolio, instead of hiking interest rates much further. The UK already announced at the last policy meeting that it would speed up QT, even as it held rates steady.
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Speeding up QT is a good idea for the Fed to consider seriously.
Amen to that LIFO…
This is exactly what fed must do. But it does not have the will. It only cares cpi. Does not care about assets going haywire.
Fed mafe big mistake in skipping september 1/4 point raise. Will extend qt longer than necessary and do even more harm to the middle class
Wouldn’t speeding up QT end up with lowering of asset values faster?
Most all loans are based upon the value of the underlying asset. Thus lower asset values put a lot of loans underwater.
Increasing the speed of QT would seem to me to be risky in that lowering asset values quickly could get out of control very fast. It would seem to me that doing it at all is risky and doing it fast would be a good way to put the US into a deep deflationary spiral.
Doing QT fast is a good recipe for creating a political situation where they would be forced to stop doing QT altogether.
“Speeding up QT” doesn’t mean selling everything on the Fed’s balance sheet tomorrow, but I don’t see any reason to have separate caps on Treasuries and MBS, which artificially slows QT.
More important, all the fretting over the harm that might be caused by implementing QT shows why QE was such a stupid policy.
What CBs have done is criminal in my mind. Wealthy/top 1% are enriched at the expense of others.
Essentials of life has been robbed from the working class.
Hope people wake up to this and make sure who are responsible pay the price.
Just look at LaGarde and Kuroda’s condescending sneers.
Makes you want to grab a pitch fork and start chanting: “peace, land, and bread!”
At least until you consider the global decline in poverty rates…
Really? You imagine that Americans who don’t even bother to vote are suddenly going to take an interest in the Federal Reserve? We truly live in an idiocracy where people care about nothing other than the newest social media craze, sports and celebrities.
@Escierto: Really? Do you truly believe that either of the parties are going to bring fiscal sanity to the US?
No, I don’t actually but it’s NEVER going to happen unless we have a citizenry who are informed and care about what happens to their country. A country like Uruguay with one of the world’s highest voter participation rates has a government which actually reflects the will of the people. Here, we are actually trying to eliminate democracy and most people just DGAF.
I tell my older daughter (just out of college) that her generation are a bunch of idiots. They simply have no time for anything truly important but put huge amounts of time into making their lives appear to be the lifestyles of the rich and famous on social media.
The youth of America should be leading riots about the federal debt and unaffordable housing and wealth transfer to the old. But they simply dont get a usable education that teaches them any of this stuff.
“The youth of America should be leading riots about the federal debt and unaffordable housing…”
In a previous thread, I (probably poorly) tried to explain that it may be impossible to make housing more affordable. Whatever causes housing prices to fall will surely also undermine the ability of buyers to pay. In fact I have probably reversed the cause and effect — declining ability to pay today’s prices will be what brings prices down. That’s not what all you (we) crash-hopeful types want.
We want the (our) ability to pay kept steady, and the WILLINGNESS of others to pay to drop.
That requires the masses of people apparently desperate to own to chill out and say “mehhh, you know what, I’d rather a landlord fix my leaky roof….” For awhile it looked like millennials where going to do exactly that, but nope, they’re following the generations before them, desperately and impatiently pushing themselves to their maximum ability to pay, because everyone else is.
I do like how “hive like” the younger generations communicate.
It’s less about competition against one another and more sharing ideas to help one another.
Very Nashy
“I tell my older daughter (just out of college) that her generation are a bunch of idiots.”
And the older generation is better? Not that I can see.
What are you talking about? There are only a few cities in America where housing is unaffordable for young people… and those cities have been that way for decades. And for decades young people have flocked to those cities to enjoy life in a cash-restricted manner until they get serious about raising a family of their own.
Likewise the federal debt has been skyrocketing ever since the “young people” took over the reins of government from the WWII generation 30 years ago. And as the ancient Egyptians taught us all (or most of us)… you really can’t take it with you… as long as the old people don’t blow it all, wealth transfers back to the young in the end.
“they simply don’t get a usable education that teaches them any of this stuff.”
Are you suggesting this might be an accident?
New generation just want to be the TikTok starts….earn lots of money for doing no real work
Yeah, those older generations who took us off the gold standard and began (with Reagan) to deficit spend like it was going out of style are the truly smart ones in the room. I mean, look at how badly those youngin’s are at running government.
/glances at Trump, Biden, McConnell, Pelosi…
Uh huh. The youngins are what’s doing us in.
Its is very dad how america has been dumbed down by media and the internet. People dont realize that internet blogs are a for profit business.
It may be time to retire the premise of of Boobus Americanus along with the idea that most Americans are destitute and Millennials all have rooms lousy with 9th place trophies.
Most Americans are damn’d smart — they’re just selfish, lazy & greedy.
You realize that with an average IQ of 100, half the population is below that. So, no they are not smart. There ARE a lot of Americans who are young and smart and rich – my own seven children for example (but I am not taking any credit for their success). However the bulk of Americans live miserable lives in poverty and ignorance.
Geezus, your conceit is surpassed only by your incontinent breeding. Seven???
But I digress — your numbers are bullshit. You’re referring to BIF, or borderline intellectual functioning individuals, and this population comprise less than 14% of the American population. Don’t throw numbers around to try to paint all Americans with your big broad boobicus brush. Just because you hate your neighbor and think he’s a half-wit, doesn’t make it so.
Meanwhile, IQ is only one handy means for assessing cognitive ability — it measures pattern recognition, recall and prediction. But there’re several different versions of the IQ test, and you’ll never score evenly across them all. For instance, have you ever taken the one where you start off by drawing a tree? How handy are you at rendering dendrites free-hand (and I’m damn’d good, so don’t start)?
