Imagine it.
- Absolutely massive MASSIVE demand destruction as whole sectors of the economy begin to layoff workers and families feeling the pinch eliminate all discretionary spending
- Housing crash. Soon you can buy a 500k house for 200k
- Bullwhip effect in durable goods triggers huge price cuts in retail
- (this is the big one) A massive surge in demand for dollars from other countries
*10 minutes later*
- Fed turns back on the tap
- Dollar demand fades as other countries reduce trade in dollars and reduce trade with dollars. Slowly, and then all at once.
- War economy will require massive money printing on top of QE (you think NATO is activating 300,000 troops for a picnic?)
Buckle up, it's going to be a wild ride.
I'm sorry, but I still don't see it. I don't want to appear argumentative as this forum gives me plenty of insights from people who would otherwise be unable to speak up, but this focus is on housing.
Instead I'm looking at four main sectors of the economy:
1) rent
2) energy
3) fuel
4) food
Remove Ukrainian and Russian grain/energy production through embargo and we have lost how much of the world supply? Less supply causes prices to rise.
I don't see us being able to make up from that with local food production by overproducing. That's number 2 and 3 and 4.
What about rent? If housing prices collapse, surely rent will go down. But here's the thing, in 2007-9, the southern border of America wasn't seeing approx a million or more migrants a year walking across the border and being automatically given housing and welfare money. But that's where we are now.
There is little chance that housing goes down if the federal government is trying to get every foreigner in to the USA on free section 8 housing. And those are just illegal immigrants. Courts in the USA have ruled that there can't be a means test on legal immigrants preventing them from automatically acquiring public welfare checks and benefits, so the chances of them leaving are very, very small. They will also require housing. Before the pandemic, I think legal immigration to the USA was half a million a year.
Any temporary drop in housing prices will still mean demand is outstripping supply. Home ownership may go down, but rentals and leasing will go up unless the government plans to put the immigrants in tents, which isn't a good look for them as they are trying to encourage maximum immigration, legal or not. The powers that be want 1 billion americans (citizen or not) by 2060 or so.
So deflation? I'm still not seeing it.