Zero Hedge

The Family Home: From Shelter To Asset To Liability

The Family Home: From Shelter To Asset To Liability

Authored by Charles Hugh Smith via OfTwoMinds blog,

The deflation of asset bubbles and higher costs are foreseeable, but the magnitude of each is unpredictable.

With the rise of financialized asset bubbles as the source of our "growth," family home went from shelter to speculative asset. This transition accelerated as financialization (turning everything into a financial commodity to be leveraged and sold globally for a quick profit) spread into the once-staid housing sector in the early 2000s. (See chart of housing bubbles #1 and #2 below).

Where buying a home once meant putting down roots and insuring a stable cost of shelter, housing became a speculative asset to be snapped up and sold as prices soared.

The short-term vacation rental (STVR) boom added fuel to the speculative fire over the past decade as huge profits could be generated by assembling an STVR mini-empire of single-family homes that were now rented to tourists.

Now that housing has become unaffordable to the majority and the costs of ownership are stair-stepping higher, housing has become a liability. I covered the increases in costs of ownership in The Cost of Owning a Home Is Soaring 11/11/24). Articles like this one are increasingly common:

'I feel trapped': how home ownership has become a nightmare for many Americans: Scores in the US say they're grappling with raised mortgage and loan interest rates and exploding insurance premiums.

The sums of money now required to own, insure and maintain a house are eye-watering. Annual home insurance for many is now a five-figure sum; property taxes in many states is also a five-figure sum. As for maintenance, as I discussed in This Nails It: The Doom Loop of Housing Construction Quality, the decline in quality of housing and the rising costs of repair make buying a house a potentially unaffordable venture should repairs costing tens of thousands of dollars become necessary.

Major repairs can now cost what previous generations paid for an entire house, and no, this isn't just inflation; it's the result of the decline of quality across the board and the gutting of labor skills to cut costs.

Here's the Case-Shiller Index of national housing prices. Housing Bubble #2 far exceeds the extremes of unaffordability reached in Housing Bubble #1:

Here's a snapshot of housing affordability: buying a house is now an unattainable luxury for those without top 20% incomes and help from parents.

The monthly payments as a percentage of income are at historic highs:

Property taxes are rising in many locales as valuations bubble higher and local governments seek sources of stable revenues:

Home insurance costs vary widely, but all are skewing to the upside.

As I often note, the insurance industry is not a charity, and to maintain profits as payouts for losses explode higher, rates have to climb for everyone--and more for those in regions that are now viewed as high-risk due to massive losses in fires, hurricanes, wind storms, flooding, etc.

All credit-asset bubbles pop, and that inevitable deflation of home valuations will take away the speculative punchbowl. What's left are the costs of ownership. As these rise, they offset the rich capital gains that home owners have been counting on for decades to make ownership a worthwhile, low-risk investment.

The deflation of asset bubbles and higher costs are foreseeable, but the magnitude of each is unpredictable. The ideas that have taken hold in the 21st century--that owning a house is a wellspring of future wealth, and everything is now a throwaway destined for the landfill--are based on faulty assumptions, assumptions that have set a banquet of consequences few will find palatable.

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Tyler Durden Sun, 04/20/2025 - 10:30

The Global Safe Haven Is Slowly Breaking: Why Central Banks Are Turning To Gold

The Global Safe Haven Is Slowly Breaking: Why Central Banks Are Turning To Gold

Authored by Alex Deluce via GoldTelegraph.com,

The global financial system is not just shifting, it is starting to breakdown.

On April 1st, I wrote: “The erosion of trust: the times are changing.”

That warning has since become a headline.

What was once dismissed as contrarian commentary by many is now being echoed by mainstream media across the world: the dollar’s role as the global reserve currency is no longer unquestioned.

For years, I’ve documented the growing dangers of the West’s overreliance on financial warfare:

  • Sanctions

  • Reserve freezes

  • The weaponization of SWIFT

These weren’t strategic tools of diplomacy. They were early signs of something deeper: desperation, fragility, and a crumbling world order.

In just the past year, the U.S. dollar has lost over 35% of its purchasing power against gold, driven by record central bank gold buying. This isn’t a trend, it’s a signal.

Meanwhile, the BRICS nations are growing more coordinated, even as fractures widen among traditional Western allies.

Across Europe and Asia, leaders are reassessing their exposure to a system that no longer feels stable.

Increasingly, nations are recognizing that true sovereignty begins with one principle: zero counterparty risk. That path leads directly to gold.

These developments aren’t isolated, they are symptoms of a deeper monetary fracture.

With trust evaporating, gold is no longer just a hedge. It’s becoming the foundation of a new system.

That’s why my recent conversation with Matthew Piepenburg, Partner at VON GREYERZ, couldn’t have come at a more important time.

His perspective on gold, debt, the BRICS realignment, and the unravelling confidence in U.S. Treasuries offered rare clarity in a world clouded by confusion and revealed what many are only just beginning to understand.