Go YouTube the grandiose and slightly tetchy Chris Langan — the Guinness Book’s man with the highest IQ. Watch the alpha-whiz espouse his blueprint for how to save humanity (a form of eugenics), and tell me you’re not at least a little glad he doesn’t have the ear of the powers that be…
Truly, the only “dumb” Americans I’ve ever met were phenotypically deprived…and even they possessed an innate wit or aptitude which was perceptible if you sat with them for a while. Unfortunately, it was arrested by circumstance or trauma or poverty or some mixture of the above. Maybe they weren’t Frank Lloyd Wright-level smart, but they were naturals at at least one or two subjects — sometimes on an almost savant level. And I bet FLW wouldn’t have been FLW if he hadn’t had some opportunity — one of the primary active ingredients underpinning all genius.
The argument overall is out of touch.
Hiring practices have changed. The best, brightest, etc., etc., are not the top level selection criteria.
To do or DEI!
Bread 🥖 and circus 🎪.that is why the new generation wants to get paid for doing nothing.
Dubro – given the contemporary high numbers of our species, coupled with the results of our ingenious technology and ever-seeming desire to reduce the need for labor from same, I see an issue with providing something truly remunerative for them to do…
may we all find a better day.
The wealthy have been doing the same stuff for more than a century… why stop now?
That line is tiresome. What stuff??? Some of you people think the wealthy are evil, greedy, and have it out to crush the middle class. Give it a rest.
Evil? Probably not. Greedy? Absolutely. Most people are. And they don’t have it out for the middle class. Many just think only of themselves, also a human trait that’s all too common.
The problem isn’t so much the wealth as it is the power that wealth buys them. Lobbying, media manipulation, etc, etc. I can’t say for sure that it’s getting worse over time because I don’t swim in those circles. But from a little guy’s perspective it sure as heck feels like it lately.
Agreed Captive. There is a an activist in the UK called George Monbiot who has a lot of explanations and proposals on how to go from here, highly recommend his books (like out of the wreckage) and articles, we need more of his kind. Like Wolf, he belongs to the club of straight shooters that keep us meaningfully informed.
“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini
Over the past 40 years, there’s been a change in how society views wealth and status. In the past, people believed wealth was earned through hard work, application, and prudent risk-taking. Now, wealth is largely achieved through luck (arbitrary wealth transfers via monetary policy), government fraud, short-cuts, exploitation, and excessive risk-taking.
We see it in a bloated misguided Wall Street, politicized government institutions, rampant government fraud and favoritism that faces no real enforcement, Swiss cheese tax law, and a social media that exploits human weakness, promotes foul behaviors and paranoia, and erodes societal fabric.
It’s not just imagination. Wealth concentration has soared.
The wealth is NOT reliably going to those who earn it, and that’s a huge problem.
Gattopardo – The wealthy ARE evil and selfish.
But really, it does take a certain amount of selfishness to fit into the top 1%. I live in a 1% community and people have a sense of entitlement, and teach that to their kids, that is overwhelming. Their treatment and view of hard-working Americans is full of disdain.
You dont ever see the wealthy talking about bringing down asset price bubbles. You dont see them advocating a wealth tax or moving the capital gains tax rate up to match the top rate for income. Because the wealthy think that they should be able to make money by just sitting on their asses.
The wealthy love to spout things that make them look enlightened. They talk a good game about helping people less priviledged or about saving the planet, while they build their 7,000 square foot mansion that gobbles up far more than their share of the world’s resources. 7 billion people living the lifestyle of the wealthy would truly destroy the planet.
As a group, the wealthy are incredibly selfish and they DO want to take more for themselves and leave the middle class behind. Maybe you havent lived among the wealthy for an extended period of time.
Gametv, I agree with all of what Bobber said and some of what you said.
However, I think a “wealth tax” is among the stupidest proposals out there. In fact, it will cause more of the very problem it seeks to prevent, that problem being the cost of living becoming unaffordable.
If people can’t pass their savings and other wealth to their children, they’ll just blow it all in the last 15 years of life, on vacations, cars, and whatever else. That means that the hotels that now charge $150 will charge whatever the market will bear from all of those people spending, and it will be a lot higher, as an example.
I agree with Bobber that “Over the past 40 years, there’s been a change in how society views wealth and status.” The biggest change I see that less and less people want to live below their means and not only spend more on status items like fancy cars and designer clothes but go into debt to do it (my parents and most of their friends have never owned a fancy car, designer clothes or traveled outside the US). We are not on social media but my wife does look at friends Instagram sites where they post photos of their fancy cars, designer cloths and international trips usually paid for with HELOC money. Wealth still is (for the most part) “earned through hard work, application, and prudent risk-taking” (there are no poor people who have been investing 20% of their pay for the past 20 years). There have always been people that got “lucky” or got government favors. It is important that there is a BIG difference between the “working rich” in the top few percent and the people inside the top 1/10th of one percent that (for the most part) do use government favors to get richer since they can afford to hire lobbyists and bribe politicians (that they call making perfectly legal campaign contributions).
Go do a Google image search for the word wealthy. Next, do the same for greedy. Then Evil.
Tiresome perhaps, but it’s a trifecta which dovetails better peace love & understanding or a BLT.
On my records we see the same stuff from roughly 1600 onwards. The records before that are not as clear but probably it has gone on forever, after all, Jesus did chuck the money changers out of the temple.
Bobber, as for the very wealthy, it is a very small club and you aren’t in it.
William,
I score very high on the Bobber wealth scale, which is more important.
Financial security, free time, friends/family, exercise/health, nature activities, community service. I think most billionaires would score a 1 out of 5 on my scale.
I went to Frankfurt a year ago. There is graffiti everywhere. Similar to what you see on US Train boxcars you see go by on train tracks in the US. I don’t think that adds any value to the propert values.
