Tag Archives: Money

The Fruits of Graft – Great Depressions Then and Now

Wayne Jett, author of “Fruits of Graft”, interviewed by Sarah Westall in an eight part (video) series to discuss in depth the amazing history of events and actions leading up to the Great Depression. They also discuss the activities and actions taken during the Great Depression that caused increased misery for millions of Americans. This is an epic historical view of the Great Depression you have not heard before; that also serves to explain what is really driving most current events we are living through today.

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Classical Capital

Video Series Links

Part 1

Part 2

Part 3


Part 4


Part 5


Part 6

The Elitist Manifesto

The Red Symphony

Progress and Poverty by Henry George

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US Government Quietly Cuts Historical Capex Data By Billions Of Dollars

While Wall Street looked upon today’s Durable Goods report with caution, noting the substantial beat in the headline print which was entirely as a result of a surge in non-defense aircraft orders (read Boeing) which soared by 65%, there was substantial weakness below the surface especially in the core CAPEX print, the capital goods orders non-defense ex-aircraft, which disappointed significantly, sliding 0.8% on expectations of a 0.3% rebound.

However, that was just part of the story. A far bigger part was missed by most because as always Wall Street was focused on the sequential change, and not on the absolute number.

As it turns out, the Department of Commerce decided to quietly revise all the core data going back all the way back to 2014. In doing so it stripped away about 4% from the nominal dollar amount in Durable Goods ex-transports, where the March print was slashed from $154.7 Billion to $148.3 Billion…

… and, worse, the government just confirmed what many had said for years, namely that CAPEX spending had been far lower than reported all along when it revised the capital goods orders non-defense ex-aircraft series lower by a whopping 6%, taking down the March print from $66.9 billion to only $62.4 billion, the lowest absolute number since early 2011.

So how did this downward revision to a critical historical series, and key driver of GDP, change the current GDP estimte?  Well, according to the Atlanta Fed, “the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 26, up from 2.5 percent on May 17. The forecast for second-quarter real gross private domestic investment growth increased from -0.3 percent to 0.4 percent following this morning’s durable manufacturing release from the U.S. Census Bureau.

Oddly not a word about the sharp revisions to the core data in main stream media.

Source: ZeroHedge

The Bubble No One Is Talking About

 https://theconservativetreehouse.files.wordpress.com/2012/06/red_hair.gif?w=604&h=256

Summary

  • There has been an inexplicable divergence between the performance of the stock market and market fundamentals.
  • I believe that it is the growth in the monetary base, through excess bank reserves, that has created this divergence.
  • The correlation between the performance of the stock market and the ebb and flow of the monetary base continues to strengthen.
  • This correlation creates a conundrum for Fed policy.
  • It is the bubble that no one is talking about.

The Inexplicable Divergence

After the closing bell last Thursday, four heavyweights in the S&P 500 index (NYSEARCA:SPY) reported results that disappointed investors. The following morning, Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Starbucks (NASDAQ:SBUX) and Visa (NYSE:V) were all down 4% or more in pre-market trading, yet the headlines read “futures flat even as some big names tumble post-earnings.” This was stunning, as I can remember in the not too distant past when a horrible day for just one of these goliaths would have sent the broad market reeling due to the implications they had for their respective sector and the market as a whole. Today, this is no longer the case, as the vast majority of stocks were higher at the opening of trade on Friday, while the S&P 500 managed to close unchanged and the Russell 2000 (NYSEARCA:IWM) rallied nearly 1%.

This is but one example of the inexplicable divergence between the performance of the stock market and the fundamentals that it is ultimately supposed to reflect – a phenomenon that has happened with such frequency that it is becoming the norm. It is as though an indiscriminate buyer with very deep pockets has been supporting the share price of every stock, other than the handful in which the selling is overwhelming due to company-specific criteria. Then again, there have been rare occasions when this buyer seems to disappear.

Why did the stock market cascade during the first six weeks of the year? I initially thought that the market was finally discounting fundamentals that had been deteriorating for months, but the swift recovery we have seen to date, absent any improvement in the fundamentals, invalidates that theory. I then surmised, along with the consensus, that the drop in the broad market was a reaction to the increase in short-term interest rates, but this event had been telegraphed repeatedly well in advance. Lastly, I concluded that the steep slide in stocks was the result of the temporary suspension of corporate stock buybacks that occur during every earnings season, but this loss of demand has had only a negligible effect during the month of April.

