UK House prices: News & Views

[jinbal]

HPC chart with Fib retracement from high to low.

 

Hi FWIW

 

I'm assuming that you're looking to see how far house prices will retrace in this correction, in which case I think you've drawn your fibs the wrong way round - could you possibly draw them from the 1996 low to the 2007 high i.e price retraces to the 23,38.2,50,61.8 in that order. Great idea BTW - i've been looking for a similar chart but never found one.

 

thanks

Jin

[ziknik]

...

So, what does it mean?

The leftmost green fib shows that the 70's peak fell to the 38.2% level with 3 years up and 4 years down.

The middle red fib shows that the 89 peak fell to the 23.6% level with 6 years up and 7 years down.

The rightmost blue fib is where I go a bit loony tunes and try and predict the future based on my observations of the past. So the next fib in the sequence would be 14.6%, and as we had 11 years up it will take 12 years down (again following the past up-down sequence/pattern). This is around the £91k mark for the average house in 2019.

 

Now, the reason I am perplexed is that one side of me does not believe that the powers-that-be would allow so much pain. They 'should' be able to debase our currency and inflate us out of this mess. Good for my gold and silver...

 

The other side of me worries that maybe 'they' can't do anything about this, due to other foreign banksters, and the best to hope for is a slow 12 year grind to the bottom. Not good for my general well being...

 

Please discuss, shoot down but don't ignore!

 

Thanks for posting. I don’t really know anything about TA so I really appreciate when others take the time to post stuff like this. Out of interest, why did you chose the real house price chart over the nominal one?

 

I’m expecting house prices to drop to around 2.5 - 3 times average salary at the very bottom of the market. I think you are in the right ballpark with 90k.

 

Inflation should cover up some of the mess.

 

Without inflation, the bottom could be down to around £60k.

 

I’m not sure about time scales. House prices may fall for another 20 years or more relative to average salary. Though I think we’ll get the nominal falls out of the way around the end of next year.

 

BTW, 2019 (ish) ties in nicely with the end of K-Winter.

 

 

[ziknik]

David Prosser is [alleged to be*] a t0$$£r

 

http://www.independent.co.uk/news/business...me-1740241.html

 

David TProsser: Why this 125% mortgage is welcomed by t0$$£r$

 

Outlook Good for Nationwide Building Society, both for having the nous to see that there is a part of the housing market that could benefit from being offered 125 per cent loan-to-value deals, and for having the nerve to market such products, which could see the mutual end up on the wrong end of some critical headlines.

…

Anyway, there is nothing intrinsically wrong with high loan-to-values. Even the infamous Together mortgage marketed by Northern Rock, which also offered a 125 per cent loan, was an attempt to tackle a genuine problem – in that case, the fact borrowers were having to pay so much to get on to the housing ladder they had nothing left over for legal costs, furniture and so on.

…

 

* By me

[romans holiday]

I’ve come up with a brilliant idea for a TV show. It’s called ‘Celebrity House Price Crash’

 

Joking aside: They’ve renamed the TV show to ‘Property Snakes & Ladders’ this year

 

http://www.channel4.com/4homes/on-tv/property-ladder/

Well, that has to be progress!

 

The old program "Upstairs, Downstairs" comes to mind though I was a bit young to remember much of it.

 

[FWIW]

Hi FWIW

 

I'm assuming that you're looking to see how far house prices will retrace in this correction, in which case I think you've drawn your fibs the wrong way round - could you possibly draw them from the 1996 low to the 2007 high i.e price retraces to the 23,38.2,50,61.8 in that order. Great idea BTW - i've been looking for a similar chart but never found one.

 

thanks

Jin

 

Hi Jin,

 

I think the blue fib does most of what you want.

 

I was using this trial software: http://www.omniumsoftware.com/chartoverlay.htm

 

and guess what my trial has run out!

 

So it may be easier for you to show me what you mean?

 

Regards,

 

fwiw

[FWIW]

Thanks for posting. I don’t really know anything about TA so I really appreciate when others take the time to post stuff like this. Out of interest, why did you chose the real house price chart over the nominal one?

 

I’m expecting house prices to drop to around 2.5 - 3 times average salary at the very bottom of the market. I think you are in the right ballpark with 90k.

 

Inflation should cover up some of the mess.

 

Without inflation, the bottom could be down to around £60k.