Dear Michael,
You are right. In Germany now they face a conundrum: the wealthy own and profit from investments in a foreign market. However, that place seeks to drive most producers, who employ the majority of Germans (the poorer 90%) out of business. Which side will win? The wealthy who do not want to offend a certain place; or the poorer Germans, who realize protectionism is sometimes necessary to beat subsidized competition.
We face the same issues, which is why so many of out industries went out of business, so many thousands of Americans lost their jobs while the wealthy, US investors in a certain place could the use tax loop holes to pay no, US income taxes on their foreign profits.
I forgot to add the most threatened, German industry is vehicles and engines, of course. The subsidized take over of a competing industry, by a foreign country with no rules, may severely diminish the German, ICE vehicle industry.
100%. They’ve driven inequality to the breaking point and for what? Keeping the 10 year down 200-250 bps? Absurd people.
All serious analysts consider money supply when looking at if something is over or under valued.
And all cronies close to the central bank front run monetary policy.
The QE/QT curve is uncanny. In addition, the German people got lucky in the permanent loss of inexpensive Russian gas is shutting down or curtailing some of there industries, cooling off their overheated economy. The scary part is some of those industries are looking to relocate, maybe to here; however, perhaps they will go to China. Regulations on the release of global warming methane (natural gas) may help to cool off our overheated economy as well.
It has been my opinion that these charts revert back to 2015 levels. Charts went parabolic. Why? I have an opinion that isn’t popular.
What is Gary’s opinion?
Will he fail like his Vix ponzi ETF trade rug pull?
Or, can he ABNB a cardboard box on a sidewalk in Eugene Oregon?
Super bubble!
Either 20% annual inflation (cooked books to show 6%) or an asset bubble crash.
Wolf does a better job of reporting, tune in here for latest.
It’s that stage where you’ve just been half awoken from sleep, still drunk from the binge, but feeling queasy and dizzy. Just before the full measure of true atonement has set in and it all turns to sh*t.
Imagine how quickly things would revert to “normal” here with a QT like Germany’s.
You mean QT like the ECB’s.
The Fed has done a lot more with rates, less proportionately with QT. I’d like to have seen stronger QT, at least in the beginning. The first trillion or so likely wouldn’t have had much marginal effect, so they could have doubled or triples the pace for a bit, then backed off to $100b/mo or whatever.
Great comment. Agreed 100%.
I think that what is keeping American asset prices higher is that the QT is largely offset by federal government deficit spending.
I think we will have an end of year meltdown in equity and debt markets and that will finally kill the real estate market going into 2024.
Bubble mentality just needs to be squashed over a long enough duration for it to truly sink in.
In The Netherlands, home prices are rising again. Interest rates have been stable for sometime now, they say. And there’s always the good old “housing shortage”, which off course guarantees prices for ever going up. What could possibly go wrong here?
The international house Hunter Netherlands episodes are always entertaining.
Wolf,
Isn’t home ownership really a completely different animal in Germany than in the US? I’ve heard that there are fewer financing options and that a lower percentage of households “own” their homes. Could you comment on that? Thanks.
It’s kind of a mixed bag, according to my limited knowledge. There are plenty of financing options, but homeownership rates are lower than in the US: a little over 50% until the pandemic v. about 65% for USians.
There are lots of protections for renters, but they also have lots of responsibilities (like painting the place before they move out, etc.), and rental turnover is pretty low. Germans don’t move nearly as much as Americans do.
This is changing too. Usually not needed to paint your place anymore. Renters protection super strong all around. Rent increases are limited nearly everywhere.
In Germany when you sell a house you take your kitchen with you just like the furniture. Cupboards and all.
Depends, you might not get your deposit back.
People who buy don’t plan to move. if you know you’ll move due to your work, you’d just rent. Maybe the costs for transactions are higher idk.
there is a lot less new construction.
Construction is much more expensive. Under 300k you’d get build nothing.
New Houses have to be very well insulated. The typical american house wouldn’t be up to standard 30 years ago. Makes it expensive to build but very cheap to heat. AC is very rare.
Interest rates are fixed between 10-30 years.
A 3 room flat under the attic costs around 250k. A small house 350-400k but then its further away.
I might be able to have the down payment when I’m 40…. paying off until over 60. Remember, salarys are a lot lower.
It’s kinda wild to see German home prices track so closely ECBs Balance. Whenever anyone wants to claim that home prices are high because of (insert scapegoat here) they just need to look at those charts, this happened in multiple countries across the globe.
It’s all the more astounding to me because I know that in Germany in years past home ownership wasn’t at all viewed as any kind of investment, rents were extremely affordable and pensions were good, you didn’t need to be a homeowner or invest in stocks to afford a comfortable retirement. So for them to have an RE bubble like this is all the more amazing to me. I wonder if attitudes around RE amd property ownership are way different there nowadays.
Foreigners bought also the german market. This OE and particulary the free COVID money went everywhere around the globe I guess. We have friends in Tansania and Thailand. Both countries experienced a crazy real estate hype without any basic development which would justify the price increases. When foreigners push up your local prices you are of course very tempted to spring on this train to make your profit. A friend bought a condo recently, the owners of the neighbour condos are chinese. This is a global story I guess.
German youth will have seen their prospects plummet as prices rose.
People will have switched investments from real businesses to buying up existing housing.
This is the unalloyed evil of our time.
All foreign purchases should be completely banned.
Immigration targets should be tied to funded/contractually agreed building plus existing supply.
Most people who support the pumping are existing owners, laughing up their sleeve the second the finish writing about “the free market”.
Georgist, it’s my theory that what you describe is the reason for the social unrest we’re seeing throughout the West.
There’s a general sense that there isn’t enough to go around for everyone at this point. It’s not easy to articulate why, but when people have this sense, the only way to “get ahead” is for someone else to fall behind. If the economy isn’t growing as much as it used to with productive businesses, whether because of a lack of natural resources or too many people, people shift “investments” into hard assets that they think will hold value in a world where the central banks think nothing of debasing the currency for political ends.
