Mish has a story on a 55 room Irish seaside resort, that was sold at auction for $6 million a few years ago, and sold again of $860,000. Auctions are normally for distressed owners, so whoever thought the price at $6 million was good, calculated wrong and had to take quite a haircut.
The buyer, who no doubt was smart enough to save money during the boom for just such an eventuality, announced he can keep the 25 employees on staff. No doubt... At $6 million the 55 rooms cost about $110,000 each, twice what a standard city hotel room costs in USA. At $860,000 the rooms are a little over $16,000 each, about a quarter of the going cost. The new owner will make better profits than his competitors charging less for comparable rooms. When more dollars chase goods, we call it inflation. When fewer dollars chase goods, we call it deflation.
Deflation, which our government works hard to fight, is a very good thing. Yes, the person who foolishly paid 6 million for the hotel is no doubt out some money. Perhaps a Warren Buffet is down $5.5 million. But 25 people, make that 26 with the owner, are gainfully employed.
What we badly need is more of this. This is an important aspect, facet, of recovery. The sooner interest rates hit a natural level and the banks are no longer enjoying a continuous bailout, the important work of recover can begin. The powers that be are counting on a new war to change the topic. That usually works.
The buyer, who no doubt was smart enough to save money during the boom for just such an eventuality, announced he can keep the 25 employees on staff. No doubt... At $6 million the 55 rooms cost about $110,000 each, twice what a standard city hotel room costs in USA. At $860,000 the rooms are a little over $16,000 each, about a quarter of the going cost. The new owner will make better profits than his competitors charging less for comparable rooms. When more dollars chase goods, we call it inflation. When fewer dollars chase goods, we call it deflation.
Deflation, which our government works hard to fight, is a very good thing. Yes, the person who foolishly paid 6 million for the hotel is no doubt out some money. Perhaps a Warren Buffet is down $5.5 million. But 25 people, make that 26 with the owner, are gainfully employed.
What we badly need is more of this. This is an important aspect, facet, of recovery. The sooner interest rates hit a natural level and the banks are no longer enjoying a continuous bailout, the important work of recover can begin. The powers that be are counting on a new war to change the topic. That usually works.
1 comments:
I don't think there will be a recovery as long as banks like the FED control whole economies.
Chris
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