 

I’m not sure about time scales. House prices may fall for another 20 years or more relative to average salary. Though I think we’ll get the nominal falls out of the way around the end of next year.

 

BTW, 2019 (ish) ties in nicely with the end of K-Winter.

 

I chose the chart primarily to 'test' my theory. The original chart is here:

http://www.housepricecrash.co.uk/graphs-av...house-price.php

 

Another, reason to use this chart was the fact that more data does not necessarily mean better analysis. This chart conveniently goes back to 1975, which is just after we all went 100% fiat.

 

We are truly in uncharted waters with this HPC. Something will break under these stresses.

 

The 2019 date is what really surprised me - I 'beleived' that inflation will take care of it; however, I cannot ignore the facts.

 

Would be good if you could show me how the k-winter figure was arrived at. I know diddly about elliot waves...

 

 

[ziknik]

...

Would be good if you could show me how the k-winter figure was arrived at. I know diddly about elliot waves...

 

I can’t find the thread that first introduced me to k-waves but I have found this one: http://www.greenenergyinvestors.com/index....p;hl=Kondratief

 

This is in the OP of the thread I was looking for http://kondratyev.com/reference/theory_explained.htm

 

BTW, There are several ways to spell Kondratiev (Kondratief, Kondratieff, Kondratyev….)

 

Basically, each season lasts around one generation (15 to 20 years). Winter is said to have started around year 2000 so we should get to the end around 2015-2020

 

 

[aliveandkicking]

I can’t find the thread that first introduced me to k-waves but I have found this one: http://www.greenenergyinvestors.com/index....p;hl=Kondratief

 

This is in the OP of the thread I was looking for http://kondratyev.com/reference/theory_explained.htm

 

BTW, There are several ways to spell Kondratiev (Kondratief, Kondratieff, Kondratyev….)

 

Basically, each season lasts around one generation (15 to 20 years). Winter is said to have started around year 2000 so we should get to the end around 2015-2020

 

 

I am a believer in this cycle. If this is a human life time cycle then we are in winter for about 78/4 from the beginning of winter. Lets say winter was avoided in 1998 and that is our date anyway, Therefore we enter spring in 2017.

 

The problem i have with this cycle is i will be 61 at the end of winter. So i might have to just create my own spring and live in that time while i have it. Younger people are better able to enjoy the depression as an investment for later living.

 

 

 

[ziknik]

I am a believer in this cycle. If this is a human life time cycle then we are in winter for about 78/4 from the beginning of winter. Lets say winter was avoided in 1998 and that is our date anyway, Therefore we enter spring in 2017.

 

The problem i have with this cycle is i will be 61 at the end of winter. So i might have to just create my own spring and live in that time while i have it. Younger people are better able to enjoy the depression as an investment for later living.

 

You might make it through another 10 K-Years

 

http://news.bbc.co.uk/1/hi/uk/4003063.stm

 

Life expectancy is increasing in the developed world. But Cambridge University geneticist Aubrey de Grey believes it will soon extend dramatically to 1,000.

 

[lowrentyieldmakessense(honest!)]

I can’t find the thread that first introduced me to k-waves but I have found this one: http://www.greenenergyinvestors.com/index....p;hl=Kondratief

 

This is in the OP of the thread I was looking for http://kondratyev.com/reference/theory_explained.htm

 

BTW, There are several ways to spell Kondratiev (Kondratief, Kondratieff, Kondratyev….)

 

Basically, each season lasts around one generation (15 to 20 years). Winter is said to have started around year 2000 so we should get to the end around 2015-2020

 

this cycle seems to make sense

 

but would he have argued differently had he known about the worlds latest fad with paper money

 

and

 

link

The Kondratieff in the Twentieth Century

 

Nikolai Kondratieff has been hailed by his current adepts as a prophet of the future as well as analyst of the past. Does his cycle fare then better in the twentieth century, before and after his own time? On the contrary, it does not seem possible, but his "cycle" is in even worse shape in our century. It is true that the alleged Kondratieff boom of 1896–1920 for once seems to fit the model, since prices were indeed rising throughout this entire period. But here again, we have to disaggregate and not pay myopic attention only to the years of peak and trough. The 1896–1914 era was the only peacetime period before 1945 when prices actually rose steadily. But the reason was not some mysterious "Kondratieff" force pushing them upward. The cause was much simpler: the burst of the last great gold discoveries in Alaska and South Africa, pushing up world prices in the first two decades of the twentieth century. But, even so, the rise was scarcely enormous, averaging 2.5 percent per year, a figure we would nowadays consider almost idyllic. The really massive inflation only took place during 1914–18, the years of World War I, where once again inflationary war finance drove up the world's money supply and prices. And once more, the boom stopped and was reversed upon the end of the war.