“Investors” rampaging through the housing markets in the West over the past 10-15 years is evidence of this, in my opinion.
The US home prices track the Government debt chart starting in 1972
I am german live there and read Wolfs vlog for a couple of years now.
I do not know much about the US property market but I am pretty interested in the developments here. The main difference sheems to be in financing. Here you can lock in fixed interest rates for a very long time. That means you can plan your payments in advance very well. In recent years here were an immense bubble in real estate with some surreal price increases in a very short time. I live in Dresden, a city where you experienced this very much. And abruptly, suddenly all this has stopped. Just a very few transactions now. Potential buyers and sellers not match.
Many sellers still think the party will continue and don’t sell at lower prices now which will force them to sell for much lower prices later I guess. Here it is not just QT and quickly higher interest rates which stopped the party abruptly but also the so called green agenda, which forces by law owner of older houses to bring their homes to new eco standards, which can easily costs the owner 100k EUR or so. A toxic mix for the owners. Additionally comes the cut of cheap energy by the ukrainian war which is essential for an industrial country. It is not the service sector which plays the music here but still the industry and their exports.
So you can short the country in my opinion.
Fully agree with this. Very abrupt change. But I still hear people saying real estate will only go up! I believe a lot of debt is less than 10y and some of this comes slowly up by for refi. Slow train wreck….
Thanks for the perspective. Sounds very similar to what’s happening here in USA.
Kurt Vonnegut was a short term resident of Dresden many years ago. They’ve even turned his old house into a museum (at Messering 6, 01067).
Easy to guess what he might say about the current housing market near his former residence, “so it goes.”
Your last bit about the German economic model is very true, and I don’t believe appreciated clearly enough, especially in the US — between the sanctions and the American Inflation Reduction Act, Germany is facing deindustrialization.
This has the potential to be politically destabilizing, not only for Germany itself, but the Eurozone as a whole.
My Great Grand Fathers were from Germany & Vienna, Austria & Scotland
Austria would give Citizenship but for ability to speak German
New York State is easy to emigrate to and California is a Hotel u check in
Just looked it up: As I suspected German is a dialect of Austrian or vice versa. The Supreme Genius of Germany, whose idiotic handling of armies in Stalingrad, Kursk. etc. spoke German with an Austrian accent.
There is no such thing as an “Austrian” or “German” accent. But there is Tyrolian (somewhat close to Swiss German), Karntnarisch, Wienerisch, etc., there are many of them, they’re completely different accents, using different vocabulary, endings, etc. The genius was to invent “High German,” a synthetic language which is taught in school throughout the German language area, so that the people in Nuremberg, who speak Fränggisch, can communicate with people who speak Plattdeutsch (close to Dutch and Afrikaans) or Schwizterdeutsch or Berlinerisch or Bairisch, etc. Otherwise they’d have to use English or whatever as a lingua franca, as they do in India.
My mother is Schwabisch ( Schwartvald and has nothing nice to say about the Biarisch Lolol. In school I was taught Hoch Deutch by a Nord Deutch teacher
Mutter was never happy about that
Schuss!!
So amusing. By the way in Switzerland the dialect changes about every next village so every 50km. People from Appenzell sound like from a different planet compared to Zurich. And Bern-Deutsch is a whole different animal.
My mom was from the town of Zug Switzerland. They speak Swiss German there. When I was growing up in Southern California, my mom was part of a Swiss club. Once a year the Swiss club (a bunch of woman) would meet for Cheese Fondue at my house. They would get really loud after a few drinks. There would be about 13 of them with 4 different conversations going on. They all had very strong accents… but the funny thing was, to me my mom spoke perfect English. I did not hear an accent when she spoke. However, my friends used to joke about how strong her accent was. That was back in the 1970s. Good memories :-)
Schwab hier. Mutti lebt noch in Bad Friedrichshall.
But I prefer hamburgers and the NFL.
That is very wrong what you say Wolf. There is certain such a thing like austrian or german german. As a native german speaker you can recognize very quickly if somebody comes from Austria or Germany but additionally there are many local accents which could differ pretty much so that it could happen you do not understand some meaning of there saying when they use their local accent. High german is not a synthetic language but is used natively in the north eastern part in Mecklenburg for example. It is a very nice and clear german. But all german regions understand high german natively because their accents are german accents just. No need for a foreign language as medium for communication like f.e. english and all austrians and swiss people understand high german, because high german is normal written german – just clearly spoken. And there is only 1 written german. All germans, austrians and swiss people understand this. Of course when you go back little bit in history of language you will find that the old language of the saxons and angels which are north german tribes is pretty similar to the anglosaxons in britain since simply they come from northern germany natively and mixed with the celtic origin of the british island. And by the way germans call themselfs not germans but deutsche. Deutsch comes from the old german word Teutsch and that again from Teuton. Teutons is only 1 german tribe among severals. Others are Alemans, Goths, Franks, Vandals and Saxons just to name the a few historically well known ones.
They spread across Europe after defeat of the Roman Empire.
“There is certain such a thing like austrian or german german.”
You’re arguing with something that I didn’t say.
I said: “There is no such thing as an “Austrian” or “German” accent,” as a national accent, which was in reply to a comment that made reference to them as national accents.
But there are a gazillion accents whose localities are in Austria, so these are “Austrian ascents” because they occur in Austria, but there is not one Austrian national accent which all Austrians speak, and by which you recognize all Austrians … that was the sense in the comment I replied to.
And the whole thing was tongue-in-cheek, including it seems the comment by Nick Kelly, that I replied to. A lot of stuff here is. But maybe you missed that.
This was the comment by Nick Kelly that I replied to:
Just looked it up: As I suspected German is a dialect of Austrian or vice versa. The Supreme Genius of Germany, whose idiotic handling of armies in Stalingrad, Kursk. etc. spoke German with an Austrian accent.
