Quantitative easing to deflate real estate further: Shilling, Prechter, Paul

helicopter dropping greenbacks

helicopter dropping greenbacks

“This shadow inventory when released will drive down prices again. Shilling thinks 20-30% lower in 2011. If you are looking to buy a home, you should be looking at some unbelievable deals in 2012 and 2013.”

We caught an interview today with Mr. Dudley of the NY Federal Reserve bank and his comments caught our attention.

“The Fed is trying to take Treasuries off the market to force investors into other investments”.

This comment tells us the place to put your money is in Treasuries and to stay in cash. Whenever the Fed wants to push you into other investments, those are the investments we would stay away from. Stocks especially are poison right now with the debt issues in banks, real estate and in the Euro-Zone.

You will also notice that Gold is de-leveraging. You would think global instability and Fed QE would push gold higher. So why is it falling the last few trading sessions? Answer: When there is instability in the world, the world moves it’s money into US dollars. Not gold, but U.S. DOLLARS.

Global instability and fear always moves the world back into the US Dollar. As long as we have the reserve currency, that is where the world moves in a panic.

Outside of higher food prices created by market makers, there is little or no inflation. What we continue to see the debt destruction and money contraction. Deflation is now baked in. Europe will continue to unravel with Greece and Ireland the first to run out of liquidity. Greece is already defaulting on its stimulus from summer. This proves that QE and kicking the can down the road with stimulus does not work. Eventually, the rubber will meet the road.

As one of the advisors has mentioned, QE only delayed the inevitable. From now until June of 2011 you will see massive de-leveraging continue. The markets should now begin the downward trend; and don’t expect the Fed to try QE again. It has not worked. It was only a band aid on massive wound. Don’t expect another bailout of the banks. The Presidents advisors have said in so many words: “No more bank bailouts.”

So you can expect to see continued de-leveraging well into the summer of 2011. You can expect the US dollar to gain against the Euro currencies. You can fully expect gold to finally begin to fall as well as oil; this is a good thing and it follows exactly the predictions of economist Gary Shilling and Robert Prechter (download free report). Both have said for months a dollar rally will come as the deflation cycle grows from the massive money contraction.

We now have almost two years worth of real estate backed up in the foreclosure process. This shadow inventory when released will drive down prices again. Shilling thinks 20-30% lower in 2011. If you are looking to buy a home, you should be looking at some unbelievable deals in 2012 and 2013. For example, reports read that 80% of all homeowners in Las Vegas are underwater. What will that market look like in two years. The guess is that you will be able to grab a home for 20 cents on the dollar from 2006 prices.

This is actually believed to be a good thing. Our country needs a good cleansing; It’s like defragging your computer hard drive. Clean out the garbage and reboot. That is exactly what our country needs — Massive de-everaging of real estate and the stock market. We also need to give businesses reasons to stay in business. Increased tax incentives as well as fair trade policies will revitalize the job market and get us rolling again. You expect to see this recovery begin in 2014 and beyond.

So let the de-leveraging continue and in the long run, it will be good for everyone. Maybe in the next few years we can eliminate the FED and the IRS and really get this economy moving again? Until then, tighten your belts a couple more years until we flush out the garbage and start anew. Source

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