 

Next, there is the alleged third Kondratieff long depression. At first sight, this again seems to fit the model, since surely the 1930s were an authentic depression in every sense, including physical data. But what about the 1920–29 period, the biggest boom decade in American history? How in the world can this period be called a part of a long depression? If the 1920s were not a boom period, what were they?

 

This brings us to one of the Kondratieffites' many problems. Peak and trough dating is based on the wholesale price index, the longest continuous time series available. But the Civil War peak dating is a problem. While prices retreated from their wartime high, there was definitely another economic boom until 1873, with prices peaking and the Panic of 1873 touching off a recession. Similarly, the post-War-of-1812 price peak was indeed 1814 or 1815, and yet there was, at least in the U.S., a surging economic boom until 1818, succeeded by a dramatic collapse in the Panic of 1819. Kondratieff, writing in the mid-1920s, found it easy simply to fuzz over the peak dates, writing that his first peak came in "the period 1810–17," and the second in "the period 1870–75." Add a few more years for good luck on either end, and the anomalies of peak dating can be glossed over.

 

But Kondratieff had the good fortune to publish his work before the cataclysmic 1929 peak. What now? It simply became too much of an evident distortion to mumble something about a "1920–30" Kondratieff peak. Instead, the Russian's later disciples added another critical part of the current doctrine, a way of "saving the phenomenon." There is not one Kondratieff peak, you see, but two, and the period in between is the "plateau" before the "secondary" and really big depression. Well, we now have the "plateau" of the 1920s. It is a bit difficult to call this frenzied boom period a "plateau," but set that aside for purposes of discussion. We can then patch up the 1866-73 period as another plateau before alleged disaster. How about 1814–18? Three or four years is scarcely the majestic plateau of the 1920s, but again let that pass. If we are willing to fudge by shoving in some "plateaus," we can now try to absorb the damaging period of the 1920s into our doctrine. Why in the world should there be this "plateau," which sometimes looks instead like a raging boom, after the alleged main peak has passed? And in what sense has the peak then been passed? Once again, ours not to reason why. Who knows? Perhaps The Force, or whatever is supposed to fuel this mysterious underlying long cycle, needs a few years or even a decade to get a head of steam before it really does us in.

 

But the Kondratieffites' problems have only begun. Their real difficulties come after the alleged Kondratieff trough of 1940 – the last trough so far. The entire boom-bust "long" cycle is approximately 54 years in length. Allow a few years here and there. But still: It has already been 44 years since the Kondratieff trough. A 44-year boom! So where's the peak? The peak is getting long overdue. Most of the Kondratieffites confidently predicted that the peak would arrive in 1974, just 54 years after the previous peak. Previous peak-to-peak stretches had been 52 (from 1814 to 1866), and 54 (1866 to 1920). So where indeed is the peak? It is now 1984 and counting. We are ten years past the confident prediction and we still have inflation. The Kondratieffites have been forecasting imminent deflation since the magic 1974 year, but still . . . nothing!

 

The severe 1973–75 recession filled the hearts of the Kondratieffites with joy: the peak had arrived on schedule! But inflation still continued. The next big recession came swiftly, but still there seemed to be always recovery, and inflation continued throughout. What price Kondratieff now?

 

But, as in the case of Joachim of Fiore and other mystics, the Kondratieffite gurus have hardly given up – instead they have rushed to change the date. Or rather to announce: the peak already was! The 1973–75 recession was the peak. For now we are on the "plateau," the false boom, and soon, very soon, we will get the secondary depression, the Big Bang. Very soon now we will have our 1819, our 1873, our glorious 1929.

 

Well, here we are, ten years after the "primary peak," so surely the time for the Big Bang is Now. And yet, instead of that, the economy seems to be bubbling along, recovering nicely. Inflation is still continuing, despite all the propaganda about the problem being over.