There’s a guy named Paul, apparently Canadian who compares languages nicely. Langfocus i believe is the website. Not that much depth, jyst 15 minutes, but pretty good.
He compares lots of related languages: German – Austrian, Ukrainian – Russian – Polish, Spanish- Italian, Scots – English (and maybe Gaelic ?), etc.
He probably compares Scots to Irish as well, to repeat he compares lots of related languages.
He doesn’t delve too much into grammatical differences.
He does briefly though. He’s quite professional.
I’m not a huge language fan, but studied Spanish in HS, German in college. Both fairly easy to learn. Spanish seemed a bit verbose… preposition phrases where we’d just do adjective followed by noun. The speech corresponds nicely to whats written, one positive.
German is, surprise, a Germanic languge like English (though English has considerable French, Latin and other influences…especially its vocabulary). I was told that I sounded like a German when I gave a speech in my college class, complement accepted. German occasionally puts verbs at the end of sentences which undoubtedly annoys some English speakers… me too. And even though it’s not a Romance language it too has nouns associated with gender: masculine, feminine, neuter.
This is annoying and I have no idea why these languages haven’t done away with it by now… the version of “the” needs to match the gender.
Definitely not a big deal just unnecessary. I dont believe Scandinavian languages do this.
Then again we crazy Americans are still using feet, inches, pounds, etc … though slowly adapting metric I assume.
…then you have the phrase attributed to Churchill (back when we were more inclined to laugh at ourselves): “…Great Britain and the United States: Two nations divided by a common language…”.
may we all find a better day.
The nice thing about German (High German I guess) is that if pronounced correctly, it can be spelled unambiguously. Just as any German word printed can be pronounced perfectly. It is a very methodical language except for the arbitrary genders, which, I agree, should be eliminated. I just use “duh” when trying to speaking German. I do not want to waste my time thinking if a chair is masculine, feminine, or neuter. Nobody cares.
Sprechen, re your comment, “This is annoying and I have no idea why these languages haven’t done away with it by now…”
As any school child or ESL learner can attest, we can add English spelling as another example of this “annoying” theme. Benjamin Franklin wrote about efforts to reform spelling nearly 300 years ago.
It’s probably a little better (or at least more consistent) since the 1740s, but this type of change usually occurs at the pace of continental drift.
Worryingly, EU governors from countries such as Italy, Greece, Spain and Portugal are already beginning to resent high interest rates. These are the cheated countries in the EU. I fear that because of them the ECB would reverse course when the economy starts to stagnate even more (it already does).
I think the recession in Europe has already started and we are far behind compared to the US in terms of policy tightening. If the ECB does not continue to increase interest rates, the EU will fall into stagflation. The Euro has already collapsed as markets believe that the peak of interest rate hikes has already been reached.
Italy, Spain, Greece, and some other euro countries, back when they still had their own currencies outside the euro-predecessor exchange rate mechanism, solved government debt problems with inflation and currency devaluation. But their people hated it. People hate inflation and currency devaluations. So people in those regions love the euro. But their governments have trouble with a relatively hard currency, now that borrowing is not free anymore. “Free money is a virus that turns brains to mush” is a scientific fact.
You are absolutely right.
France was also not among the standouts in Europe with its devalued franc.
What I wanted to say is that I really hope the ECB will not give in to the blackmail of these countries (Greece, Italy, Spain Portugal and France) and continue their fight against inflation at all costs (whatever the cost).
“… and continue their fight against inflation at all costs”
Lol. They had zero or negative interest rates for like a decade and a half. And raised rates for what? 15 months?
Andy,
Now, Higher for much longer.
maybe for a decade.
I remember a lot of problems with the PIGS some years back, when Greece nearly went belly-up. I recall the EU or euro was not held in high esteem by those countries back then.
The Greeks despised their own government for getting them into this (massive protests), and they despised the bailout conditions. But they wanted to keep the euro. Important to distinguish.
Not only is borrowing “not free” in the Euro Zone, Wolf, it’s expressly forbidden (annually) above a certain level — though the ECB has relaxed those rules during times of crisis.
It’s an open question whether or not the thing can be held together over the long run.
I said this many times, the skyrocketing housing market after the GFC have nothing to do with high demand or less supply, the one and only reason was the ECB´s QE which inflated the asset prices. And the charts you posted, speaks a clear language!
Worryingly, EU governors from countries such as Italy, Greece, Spain and Portugal are already beginning to resent high interest rates. I fear that because of them the ECB would reverse course when the economy starts to stagnate even more (it already does).
I think the recession in Europe has already started and we are far behind compared to the US in terms of policy tightening. If the ECB does not continue to increase interest rates, the EU will fall into stagflation. The Euro has already collapsed as markets believe that the peak of interest rate hikes has already been reached.
Western economies have had stagnant (even declining) productivity (thus declining wealth) since at least the end of the dot-com bubble
“All things tech” is simply western economies grasping at straws and for any chance of finding the “next great productivity stimulus”. But it is failing. All things tech is a mish-mash of ridiculous and supposed “comfort and convenience” items, most of which have negative producitivity when you step back and realize what they cost in terms of initial price and usage costs (including your time).
All that said, western economies intentionally created an industry around “all things housing” to prop up their lack of productivity growth. It is faux wealth generation in the sense that it is all comfort and convenience and “ego”, but it created lots of jobs including in the finance sector.
Powell and the Fed realize all of this of course. Like all past Fed leaders as well as Presidents and congressional leaders, they have to deal with the hand they are dealt at the time. It’s not as if Powell, for example, created this mess. It started decades past. Clinton to be precise.
I believe Powell is determined to deflate the housing bubble at least to some signficant degree. Anyone with half a brain can see the societal damage it has caused with all sorts of people unable to afford simple decent housing. I’m sure this is the same in Germany and other developed countries.
