Wednesday, 2 December 2009

"The Black Death"

Please if you were looking for a note of optimism this morning, then switch off you laptop. If you are at work, you should not anyway be browsing this site.

So, let's talk pandemic.It seems that the Finnish government want to vaccinate any living creature on the Finnish soil against the H1N1. I'm not sure about their aim, to enter in the World Record book? maybe as the country which vaccinated about 99.999% of the population (the 0.001% missing ... could be me ;->) .

Pandemic is nothing new, it has happened many time during human history. Not surprising to the readers, the human has always survived. The most known and deadliest is "the Black Death". It occured during the 12th century, precisely around 1348. The impact was tremendous, 50% of the European population was decimated. It was a very dark period marked by economical, social and religious instability. Tragically, like any similar periods, when nobody understand the true reasons, minorities became the targets and were hit very hard.

So this has happened 1348. This is important. Let's go a bit earlier in time an revisit the situation prior to that time:
"During the Medieval Warm Period (the period prior to 1350) the population of Europe had exploded, reaching levels that were not matched again in some places until the nineteenth century (parts of France today are less populous than at the beginning of the fourteenth century). However, the yield ratios of wheat (the number of seeds one could eat per seed planted) had been dropping since 1280 and food prices had been climbing. In good weather the ratio could be as high as 7:1, while during bad years as low as 2:1—that is, for every seed planted, two seeds were harvested, one for next year's seed, and one for food. By comparison, modern farming has ratios of 200:1 or more.

There was one catastrophic dip in the weather during the Medieval Warm Period that coincided with the onset of the Great Famine. Between 1310 and 1330 northern Europe saw some of the worst and most sustained periods of bad weather in the entire Middle Ages, characterized by severe winters and rainy and cold summers.

Changing weather patterns, the ineffectiveness of medieval governments in dealing with crises and a population level at a historical high water mark made it a time when there was little margin for error."
This finally bring to the "Malthusianism" theory:
"I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man. Population, when unchecked, increases in a geometrical ratio (Exponential growth)." – Malthus 1798, Chapter 1
So after all, it might be the reason that governments take great care that such thing doesn't occur again or is it just to keep the consumer, the engine of the economy, consuming?


Anonymous said...

Housingfinland's Biased Poll:

House Prices will drop into 2010 by: -5, -10, -30, -50%

So, this poll assumes for sure price will decrease (Housing finland's opinion)- no room for differing opinion.

Can't you add option for increase in 2010 as well?

+5, +10, +30, +50%

then we can see real opinion.

HousingFinland said...

That's an interesting comments and show most probably that we are about to reach the peak of the bubble.

This is exactly the type of comment I would like to hear and see in the media, which are typical symptom when the peak is reached.

The forecast is still valid but was updated in november 2008 :

The peak will most probably be around 2012 which is getting more and more realistic considering the monetary policies conducted, the fall of the dollars, the gian asset bubble (similar to Japan in 1990) that are building up in Asia, the aging and non competitive forces in Europe and the record price of Gold....

So for buyers I will advise to wait as anyway the economy will relapse in mid to end of 2010. At that moment, nobody knows how it will turn out ...

HousingFinland said...

Just for the one who don't still get it... or are too much influenced by some media.

"Construction market conditions have weakened rapidly during the year," Rautaruukki said in the statement - 03/12/2009

Anonymous said...

I guess the final peak of the bubbles would be at the end of the world. Actually the earth is in his middle age. But, don't worry since anything in the universe has a finite lifespan. In some sense, everything grows in order to destroy oneself.

Talking about the population growth of the countries, I would add different resource consumption weights to them. A highly developed country has a much bigger resource consumption weight than that of a highly undeveloped country, maybe 100 times bigger.

Now, please have a look at the states' population figure, e.g., at . You would be even further scared that we are doomed. There seems no other way since people will vote down any of those try to lower their living quality anyway...

HousingFinland said...

"I guess the final peak of the bubbles"

You might be right, that we might be witnessing the end of the bubble in the form they were during the 1980-2010 period.

We had the "new economy" bubble, the housing bubbles, MBS-CDO or financial bubble, commodities and oil bubble...all were triggered one after another to circunvent the effect of the previous one.