 

Time is inevitably running out on the Kondratieffites. For there will be no Big Bang, no repeat of 1929. Pointing to problems in the economy, to stagnation, to stagflation, to falling commodity prices, to secular rises in the unemployment rate, while interesting and significant is not enough. It does not demonstrate the Kondratieff. After all, there are always economic problems. The point is that there is no permanent depression, and there is not, and will not be, any deflation. The idea that we are right now in the midst of a Kondratieff depression, but that the deflation is being masked by inflationary bank credit, cannot be the way out. For that is simply the mystic's fudge factor so that you can never prove him wrong, regardless of the evidence. No, the Kondratieff is dead, and now it is simply a question of how long it will take the Kondratieffites to lie down, to admit defeat and slip away into the night. How many years will it take before everyone sees that there has not been and will not be a "fourth peak"? And without such a peak, there can be no cycle.

 

Cycles of War?

 

To the criticism that "Kondratieff peaks" are simply the results of war-borne inflation, the Kondratieffites have an answer: "Ahh, but this analysis is superficial, for the wars themselves are caused by the arrival of the Kondratieff peak!" Well, in a sense: the War of 1812–Napoleonic War, the Civil War, World War I, major wars all, came at (i.e., brought about) Kondratieff peaks. Can we then say which was cause and which was effect – the war or the cycle? Aside from the fact that we would again have to postulate some mysterious force that drives men mad and on to war during Kondratieff peak periods, there is one mighty counter-example that destroys this theory totally: World War II, which came, not at the end of a Kondratieff boom, but rather – in stark contrast – at the end of a Kondratieff depression.

 

This example indicates another gross error in the Kondratieff analysis. Where real cycles exist, in physics, astronomy or biology, the scientist concludes that there are cycles after hundreds, if not thousands, of mutually confirming observations. But in the alleged "Kondratieff," there are, at very most, only three-and-a-half cycles. What kind of analysis builds a cycle theory on only three-and-a-half observations?

 

Why Business Cycles?

 

If "the Kondratieff cycle" is a myth and a chimera, why are there business cycles at all? There is no space here to present a positive solution to the business-cycle phenomenon. But we have already seen (1) that since the market is interrelated and a seamless web, there can be no multiple "underlying" and interacting cycles; there is only one business cycle. And (2) the real business cycle is in no sense periodic, but is a continuing, wave-like motion that varies considerably in length and intensity.

 

We can only sum up the correct answer to the problem of the business cycle. We have already seen a hint of the solution: that inflation and the inflationary boom are caused by bank credit expansion generated by governments. In fact, government's central banking system provides the key causal element for all business cycles, a cause exogenous to the market economy. Continuing government intervention sets in motion business cycles by generating inflationary booms. Because these booms distort the signals of the market place in interest rates and in relative prices they bring about grave distortions of production and prices, which must be corrected by recessions and depressions.

 

In short, government intervention cripples the market economy, and recession or depression is the painful but necessary adjustment by which the market reasserts itself, and liquidates the distortions committed by the government's inflationary boom. After each depression, the government generates inflation once again, because it is the government's natural tendency to inflate. Why? Quite simply, whoever is granted a monopoly of printing money (e.g., the Fed, the Bank of England) will use that monopoly and print – to finance government deficits, or to subsidize favored economic groups. Power will tend to be used, and the power to create money out of thin air is no exception to the rule.

 

And so we see – and this is the great insight of the "Austrian" theory of the trade cycle – that micro and macro economics are in harmony after all. The free market does tend to adjust harmoniously without boom and bust, without incurring clusters of severe business losses. It is government intervention in the market that creates the business cycle, and unfortunately makes the corrective adjustment of recessions necessary. The cause of the boom-bust cycle is not some mystical periodic Force to which man must bend his will; the fault, dear Brutus, is not in our stars but in ourselves, that we are underlings.

[romans holiday]

this cycle seems to make sense

 

but would he have argued differently had he known about the worlds latest fad with paper money

How about a triangle instead?

 

 

http://www.financialsense.com/editorials/m.../2009/0508.html

[aliveandkicking]

this cycle seems to make sense

 

but would he have argued differently had he known about the worlds latest fad with paper money

 

and

 

link

 

The Kondratieff Cycle: Real or Fabricated?

by Murray N. Rothbard

 

If Rothbard dismisses Kontratiev because of 'mystic forces' he not have much credibility with me. It is a stupid thing to say.

