"Erkki Liikanen, the governor of the Bank of Finland, told the parliamentary finance committee on Thursday ...
... that a lack of confidence in the balance on the market and among the public would have an "immense" negative impact on the economy.
... that the Finnish economy was recovering from the recession at a slower rate than other EU countries were because the share of exports of Finland's gross domestic product was relatively high in general, with 80 per cent of exports made up of investment goods and raw materials"
Nothing much to add unless the fact that Erkki is stressing that the recovery is based on a virtual fundation: "the positive attitude" ... back to '68?
11 comments:
We may have to accept the fact -- that the whole world economy is built over an ever-growing bubble.
HousingFinland, can you kindly predict when would be the time to hedge for the inflation? It is also very much appreciated if you could comment on how to hedge the loss caused by the current effective negative-interest rate.
Thanks in advance.
I wouldn't edge against inflation...Deflation (including asset deflation) has only started.
The best strategy is to stay cash for 2-3 years and in the meantime do real investment i.e education, family and career.
You would be surprised to see that most of the asset will see a pretty big devaluation...
It just require patience and in the meantime you would concentrate on what is important...
PS: inflation is -0.7 and interest rates is 1%...I don't see the negative interest rates?..in reality that is the problem of central bankers is that they cannot go into negative territory with regard to interest rates setting...
PS2: the 1970's scenario is to be ruled out in Europe...'cause demography and totally different policy maker at the wheel (less corrupt than some politicians and thos 1970 policy makers)
Regarding "Gohst" inflation that some seem to see coming (which is pure illusion)...here is some concrete example of what is hapenning:
"The board of the Finnish Federation of Professional and Managerial Staff (YTN) on Wednesday approved a three-year pay and conditions agreement with the Federation of Technology Industries.
The draft agreement had been negotiated last month.
The agreement is to enter into force next month, with locally agreed wage increases of up to 0.5 per cent.
The YTN deal is similar to the one struck with the Metalworkers' Union earlier in August"
A wage increase of 0.5% from major unions...one could say it's great that they didn't agree to reduce salary in order to become competitif...
It just show you that this currrent economical rebound has no leg it was only triggered by various stimulus in place which are all but vanishing what would be left ...nothing and that is pretty worrying. this is to be seen in the next 2 years.
Remember that the lowest level of unemployment in Finland was reached in 1990 where it got to the 3.5% level, yet it was followed by a massive depression. Today the unemployment has just started to level out...hopefully will only reach the optimistic figures 11% put by the government instead of the 25% reach during the peak of the last big Finnish Recession...
Regarding deflation...just by having a quick look at the news..they are signs everywhere...it cannot just be ignored...so here is another sign:
"Finnish average hotel rates fell by 15 per cent year-on-year in the first half of the year, Hotels.com said in a statement Tuesday."
Hotels.com , I suppose is a body that is not part of the Finnish press/media which are mainly linked or own by big lobbies and real estate agencies and builders...
And here is the deflationnary trend with regard to the rental market...and it is only the beginning...
"Jan Vapaavuori (cons), the Finnish housing minister, said Tuesday that the rate of subsidised housing construction would treble this year from previous levels.
He added that some 12,000 subsidised flats and terraced houses would be built this year."
last note...then I disappear as I said there are better thing to do duing the next 2-3 years period... Vapavuori is not doing that in order to relief the rental market..it is atrgetting at two fold:
-Keep unemployment fron overshooting, keeping the construction sector employment afloat
-Helping the main lobbies/political investors in check
Thanks a lot for the prediction. Actually, I have taken the deflation scenario seriously and, will invest with the way as you suggested.
What just alerted me is that a major part of the huge stimulus went into the stock markets and real estate markets. Another part went into the material markets. There have been "price" increasing expectations already in some major countries at least. I agree they are leg-less. Though, the crony governments can print their FIAT notes coordinately as much as they like. Hum, what would this play for in the long run?
More on deflation:
"Finnish flag carrier Finnair said in a statement Wednesday that the Finnish Cabin Crew Union (SLSY) had accepted a fixed-term pay cut....
Under the agreement cabin crew pay is to be cut by five per cent at the beginning of next month, with current pay levels restored at the end of next year."
Link: http://newsroom.finland.fi/stt/showarticle.asp?intNWSAID=22798&group=Business
The business I work for has decided to keep prices steady for the next year (no increase/no decrease)
"IslandCrow"
HousingFinland you said while ago that the value of flats will colapse 20-30%. I'll see prices going sligthly up. What went wrong ?
Believers will believe that the value of flat will go up and they pay more. The investors and banks are believers.
Tax payers need to live anyway somewhere and need to pay to believers.
Is it possible to add emailing list to your blog, since would be nice to follow what/how you update a blog.
Me too lazy always figure out where the blog where ....
"I'll see prices going sligthly up. What went wrong ?"
I give an answer in the next article as I think clarification was needed (thanks for trigerring some adrenlanine... %=|).
so in short nothing is going wrong...it's just that a correction takes about 4-5 years at least to hit it's bottom, we are at the beginning.
To add one more argument...think about the amount of loan that are linked to variable rate...this is something to really worry about.
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