So expect housing to continue to stagnate. New, single family construction will be pretty much toast except for very high end stuff where people have more money than sense. Multi-family will continue with government funding support. And the rest of the existing stock is slowly stalling out and dropping in price.
I don’t know where it will end, but I am pretty sure housing prices have peaked or are near peak in most western developed countries.
Clinton started this mess? Talk about revisionism. He was the only president in the last 54 years to have a budget surplus. So no, he didn’t start this mess!!
Clinton’s budget surplus was accomplished with the dot-com bubble that he and Greenspan allowed to form. Those were the days of all the bogus dot.com startups, massive capital gains and everyone flying around first class.
This was only one of Clinton’s screw-ups. The big one involving housing was the passage of the capital gains exemption for house gains ($250K/500K). That started the whole thing rolling and it was intentional to create a “housing industry”.
Other terrible rollback include major banking deregulation. This was all Clinton, Rubin, Greenspan and Larry Summers great ideas.
“Other terrible rollback include major banking deregulation. This was all Clinton, Rubin, Greenspan and Larry Summers great ideas.”
I agree it was terrible legislation, but it was bipartisan and you can’t ignore the role of Texas Senator Phil Gramm. He was the first name on the act after all: Gramm–Leach–Bliley Act of 1999.
Mike R,
“was the passage of the capital gains exemption for house gains ($250K/500K). That started the whole thing rolling and it was intentional to create a “housing industry”.
I think the previous law was that housing gains were entirely tax exempt so long as you bought another house at equal or greater price. The replacement law was (is) LESS favorable, and to qualify for that gain you have to live in the house for a few years. You can’t just buy and flip and have a tax-exempt gain. So your comment is completely wrong.
Um, Escierto, those surpluses eventually led to recession, as I recall. Unless there are foreign nations running corresponding deficits, the sectoral balances equation means that a government which is running a surplus is shrinking its private sector economy.
Stop with three Clinton Budget Surplus.
It is toal BS.
Good comment. The last major productivity gains were when computers were linked together. Like previous technological developments e.g. railways this created true wealth and useful underlying infrastructure. Both had a mania, a boom, and the following bust. Since the dotcom bust only minor improvements in productivity have been scratched out. After the bursting of the railway mania came a very long period of stagnation. Today this stagnation has been papered over by money printing creating the illusion of wealth. This illusion is coming to an end. All governments are foolish. Foolish because they are captured by vested interests, making decisions that favour the vested interests rather than that is for the good of the bulk of the population.
Germany may appear to be a larger country in comparison to the rest of Europe, but it’s dwarfed by the United States. There’s forests and fields and hilly areas that further restrict construction, and they’re really serious about not building anything in those areas. The US regulates construction locally for the most part and there’s lots of unincorporated land with relatively lax building codes or none at all. It takes longer to build anything in Germany than the US, but I remember time and complexity of construction requirements in France to be even worse. And trying to find anything at all reasonable for rent in Munich was extraordinarily tough back in the day, don’t imagine that’s changed much. It would be interesting to compare real estate markets in the EU states. Fifty years ago the affluent Germans were buying up Greek island lots, Italian country houses, and Scottish castles with dynamic Deutschmarks and forex arbing. Now the affluent Italians are blowing €14,50 per mug of Paulanerbrāu at Oktoberfest.
In Bavaria, we never listened to what the Schwäbisch said about us. Just figured they were jealous.
In the US, things are much brighter. On Thursday, AATOM reported that house flips are more profitable than they were earlier in 2023. In the latest report, the average flip profit rose to $67K. However, that is still lower than the $102K profit recorded in 2022.
How would any measurement of “house flips” be able to discern an accuracy down to $1,000???? When a statistic is reported as $67K, that means they have accuracy down to the nearest $1,000 (the 7 in 67). Think about that for a minute.
The US is filled with so much BS it’s hard to conjure.
Mike R.,
Your comment is total BS. I normally delete this type of BS. You posted this type of nonsense many times. So now I’m going to explain it to you — rather than delete it.
You’re clueless about “data.”
If you want 100% certainty or 100% accuracy, go to church.
No one claims that data is 100% “accurate,” and if that’s your measuring stick, you’re a moron, and moronic statements like yours make laughing stock out of you and folks that agree with your BS. Data is presented in averages and medians, sometimes rounded, sometimes not, based on all kinds of data points, and has probabilities and margins of error, DUH
1) On Oct 1990 Germany was reunited. In 1992 the Euro was born.
In 1990 Saddam invaded Kuwait. Greenspan ignored the credit crunch
that led to the S&L crisis.
2) RRP provides good collateral to the o/n market. RRP is down from $2,5T to $1.4T stressing the regional banks and the shadow banks.
3) Consumers and companies cash in the banks tripled from $6.8T to
$18T due to the stealthy raids, not as a result of bank lending. Bank
lending shrank b/c the banks try to survive.
4) Bidenomic is a System Control with a positive feedback loop pouring
trillions to the economy. The PourHouse might kick the can down until Xmas, but in Q1 2024 the feedback loop might flip signs from positive to negative.
5) In early 2024 SPX might plunge into the 1990’s tranquility Lazer :
Oct 1989 to Mar 1993 highs, parallel from Oct 1990 low. in 1989 SPX
was backing up > Aug 1987 high for 4 years. Dec 1994 low was the
last test. Thereafter SPX popped up until 2000.
6) Will Germany break the Euro zone.
ME-
“ 6) Will Germany break the Euro zone.”
Will Germany break OUT of the Euro zone, at some point?
Not “sayin”…… just “asking.”
I’m getting more curious about how global fiscal and monetary policies seem somewhat synchronized — and potentially politicized, in terms of achieving the perception of stability.