[romans holiday]

this cycle seems to make sense

 

but would he have argued differently had he known about the worlds latest fad with paper money

 

and

 

link

Time is inevitably running out on the Kondratieffites. For there will be no Big Bang, no repeat of 1929. Pointing to problems in the economy, to stagnation, to stagflation, to falling commodity prices, to secular rises in the unemployment rate, while interesting and significant is not enough. It does not demonstrate the Kondratieff. After all, there are always economic problems. The point is that there is no permanent depression, and there is not, and will not be, any deflation. The idea that we are right now in the midst of a Kondratieff depression, but that the deflation is being masked by inflationary bank credit, cannot be the way out. For that is simply the mystic's fudge factor so that you can never prove him wrong, regardless of the evidence. No, the Kondratieff is dead, and now it is simply a question of how long it will take the Kondratieffites to lie down, to admit defeat and slip away into the night. How many years will it take before everyone sees that there has not been and will not be a "fourth peak"? And without such a peak, there can be no cycle.

 

 

"This article first appeared in two parts in Investment Insights for August and September 1984."

[lowrentyieldmakessense(honest!)]

How about a triangle instead?

 

 

http://www.financialsense.com/editorials/m.../2009/0508.html

yes but it doesnt work if we get hyperinflation

 

gold still ok though under both possibilities

 

john exter seemed ok for a central banker

 

heres an old link

 

http://www.greenenergyinvestors.com/index....st&p=108295

[lowrentyieldmakessense(honest!)]

 

"This article first appeared in two parts in Investment Insights for August and September 1984."

money supply is still increasing

 

no deflation

 

other than in leveraged assets

[romans holiday]

money supply is still increasing

 

no deflation

 

other than in leveraged assets

More circles.

 

http://www.greenenergyinvestors.com/index....st&p=116039

 

Credit is central to the Austrian economists about whom you post often. Perhaps you are more a monetarist?

[lowrentyieldmakessense(honest!)]

More circles.

 

http://www.greenenergyinvestors.com/index....st&p=116039

 

Credit is central to the Austrian economists about whom you post often. Perhaps you are more a monetarist?

dont think of myself as either

 

but happen to think most of what the Austrians say makes sense

 

i like exters pyramid - i just dont think it takes into account the possibility of currency collapse

[aliveandkicking]

money supply is still increasing

 

no deflation

 

other than in leveraged assets

 

money supply might be increasing but all assets today are levered assets. Assets were also levered back in 1900 or 1800. Ever since people traded with money rather that assets, assets have been levered to create money.

 

 

[romans holiday]

dont think of myself as either

 

but happen to think most of what the Austrians say makes sense

 

i like exters pyramid - i just dont think it takes into account the possibility of currency collapse

I think currency "collapse"/depreciation can be built into the pyramid if you consider that assets above the [reserve] currency depreciate while concomitantly, or at a later date, the currency also depreciates against gold. Conceivably, assets [say a house] could depreciate by a a factor of 2 against cash while depreciating by a factor of 4 against gold. Of course, this has nothing to do with the hyperinflationary idea. Also, peripheral currencies would be further up the pyramid.

 

An investor would do well in the reserve currency, but exceedingly well in gold.

[ziknik]

This is a good Kondratiev resource. Have a look at this presentation on K-Waves**

 

Make sure your virus scanner is up to date. There was previously a virus on this site. I think the site gets attacked regularly. They’ve changed the URL a few times in the last year

 

http://www.longwavegroup.com/flash_pres.html

 

You can download some of the charts/slides here.

 

http://www.longwavegroup.com/downloads.html

 

money supply is still increasing

 

no deflation

 

other than in leveraged assets

 

Hyperinflation of fiat currencies = deflation relative to gold (?)

[lowrentyieldmakessense(honest!)]

This is a good Kondratiev resource. Have a look at this presentation on K-Waves**

 

Make sure your virus scanner is up to date. There was previously a virus on this site. I think the site gets attacked regularly. They’ve changed the URL a few times in the last year

 

http://www.longwavegroup.com/flash_pres.html

 

You can download some of the charts/slides here.

 

http://www.longwavegroup.com/downloads.html

 

 

 

Hyperinflation of fiat currencies = deflation relative to gold (?)