The bottom line is that the fundamentals don’t seem to matter, and they haven’t mattered for a very long time. Instead, I think that there is a more powerful force at work, which is dictating the short- to intermediate-term moves in the broad market, and bringing new meaning to the phrase, “don’t fight the Fed.” I was under the impression that the central bank’s influence over the stock market had waned significantly when it concluded its bond-buying programs, otherwise known as quantitative easing, or QE. Now I realize that I was wrong.

The Monetary Base

In my view, the most influential force in our financial markets continues to be the ebb and flow of the monetary base, which is controlled by the Federal Reserve. In layman’s terms, the monetary base includes the total amount of currency in public circulation in addition to the currency held by banks, like Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM), as reserves.

Bank reserves are deposits that are not being lent out to a bank’s customers. Instead, they are either held with the central bank to meet minimum reserve requirements or held as excess reserves over and above these requirements. Excess reserves in the banking system have increased from what was a mere $1.9 billion in August 2008 to approximately $2.4 trillion today. This accounts for the majority of the unprecedented increase in the monetary base, which now totals a staggering $3.9 trillion, over the past seven years.

The Federal Reserve can increase or decrease the size of the monetary base by buying or selling government bonds through a select list of the largest banks that serve as primary dealers. When the Fed was conducting its QE programs, which ended in October 2014, it was purchasing US Treasuries and mortgage-backed securities, and then crediting the accounts of the primary dealers with the equivalent value in currency, which would show up as excess reserves in the banking system.

A Correlation Emerges

Prior to the financial crisis, the monetary base grew at a very steady rate consistent with the rate of growth in the US economy, as one might expect. There was no change in the growth rate during the booms and busts in the stock market that occurred in 2000 and 2008, as can be seen below. It wasn’t until the Federal Reserve’s unprecedented monetary policy intervention that began during the financial crisis that the monetary base soared, but something else also happened. A very close correlation emerged between the rising value of the overall stock market and the growth in the monetary base.

It is well understood that the Fed’s QE programs fueled demand for higher risk assets, including common stocks. The consensus view has been that the Fed spurred investor demand for stocks by lowering the interest rate on the more conservative investments it was buying, making them less attractive, which encouraged investors to take more risk.

Still, this does not explain the very strong correlation between the rising value of the stock market and the increase in the monetary base. This is where conspiracy theories arise, and the relevance of this data is lost. It would be a lot easier to measure the significance of this correlation if I had proof that the investment banks that serve as primary dealers had been piling excess reserves into the stock market month after month over the past seven years. I cannot. What is important for investors to recognize is that an undeniable correlation exists, and it strengthens as we shorten the timeline to approach present day.

The Correlation Cuts Both Ways
Notice that the monetary base (red line) peaked in October 2014, when the Fed stopped buying bonds. From that point moving forward, the monetary base has oscillated up and down in what is a very modest downtrend, similar to that of the overall stock market, which peaked a few months later.

 

What I have come to realize is that these ebbs and flows continue to have a measurable impact on the value of the overall stock market, but in both directions! This is important for investors to understand if the Fed continues to tighten monetary policy later this year, which would require reducing the monetary base.

If we look at the fluctuations in the monetary base over just the past year, in relation to the performance of the stock market, a pattern emerges, as can be seen below. A decline in the monetary base leads a decline in the stock market, and an increase in the monetary base leads a rally in the stock market. The monetary base is serving as a leading indicator of sorts. The one exception, given the severity of the decline in the stock market, would be last August. At that time, investors were anticipating the first rate increase by the Federal Reserve, which didn’t happen, and the stock market recovered along with the rise in the monetary base.

If we replace the fluctuations in the monetary base with the fluctuations in excess bank reserves, the same correlation exists with stock prices, as can be seen below. The image that comes to mind is that of a bathtub filled with water, or liquidity, in the form of excess bank reserves. This liquidity is supporting the stock market. When the Fed pulls the drain plug, withdrawing liquidity, the water level falls and so does the stock market. The Fed then plugs the drain, turns on the faucet and allows the tub to fill back up with water, injecting liquidity back into the banking system, and the stock market recovers. Could this be the indiscriminate buyer that I mentioned previously at work in the market? I don’t know.