That should be no surprise, after the global stimulus response during the pandemic — so why not accept the notion that there’s currently an effort to universally accelerate QT, while simultaneously accelerating fiscal spending.
If that new policy hybrid connects to future political instability, that begins to look very familiar in terms of the Schrödinger Cat economy that we’ve been living in — which in many ways encapsulates stagflation.
Going forward into the USA political blender, what if the current fiscal growth and slow pace of monetary tightening, result in a perfect balance of stability, which is both painful and manageable— not too hot, not too cold, but lukewarm. Not a soft landing, but a foggy landing.
In that fuzzy and blurry process of discovery, voters will be more confused than ever as to how to solve a problem that nobody understands, yet, that indecision, hesitancy and confusion will fuel imaginary narratives that will stray from reality — a circular loop of disinformation.
The proof in the economic pudding, globally, will play out slowly and be increasingly hazy, but more than likely, as always, voters will vote their pocketbooks — if the prosperity we read so much about, doesn’t end up as positive in checking accounts, people will be quick to vote for change.
1) The ECB raided bank accounts to keep Greece and Crete in the Eurozone, save Portugal, Italy, Greece and Spain, but failed to jail the UK.
2) The ECB became more powerful than any state in the eurozone.
Madm ECB, a bureaucrat, is more powerful than Scholz or Macron.
3) Europe RE was a System Control with a positive feedback loop, that
suppressed mortgage rates and provide gov incentives in order to prevent their collapse, during the credit crunch.
4) The ECB distortions might untangle after Nerd #1 and #2 were dissected.
Amazing amazing analysis Wolf. Right on point. Asset prices are much more sensitive to money supply, rather than the interest rates. That’s why in Germany and in other places in Europe, the asset prices are declining as ECB thightens the money supply.
In contrast, because the FED did a (though temporary) u-turn in March 2023 banking crisis and printed $300B almost overnight, the housing prices in U.S are in historic highs now and very strongly resist going down. Not just housing, also stocks, bitcoin and other asset prices are not moving down meaningfully. All because of March 2023 flip.
If FED showed the same determination and willingness to correct the asset prices like ECB, BoC or BoE, we would see a similar realization of asset prices in US. When asset prices are about to go down, FED rains money from the sky.
FED only targets inflation. If the CPI didn’t go haywire, FED will be very comfortable with the ridiculous never-ending increase in the housing prices. They just don’t care a bit about the young people being outbid in the housing market. Just empty words.
> If FED showed the same determination and willingness to correct the asset prices like ECB, BoC or BoE,
Canada and Britain both have horrendous housing bubbles and their respective central banks are desperate to pause rate hikes despite bad inflation because their main real remit is propping up asset prices.
1. Inflation in the US around 3.2 bc.
Fed rate 5.5%
2. Inflation in Canada around 4 bc. Boc interest 5 bc.
3 Inflation England 6.7 bc
Interest BoА 5.25 bc.
4. EU inflation 5.9 pr.
interest BCE 4 pr.
it turns out that the ECB is the bank that least wants to fight the real estate bubble, which is no less than the one in Canada and England
Do we really believe government inflation metrics which are highly manipulated?
Jon
Since real estate markets around the world are slowing down as a result of these interest rates, we are in the middle of the truth
Asset prices are mostly correlated to money supply, not rates. Neither consumers nor businesses care about rates in the US when they are making purchasing decisions, as they are perfectly sure that they can refinance when the rates go down.
Jason
ok, QT continues……
Imagine replying about house prices and using inflation statistics to make your case. Sorry I can’t afford the time for more of this thriller conversation.
Juliabn, you’re looking at inflation that has already occurred over the last year (annual rates). Measuring interest rates against that is like fighting the last war. What’s meaningful is the CURRENT rate of inflation, which we know is volatile.
Georgist
*Julia if you cite inflation statistics to disprove housing inflation you just don’t understand what happened.*
I am quoting inflation and interest rates to say and I SAID it, but you clearly haven’t read it, that the ECB is the bank doing the least to fight inflation.
It is clear from all the Wolf articles that since the banks started raising interest rates property prices have started to fall from their highs and deals have collapsed.
This says the banks are on the right track in their fight against inflation and the house price ratio.
I hope you understand my position.
Again, I am outraged by the previous bank monetary policy, but I am hopeful about your policy NOW.
If this policy of normalization continues, prices will fall further, but it will still not be easy for the first buyers to earn the high interest rates.
Correct. The central banks have to maintain asset prices at outrageous levels, or the entire debt complex comes crashing down.
People who didn’t have enough capital or craziness to ride the Free Money Bonanza of 2010 to 2022 will be shut out of asset markets and reasonable investment opportunities for the rest of their lives, if central banks have their way.
They should give the current generation an arrival letter upon birth that says:
“Welcome to the world. The party of over. You own nothing, but your share of the national debt is $XXX,XXX.”
Correction – the party is over.
Correct, but these planners are overestimating the willingness of those shut out people to continue slaving away to live a subsistence lifestyle so that others can enjoy fabulous wealth.
There’s a reason for these strikes and “quiet quitting” and so on.
UK property inflation was over 6% every year from 1998 to 2008.
Inflation was well under 2%.
People like julianb are dismissing the struggles of millions who are stolen from daily by high house prices, all because they demonstrably don’t understand the basic maths behind the numbers they quote.
Google trading economics UK house inflation then on s
that page select compare and uk inflation rate.
In 2004 we had “inflation” under 2% and housing inflation over 25%.
Remember that every time you read some comfy journalist who owns their own home claiming its an asset.
The biggest crime, that I’ll never ever forgive, is the housed older generation dismissing all this.
Georgist,
*People like julianb dismiss the struggles of millions who are being robbed daily by high house prices, everyone*
I am not rejecting anything and i am outraged by property prices and all assets.
You just complain too much, like some kind of widow.