Let’s break it down.  

The Treasury Market’s Safe Haven Status is Eroding and Gold is the Refuge

For decades, U.S. Treasuries have functioned as the cornerstone of global finance, seen by investors and institutions as the ultimate safe haven. That narrative is now fraying.

“There is a liquidity crisis,” Piepenburg told me. “There’s simply not enough grease to keep this system going.”

Rather than providing stability during periods of volatility, U.S. government bonds have started to behave more like risk assets. In recent market turmoil, yields rose when they typically would have declined, highlighting the growing fragility of the system.  

“Yields have actually been going up, not down, in times of stress,” he explained. “Why isn’t the U.S. Treasury acting like a safe haven anymore?”

The answer, he says, lies in debt, which has buried the American economy.

With over $37 trillion in federal debt and more than $100 trillion when household, corporate, and long-term entitlement obligations are included, the system is buckling under the sheer weight of its own promises.  

“Santa Claus can’t solve a liquidity crisis when you’re buried under this much debt,” Piepenburg warned. “There’s not enough grease to keep those debt wheels spinning without bazooka money, without debasing the currency.”

That’s why, he added, gold is being quietly re-monetized by central banks around the world, not as a hedge, but as a foundational reserve asset.

“Gold is now a Tier 1 asset. Central banks are net settling in it. They’re moving away from Treasuries,” he said. “This isn’t about getting rich. It’s about not getting poor.”

The Rise of BRICS and the Global Move Away from the Dollar

The de-dollarization trend, long discussed in policy circles, has become an observable reality in the wake of U.S. sanctions against Russia. What began as an assertion of geopolitical power has accelerated a multipolar financial realignment.

“Since the weaponization of the U.S. dollar in 2022, 45 countries are now trading outside of it,” Piepenburg told me. “Thirty countries have repatriated their physical gold. That’s not a coincidence, it’s a reaction.”

He pointed to the critical shift that occurred when the U.S. froze Russian central bank assets. For many governments, that action shattered the illusion of the dollar as a neutral global reserve. “When you weaponize the world reserve currency,” he said, “you undermine the very trust it depends on.”

Nowhere is this shift more evident than among the BRICS nations, Brazil, Russia, India, China, and South Africa.

While rumors of a BRICS currency circulate around the world, Piepenburg clarified the group’s actual intention: “They don’t trust each other’s fiat currencies either but they trust gold.”

The BRICS plan, he noted, isn’t to launch a single currency, but rather to use a settlement system backed 40% by gold and 60% by local currencies kept in escrow.

“This isn’t about replacing the dollar overnight,” he said. “But it is a definitive move away from it.”

Fort Knox: The Taboo That Exposes the System

No discussion of gold’s resurgence would be complete without addressing America’s own reserves.

The United States claims to hold over 8,100 tonnes of gold largely stored at Fort Knox.

Former Treasury Secretary Steve Mnuchin at Fort Knox in 2017

Yet, a full, independent audit hasn’t been conducted in over six decades. Now, calls for transparency are gaining momentum. The President of the United States Donald Trump and Elon Musk have floated the idea of a livestreamed audit of Fort Knox.

But according to Piepenburg, transparency carries risks. “Be careful what you ask for,” he said. “I wouldn’t go into combat unless I knew how many bullets I had. And I wouldn’t want to show my hand unless I knew what was there.”

He believes the U.S. may not be as dominant in gold holdings as it claims and he suspects that China’s reserves are vastly underreported.

“I’m fairly confident China has at least ten times more gold than the World Gold Council says it does,” he said. “And probably more than the United States unless we’ve been hiding a best-kept secret.”

What’s at stake is more than optics. “Gold is the ultimate BS detector,” Piepenburg told me. “It’s a mirror held up to the system and that’s why they don’t want to talk about it. Because it holds its value while everything else melts.”

A Moment of Reckoning

We are not witnessing the end of the U.S. dollar but we are witnessing the end of its unchallenged supremacy.

The petrodollar framework is fracturing. Gold is being quietly repurposed as a strategic reserve asset. And U.S. Treasuries the once untouchable cornerstone of global markets are being reassessed by the very institutions that once depended on them.

The implications are profound. Central banks are no longer being quiet about what they doing… they are moving quickly and deliberately toward gold.

The real question isn’t whether gold will rise, but whether the public will grasp what’s driving the move.

WATCH THE FULL CONVERSATION:

Tyler Durden Sun, 04/20/2025 - 09:20

Americans Are Searching "USA Products" Like Never Before

Americans Are Searching "USA Products" Like Never Before

Tariffs are designed to shift consumer demand toward domestically produced goods. As foreign products become increasingly expensive, driven by levies such as the Trump administration's 145% effective tariff rate on Chinese imports, consumers are starting to take notice.