What I can’t do is draw a road map that shows exactly how an increase or decrease in excess reserves leads to the buying or selling of stocks, especially over the last 12 months. The deadline for banks to comply with the Volcker Rule, which bans proprietary trading, was only nine months ago. Who knows what the largest domestic banks that hold the vast majority of the $2.4 trillion in excess reserves were doing on the investment front in the years prior. As recently as January 2015, traders at JPMorgan made a whopping $300 million in one day trading Swiss francs on what was speculated to be a $1 billion bet. Was that a risky trade?

Despite the ban on proprietary trading imposed by the Volcker Rule, there are countless loopholes that weaken the statute. For example, banks can continue to trade physical commodities, just not commodity derivatives. Excluded from the ban are repos, reverse repos and securities lending, through which a lot of speculation takes place. There is also an exclusion for what is called “liquidity management,” which allows a bank to put all of its relatively safe holdings in an account and manage them with no restrictions on trading, so long as there is a written plan. The bank can hold anything it wants in the account so long as it is a liquid security.

My favorite loophole is the one that allows a bank to facilitate client transactions. This means that if a bank has clients that its traders think might want to own certain stocks or stock-related securities, it can trade in those securities, regardless of whether or not the clients buy them. Banks can also engage in high-frequency trading through dark pools, which mask their trading activity altogether.

As a friend of mine who is a trader for one of the largest US banks told me last week, he can buy whatever he wants within his area of expertise, with the intent to make a market and a profit, so long as he sells the security within six months. If he doesn’t sell it within six months, he is hit with a Volcker Rule violation. I asked him what the consequences of that would be, to which he replied, “a slap on the wrist.”

Regardless of the investment activities of the largest banks, it is clear that a change in the total amount of excess reserves in the banking system has a significant impact on the value of the overall stock market. The only conclusion that I can definitively come to is that as excess reserves increase, liquidity is created, leading to an increase in demand for financial assets, including stocks, and prices rise. When that liquidity is withdrawn, prices fall. The demand for higher risk financial assets that this liquidity is creating is overriding any supply, or selling, that results from a deterioration in market fundamentals.

There is one aspect of excess reserves that is important to understand. If a bank uses excess reserves to buy a security, that transaction does not reduce the total amount of reserves in the banking system. It simply transfers the reserves from the buyer to the seller, or to the bank account in which the seller deposits the proceeds from the sale, if that seller is not another bank. It does change the composition of the reserves, as 10% of the new deposit becomes required reserves and the remaining 90% remains as excess reserves. The Fed is the only institution that can change the total amount of excess reserves in the banking system, and as it has begun to do so over the past year, I think it is finally realizing that it must reap what it has sown.

The Conundrum

In order to tighten monetary policy, the Federal Reserve must drain the banking system of the excess reserves it has created, but it doesn’t want to sell any of the bonds that it has purchased. It continues to reinvest the proceeds of maturing securities. As can be seen below, it holds approximately $4.5 trillion in assets, a number which has remained constant over the past 18 months.

Therefore, in order to drain reserves, thereby reducing the size of the monetary base, the Fed has been lending out its bonds on a temporary basis in exchange for the reserves that the bond purchases created. These transactions are called reverse repurchase agreements. This is how the Fed has been reducing the monetary base, while still holding all of its assets, as can be seen below.

There has been a gradual increase in the volume of repurchase agreements outstanding over the past two years, which has resulted in a gradual decline in the monetary base and excess reserves, as can be seen below.

I am certain that the Fed recognizes the correlation between the rise and fall in excess reserves, and the rise and fall in the stock market. This is why it has been so reluctant to tighten monetary policy further. In lieu of being transparent, it continues to come up with excuses for why it must hold off on further tightening, which have very little to do with the domestic economy. The Fed rightfully fears that a significant market decline will thwart the progress it has made so far in meeting its mandate of full employment and a rate of inflation that approaches 2% (stable prices).