So indeed we are entering a new economical order...where bubble based economy will be abolished (hopefully).

Now you are confusing real estate overpriced, asset price collapse with the end of the world - this had happen many time in the think about it.

Thanks for giving me the opportunity to clarify the few point that some may still be confused with.

Anonymous said...

How do you see inflation? Is it another kind of bubble? Or consider deflation- is it "burst of the bubble" through inflation.

I mean how we can analyse:

House price increase vs Inflation
House price decrease vs Deflation

HousingFinland said...

you are too short sighted. When you buy a house, today, you have a duration between 15-30 years.

When I talk about higher inflation eating up the value of the house, at some point, I'm talking about 3-5 years down the line, and from that point you may have sticky inflation in the order of 8% due to many factors.

But before that you will see a big deflation - we have only seen the tremors in the past year. This was only avoided because of monetary policy actions, quite exceptional done in an extreme urgency.

Remember as well that most of the country, especially Finland entered into this recession in an economically good shape. This is not the case as of today, if there were to be a relapse (I'm pretty sure it will, end of 2010), then we will be in a serious situation that will to my opinion trigger a deflation that will be hard to avoid.

You can't keep tree growing to the sky, can you?

Strangely enough it seems that we are repeating the 1990 scenario.

1987-89 a crisis in the US. stock market crash. 1989-1990 relief followed by an exponential housing growth then a collapse of the banking system in the nordic countries in 1991.

To my opinion we could get worse but you never know.

HousingFinland said...

with regard to your questions, housing and inflation ...refer to my previous post , some were related to that question...

Andrew said...

There seem to be many strikes too. Not quite the 1970's but it might get closer.

Also the high cost of parts for a house almost make the cost of a house made of parts seem cheap.

But when you can buy the house for 1.24% plus .95% margin courtesy of the nice M Trichets easy money policy it makes some sense maybe that things are expensive? Far easier than the nice Mr Bernankes more expensive money policy where a rate of 4.8% is a good one and house prices have fallen in value.

So many nice people and so many expensive items that almost nobody can afford

We live in very confusing times.

Which way is now up and which way down??

HousingFinland said...


Not quite the 70's when people were asking pay rise of 10% very often.

Here people are striking because they disagree a pay increase of 0.5%... (and people are still thinking that house price will grow on fondamental reason ;.->)

You are right the ECB has lowered rates to record low not for propelling asset price but for supporting bank from becoming insovant and avoiding a run on them as we started to witness some glimpse of it at the beginning of this crisis.

I think we are going through turbulent time and the gold market is telling us that...

Note, Gold price may tell that inflation will be raging in emerging market i.e China and India hence the search of protection from investors or government from those country that clearly do not have independant central banks.

In Europe they are fighting deflation...they nearly avoided a defaltion spiral but for how long?have they just merely delayed the issue by 1-2 years with those extreme measure? we will see end of 2010.

That why I'm stressing, especially for first time buyers, that a delay of few years on getting into the housing market won't hurt..the contrary could...

Anonymous said...

There is a bubble in Food prices. As deflation is coming, do not buy or eat Food, first time buyers (babies). Wait another year (deflation is coming), then, buy and eat food. Enjoy.

HousingFinland said...

"There is a bubble in Food prices"

Not bubble in the strict definition however it is clear that there is some kind of price fixing going on with regard to the food price in Finland.

For example, grain in particular wheat has seen its spot price collapse at the end of last year while at the same time Russia is reporting that it had massive surplus and has not enough storage to keep them....while in Finland is utterly expensive and has see a very minimal decline.

So cmopetition is not working and the market is completely controlled and distorting supply and demand.

It's amazing to see that the lift business Kone + Shlinder + Otis formed a cartel and set the price in Europe...after a decade they were fined.

The same story repeat with the wood industry..UPM + Stora enso + Metsäliitto formed a cartel and fixed prices during a decade up to 2004..they are now - finally (a bit late?) fined (see

I would not be surprised to learn that airline company, food industry etc etc... are all setting cartels in this small market where regulators helped by politicians have clear decided to work on behalf on the lobbies/industry instead of what their mandate was proning...working on behalf of the consumers: the people on the street and not agains it.

It is only in time of crisis where those schemes appears as it becomes impossible to we will see more.