You think that you are the only one who suffers and loses the most out of everyone else and somehow that sounds funny because you have no idea how many people live much worse than you over there in Canada.
For God’s sake, stop bawling like a chick and be a man!
We all suffer from this stupid policy except the rich 1%, of which I am not.
Julia if you cite inflation statistics to disprove housing inflation you just don’t understand what happened.
That’s why you’ve moved on to ad hominem. Just take the correction like a man.
@ Georgist,
“The biggest crime, that I’ll never ever forgive, is the housed older generation dismissing all this.”
Soooooo, it sounds like you just want the older housed generation to recognize your pain, you just want sympathy? Ok, you got it! Or is there some action you want the housed older generation to take for you?
If you were well read you’d know from my name.
Land value tax.
@ Georgist,
<>
A land value tax would not help you, or at least not the masses. While that would bring property values down more (if the taxes were larger than currently already high prop taxes in much of the US), the cost of owning property would be higher for all. You’d still be unable to afford what you want. I’m surprised you don’t get this.
Georgist, may you find peace in the most socialist country you can find, where more of your problems will be hopefully be solved.
Georgist, most people dismissing the struggles caused by bad government policy were born between 1946 and 1964. They even have their own name.
@ Einhal,
“…most people dismissing the struggles caused by bad government policy were born between 1946 and 1964. They even have their own name.”
Have even a shred of evidence of that one? I’m not part of that demographic, so this isn’t a case of defensiveness. It’s a case of hating unsubstantiated ridiculousness.
Asset prices increase of interest rates. Gee, hoocoodanode?
Already seeing perfect houses selling ok, imperfect at a much larger discount.
But a very large interest rate makes an impossible monthly payment. Lesson is simple, sell imperfect assets fast and first. I already see monthly payments for property have doubled with the 20% down model in Zillow. No room for improvements, or job losses.
A very brittle market for asset is here for everything.
Google trading economics Canada resistance housing, select compare add Canada inflation rate, select 25 years.
> yeah but it’s an asset
> housing is partially included
> you just have to wait, it’ll come back down
What they’re really saying
> I’ve got my own house
> I don’t care if the next generation lives are ruined
> I don’t care if the entire system ends after me
> I don’t even care enough to think about it
Sorry autocorrect! Google
Trading economics Canada residential housing
Then
Select compare then Canada then inflation rate.
Do the same for the UK.
lmao
///
The QT that the ECB is performing is just the first step of what needs to be done in Europe, to bring the economy back on track.
///
Big picture
Europe and its economy are highly dependent on the free flow of capital, labor and goods. Though the first two are a given (the first is also now under threat), the third aspect is something that depends on many external factors. A technology based added value economy needs raw materials and energy at competitive prices (and markets to sell)…Something they have a limited access to now, unlike the rest of the world.
///
How it actually looks
As an everyday user of goods in Europe I can state with high confidence that all, without exception, indicators of inflation are severely slashed to numbers below or around 5%. It seems more like at least 15-40% yearly inflation depending on the product/service.
The high cost of housing has caused an increase in labor cost that was in Europe transfered first to the suppliers and then to the customer.
The automaker industry conglomerates are making open threats to the German government, and as a show of force have fired some employees (this is unheard of in Germany).
The union meetings are everything but civil.
The price of energy is expected to increase in the onset of winter, leading Germany into another at least two quarters of recession.
The severity of the situation can be measured by the amount of energy and fertilizer Europe buys from Russia. Though the numbers are nowhere near the ones prior to 2021, the numbers are rising – given the circumstances something that can be only interpreted as a desperate measure.
///
The media will continue to lie about inflation, continue to say that taking in immigrants who have low education levels is boosting GDP per capita, continue saying house prices going up is growth, continue saying low birth rates have nothing to do with high housing costs etc.
It’s actually over, we lost.
We lost the war and we didn’t even get to look the enemy in the eye.
I bet they thought we’d put up more of a fight.
///
This is the beginning of the end of a cycle, one that is happening every 120-140 years in Europe, in conjunction with a resurgence of the ancient nations…But this is a matter of history, and out of respect to Wolfstreet and our commonly agreed upon scope of commenting I will not elaborate.
///
Which ancient nations are resurging? ancient Rome (surely not Italy), ancient Greece (surely not Greece), Persia (surely not Iran), ancient Egypt (surely not Egypt), Ottoman Empire (uh, Turkey, nope), Genghis Khan and his horde (okay, I’ll agree maybe with China), India was never united as a nation in ancient times. I like big picture stuff, but need more info.
Ressource prices are already falling. We in europe are missing the large salary increases the US got/ demanded in face of inflation.
The “good” thing is that inflation is slowing.
The bad thing is that our purchasing power deteriorated without finding a new eliquibrium and our dept is not inflated away.
The german saying: Einen Tod muss man sterben, comes to mind.
*We in europe are missing the large salary increases the US got/ demanded in face of inflation.*
Wages in Europe have risen, but fortunately not as much as in the US.
I say fortunately because it acts as a brake on inflation and prevents the wage inflationary spiral.
Europe is already in recession.
What is dangerous for me is if the ECB pivot and stop tightening the policy because of the countries like Italy, Spain, Greece, Portugal, even France.
///
As someone who is directly affected by supply chains I must inform you that the pricing and availability is far from a competitive level (in comparison to Asia that is marginally affected by the European energy crisis). The situations is so bad that the price differences are always double digit percentage to their advantage (>>10% cheaper then the cheapest we can do) and the quality is good.
///
With the new seasonal energy price hikes, I anticipate the situation to worsen.
///
Thanks for this article Wolf. It’s nice to see how other parts of the world are faring with their own central banks. It seems like every other one we profile here that did QE is now doing QT at a faster pace than our Fed. We Americans just don’t believe in ripping off the band aid anymore, for anything. Pain is a four letter word.