 

 

yes i know

 

nature wants deflation and thats what nature will get

 

just cash is the joker as someone else once posted

[romans holiday]

just cash is the joker as someone else once posted

I wonder who that could be. .....V

[aliveandkicking]

This is a good Kondratiev resource. Have a look at this presentation on K-Waves**

 

Make sure your virus scanner is up to date. There was previously a virus on this site. I think the site gets attacked regularly. They’ve changed the URL a few times in the last year

 

http://www.longwavegroup.com/flash_pres.html

 

You can download some of the charts/slides here.

 

http://www.longwavegroup.com/downloads.html

 

 

 

Hyperinflation of fiat currencies = deflation relative to gold (?)

 

The problem with this argument is that you have to decide the future is the collapse of all fiat currencies and governments, which more or less means war and chaotic world wide distruction.

 

Meanwhile you have the realities so far of world wide government coordination.

 

http://www.moscowtimes.ru/article/1016/42/379421.htm

[lowrentyieldmakessense(honest!)]

 

 

The Politics of change

 

I have long argued that China is using the idea of an SDR reserve currency as a stalking horse. I positioning the SDR as the replacement for the $US, China can engage the support of other countries like Russia, India and Brazil, who might blanch at the prospect of the RMB as the reserve currency (e.g. see here for discussion of support for the SDR in relation to India and Russia).

 

The underlying reality behind the challenge for reserve supremacy is that China is increasingly the linchpin in the global financial system. Whatever China does with its massive reserves quite literally shapes the world financial system. China quite literally has the power to make or break any asset or any market, as can be seen in the attention paid to every utterance from China regarding the $US. When a country has such economic firepower, it is puzzling that anyone might suggest that it is not ready to take on the role of a reserve currency. I can only assume that many analysts are taking the SDR stalking horse seriously, and are not considering the vacuum that will be left when the $US finally collapses under the weight of quantitative easing and fiscal profligacy.

 

One argument I have read (sorry, I forget where) is that China would not want the RMB to become a reserve currency, as it would mean that the RMB would strengthen. There is some merit to this argument, as the fall of the $US against the RMB would make a serious dent in China's trade. However, the problem that underpins the current fragility is that China is currently subsidising US consumption at the expense of Chinese people.

 

At present, China is funding the US deficits and consumption in return for treasuries. Those treasuries are a promise of payment in $US, and yet the issuance of $US is massively expanding even as output is falling in the US. With each $US a representation of the output of the US economy, such issuance of $US currency and debt means that each currency unit is representing a smaller amount of output (I explain this in more detail here). As such, one way or another, China must eventually shift its reliance on a large US export market, and start to gain the full value of their economic output. They can not continue to literally give away a proportion of their output to the US, which is what the purchase of treasuries represents.

 

The only question marks that remains over the RMB as a reserve currency are largely to do with whether China can continue the present economic momentum, and the timing and nature of the collapse of the $US. When I first wrote about China for the blog in July 2008, I highlighted the risks for China, but concluded that on balance I favoured the view that China would emerge in the ascendant in the economic crisis. Whilst still issuing a note of caution, the developments since that time are even more favourable for China. With regards to the collapse of the $US, it is quite astounding that it has defied gravity this long.

 

As the current situation stands, the RMB is looking very much like the new reserve currency, and it is not going to become the reserve currency in ten or twenty years time, but in the near future. It may be that SDRs will be implemented as a reserve on a temporary basis during the transition, for long enough for China to satisfy the aspirations of the other supporters of the SDR. However, unless China's ascent is halted (e.g. through civil unrest), it is almost certainly going to succeed in the ambitions for the RMB.

 

Note 1: I have recently seen an article which agrees with my view that the SDR is a stalking horse, though he is using the expression 'smoke screen'.

 

Note 2: I have had some negative feedback on the new comments system. More feedback would be welcome, as I am starting to think that I need to revert to the old system (which might be a bit tricky to actually do, but I will work it out if necessary).

[ziknik]

The problem with this argument is that you have to decide the future is the collapse of all fiat currencies and governments, which more or less means war and chaotic world wide distruction.

 

Meanwhile you have the realities so far of world wide government coordination.

 

http://www.moscowtimes.ru/article/1016/42/379421.htm

 

You're such a pesimist . Why would fiat failiure lead to world wide distruction