Wednesday, 15 July 2009

Gowing Forward,Turbulence Ahead?

2009 will be remembered in the same way the late 80's,the end of an economical boom and historical credit expansion, and a reversal that will last, in the best case, a decade or so.

It will be, as well, remembered in the same way as in the 30's where central bankers slowly became powerless and impotent in the Pfizer sense. Ultimately they will transform themselves into "phoenix", to do so they will allow the inflation beast to reappear in order to fight the deflationnary trend that is slowly but surely settling into the basic consumer mindset. So they will reborn from the ashes and like the Incas will sacrifice some retiree, and a good percentage of youngster.

One has to understand that the economy is stable thanks to social stabilizer i.e robbing the wealth of the young and next generations though all sorts of Houdini type of benefits. This is the price to pay for a sluggish but non violent economical and social environment.

For the moment, low interest rates, government benefits and past saving allows this stabilization and gives the false feeling that the situation is not as bad on the ground... mid 2010 will be a very big test as slowly all the stabilizer disappear including the effect of low interest rates, then if the emerging market had failed to restart then we will enter a very turbulent economical environment.

Last but not least, if you have not understood what I tried to demonstrate on the graph above...well print it and bring it to your banker. Depending on the answer, here is a possible profile of your banker:
-A(Answer) : "don't get it"
-P(Profile): He must be as smart as an Elk - maybe a SBank banker?

-A: "hum, not possible...housing price will stabilize, so can't happen"
-P: If he has a bear, give him some red wine and bread...he most probably has already walk on water...

-A: "Finland has no housing bubble, and construction is loses can't grow further"
-P: He may have had an intensive training in a US Camp, probably having the FED or the couple Greenspan-Bernanke as lead trainers...

That's all ...have a nice sunny holiday wherever you are...


Anonymous said...

Today, I had the yearly inspection of my car. The price is 90€! I recall in 1998 or so, the price is about 48 Finnish MK. The damn price has increased 11.25 times in just ten years!

If you carefully look at the daily life stuff, how many times of price increases they had in the past ten years?

Who said there is only one country with hyperinflation in the world today?! I have seen many. The difference is that those hidden countries have good mathematicians in their national statistics agencies...

HousingFinland said...

Do not is true that Finland is a very expensive country and the reason is that the "free" market is not working over here.

The lack of competition is visible on day light, as it looks like markets are being shared between the dominant actors. To name few , Abloy for the Keys, K & S super market (although only in the past 2-4 years Lidl has managed to get in), Alko the government Alcohol monopoly, land taxation and housing permit in the Helsinki region which favor the big construction company while politicians pockets commissions, etc..etc...

So I'm not sure why there is a lack of it due to corruption?, a small market that doesn't attract foreign investors?, the Finnish attitude of accepting anything from price to quality? customs?

Nethertheless prices went up but so did the wages but in some cases faster such as housing... and on top of that the transition to the Euro that was clearly abused by the retailers and the confusion of the consumers.

It is true as well that statistics can be manipulated without any evidence that could back dishonesty and corruption.

For example if the inflation formula contains orange prices and thus price triple...then the statictic agency will replace that fruit by another such as apple which could have seen no change in price. The idea is that the consumer will buy the cheaper product...

Most statistical agencies do not include "clearly" housing price as it is a cyclical one and subject to boom and bust...I think it is a mistake since the end result is devastating i.e see the US, Ireland etc...

Last word , as long as they do not change the formula too often it could be "better than nothing"...

Anonymous said...

Lack of competition seems to be a problem in Finland.

Food prices are a good example, where the market has been stitched up for years and yet government only criticised the situation earlier this year.

But customers seem to accept it and get a lower standard of living as a consequence.

I suspect that there is a lot more corruption in Finland than is reported or known - but maybe Finns don't regard as corrupt what other nationalities would call corrupt or even more likely prefer not to admit its existence.


Anonymous said...

I forgot to mention about the planned reduction in VAT on food coming in, is it in October?

I wonder what the government will do to try to make the shops pass on the reduction?


Billpete002 said...

I don't know if any of you caught it, but in the Helsignin Sanomat they had a large article on corruption and how corruption in Finland is not simple "I give you 10mil and you let me do X" it will be "Let me take you out to golf, dinner, movies, massage your back for X" which all goes under the radar.

If Finland wanted to 'open' up we should import more Austrian Economic thinkers and less Swedish Economic (Nordic) thinkers. Frankly I was pretty amazed there isn't a "Libertarian" party over here that tries to open trade, competition, and most of all innovation & entrepreneurship

Anonymous said...

More comfirmation of the bad news:

"Housing prices in Helsinki came down by 7.7 per cent year-on-year in the first quarter, the city council said in a statement Friday.

Prices in the heart of the city plummeted by almost ten per cent year-on-year.

Overall, prices fell by 2.3 per cent from the final quarter of last year, marking the third consecutive sequential quarterly drop."


"IslandCrow" who is currently enjoying a pause in looking at the boats in the Tall Ships Races in Turku.