The Barefoot Investor is on a new mission. Do I support it?
So, I don’t know if you caught this, but the global housing boom has claimed a Prime Minister. Stefan Lofven in Sweden lost a no-confidence motion last week over his handling of the housing crisis.
Sweden had actually been trying to lean against the global housing boom, triggered by a tsunami of cash coming out of the Covid crisis. They had introduced things like rent-controls, which history shows us, rarely work out well.
But the rent controls failed, house prices exploded, and Sweden lost patience with its Prime Minister.
Is this a taste of things to come?
If they’re angry in Sweden, how are they feeling in New Zealand, where house prices have gone vertical and are currently growing at 32% p.a?
Or what about in America, where house prices are now growing at 24% p.a?
And we’re well into double digit growth here at home, so what about Australia?
I think it’s unlikely because in the anglo-sphere, we haven’t really tried to lean against the boom. Our governments haven’t pretended that they’re able to control prices or rents – not in a short-term way.
Lofven’s problem is that he tried to stick his finger in the firehouse of money that was gushing all over the world.
That was a fight he was never going to win.
Remember, we are still in the middle of the wildest financial experiment in human history.
Since Covid hit, Government debt across the world has exploded. In advanced economies, it’s now back at where it was, as a percent of GDP, in WWII.
In emerging economies it has never been this high.
And all that debt is being used to fund the greatest spending spree in human history.
Check it out. This chart tracks what each country is doing in terms of fiscal firepower. In the US they’re up to about 25% of GDP. 25%!
And it’s not an isolated thing. Every country is doing it.
Money money money. The world is awash with it.
It’s a brave politician who would pick a fight with that.
And it’s a silly investor who would ignore it.