Faced with rising prices for foreign goods, some consumers have turned to the internet to determine which products are still made in the United States. 

Google Trends data shows "What products are made in the USA?" reached record highs by mid-April, with data going all the way back to 2004.  

These related search queries are in "breakout" territory:

With an effective tariff rate of 145% on all Chinese goods, Beijing signaled on Wednesday that it is open to trade talks in the near term. In the tit-for-tat tariff war, China has imposed 125% duties on U.S. goods.

In recent weeks, President Trump has paused reciprocal tariffs for countries that chose not to retaliate following "Liberation Day" in early April. The White House announced this week that the administration is in talks with 75 countries to secure new trade deals. Trump held discussions with Japan overnight, calling the talks "big progress."

Even as trade deals are expected in the coming weeks and months, the broader objective of the tariff strategy is to reshore critical supply chains essential to national security and to position the United States for dominance in the 2030s. Early internet search trend signs suggest that the tariffs are already influencing consumer behavior - this is a great start. 

 

 

Tyler Durden Sun, 04/20/2025 - 08:45

Europe, You Can't Sit On The Sidelines Anymore

Europe, You Can't Sit On The Sidelines Anymore

Authored by Victor Davis Hanson via The Daily Signal,

I’d like to talk today about the role of China, the United States, and the European Union, or just Europe in general, in the context of these tariffs and the so-called trade wars.

Right now, President Donald Trump has given a 90-day reprieve from high tariffs. I think that 10% tariffs are still in existence. And they are negotiating with a number of European countries and particularly, Asian dynamic economies, such as South Korea, Taiwan, and Japan. In addition to that, they are targeting China with tit-for-tat tariffs. And we are maybe on the brink—nobody wants it, but we might be on the brink of a trade war, which we’ve addressed in earlier videos.

But here’s my point.

What is the attitude of Europe? 

Roughly, China has a $1 trillion deficit with the world. We have about a $1 trillion deficit in trade with the world. But here’s the ratios. About a third of our deficit is with China, which makes up a third of their surplus. In addition to that, Europe makes up about a third of their surplus.

So, China has called on Europe to join forces with it to prevent all of the retaliatory tariffs that the United States has threatened Europe, which has a $200 billion surplus with us, and China, which has a nearly high $300 billion, maybe even $400 billion, who knows?

It’s kind of crazy, isn’t it, that these illiberal apparatchiks in China would think that a Western democracy would want to join them against the United States?

I don’t think that’s gonna happen. 

But the European Left is very angry at the Trump administration.

So, Choice One might be, “Well, we don’t like the Chinese and we are an ally of the Americans, who subsidize our defense, but we detest the Trump administration. So maybe, (wink and nod) we’ll either be quiet or hope China wins that trade war and the United States, under the Trump administration, backs off all tariffs.”

That would be a big mistake given their vulnerabilities they have with the United States vis-a-vis security.

The second attitude might be the Europeans will just say, “We’ll lay low. We won’t say much at all. We’ll kind of drag out our tariff negotiations with the Trump administration. And we’ll let the Chinese and the United States battle it out. And if Trump should win and he lowers the amount of trade with China, maybe that will be an opening for us to replace China as the United States chief importer.”

That is something that I don’t think will happen.

The third scenario is what I would suggest for the Europeans. They should say the following: “Despite our disagreements with the Trump administration, the United States is an ally. And we know that we have been as victimized by Chinese mercantilism, high tariffs, cheating on patents, copyrights, dumping, financial money manipulation—all the things the United States complains about, we do too. In fact, we as Europeans in a whole have about the same deficit with China as the United States does. So, we are kindred spirits. So, what we will do is, even though we have disagreements on our surplus with the United States and their efforts to reduce it, we will ally with the United States.”

And that would represent about two-thirds of China’s total trade action or monetary value. And especially, if Japan and our allies in South Korea, Taiwan would join, then China would find out that about 85% of its trade is in a block. That is, they are united. And they have common complaints against China. And China would not be able to say to the United States, “We’re going to cut deals with Vietnam and Japan and Taiwan and South Korea and the EU and leave you out in the cold.”

Instead, the Europeans and, to a lesser extent, the Asian powerhouses would join the United States and say, “You know what? We’ve been quiet. We’re afraid of China. They’re bullies. But now that you’ve stood up, we’re embolden ourselves to air the same complaints as you are and hope that you win. And maybe a byproduct of reduced trade with China from the United States will open a door. So, even though we might have to lower our tariffs, there will be more opportunity in the American market with a less prominent Chinese trade profile that we can then be welcomed in as a kindred ally.”

So, Europe has two or three choices in this proposed Chinese-American trade standoff. Nobody wants a trade war with anybody. No one wants it with China. But this is long overdue. And Europe has to decide what course they’re going to take. And for everybody’s sake, let’s hope they choose wisely.

Tyler Durden Sun, 04/20/2025 - 08:10

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