The conundrum the Fed faces is that if the rate of inflation rises above its target of 2%, forcing it to further drain excess bank reserves and increase short-term interest rates, it is likely to significantly deflate the value of financial assets, based on the correlation that I have shown. This will have dire consequences both for consumer spending and sentiment, and for what is already a stall-speed rate of economic growth. Slower rates of economic growth feed into a further deterioration in market fundamentals, which leads to even lower stock prices, and a negative-feedback loop develops. This reminds me of the deflationary spiral that took place during the financial crisis.

The Fed’s preferred measurement of inflation is the core Personal Consumption Expenditures, or PCE, price index, which excludes food and energy. The latest year-over-year increase of 1.7% is the highest since February 2013, and it is rapidly closing in on the Fed’s 2% target even though the rate of economic growth is moving in the opposite direction, as can be seen below.

The Bubble

If you have been wondering, as I have, why the stock market has been able to thumb its nose at an ongoing recession in corporate profits and revenues that started more than a year ago, I think you will find the answer in $2.4 trillion of excess reserves in the banking system. It is this abundance of liquidity, for which the real economy has no use, that is decoupling the stock market from economic fundamentals. The Fed has distorted the natural pricing mechanism of a free market, and at some point in the future, we will all learn that this distortion has a great cost.

Alan Greenspan once said, “how do we know when irrational exuberance has unduly escalated asset values?” Open your eyes.

What you see in the chart below is a bubble. It is much different than the asset bubbles we experienced in technology stocks and home prices, which is why it has gone largely unnoticed. It is similar from the standpoint that it has been built on exaggerated expectations of future growth. It is a bubble of the Fed’s own making, built on the expectation that an unprecedented increase in the monetary base and excess bank reserves would lead to faster rates of economic growth. It has clearly not. Instead, this mountain of money has either directly, or indirectly, flooded into financial assets, manipulating prices to levels well above what economic fundamentals would otherwise dictate.

The great irony of this bubble is that it is the achievement of the Fed’s objectives, for which the bubble was created, that will ultimately lead it to its bursting. It was an unprecedented amount of credit available at historically low interest rates that fueled the rise in home prices, and it has also been an unprecedented amount of credit at historically low interest rates that has fueled the rise in financial asset prices, including the stock market. How and when this bubble will be pricked remains a question mark, but what is certain is that the current level of excess reserves in the banking system that appear to be supporting financial markets cannot exist in perpetuity.

Article by Lawrence Fuller | Seeking Alpha

Is This The End Of The U.S Dollar? Geopolitical Moves “Obliterate U.S Petrodollar Hegemony “

https://i0.wp.com/shtfplan.com/wp-content/uploads/2014/09/king-dollar.jpgIt seems the end really is nigh for the U.S. dollar.

And the mudfight for global dominance and currency war couldn’t be more ugly or dramatic.

The Saudis are now openly threatening to take down the U.S. economy in the ongoing fallout over collapsing oil prices and tense geopolitical events involving the 9/11 cover-up. The New York Times reports:

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

China has been working for years to establish global currency status, and will strengthen the yuan by backing it with gold in moves clearly designed to cripple the role of the dollar. Zero Hedge reports:

China’s shift to an official local-currency-based gold fixing is “the culmination of a two-year plan to move away from a US-centric monetary system,” according to Bocom strategist Hao Hong. In an insightfully honest Bloomberg TV interview, Hong admits that “by trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars.”

Putin also waits in the shadows, making similar moves and creating alliances to out-balance the United States with a growing Asian economy on the global stage.

Luke Rudkowski of WeAreChange asks “Is This The End of the U.S. Dollar?” in the video below.

He writes:

In this video Luke Rudkowski reports on the breaking news of both China and Saudi Arabia making geopolitical moves that could cause a U.S economic collapse and obliteration of the U.S hegemony petrodollar. We go over China’s new gold backed yuan that cannot be traded in U.S dollars and rising tension with Saudi Arabia threatening economic blackmail if their role in 911 is exposed.

Visit WeAreChange.org where this video report was first published.

The Federal Reserve, Henry Kissinger, the Rockefellers and their allies created the petrodollar and insisted upon the world using the U.S. dollar to buy oil, placing debt in American currency and entire countries under the yoke of the West.

But that paradigm has been crumbling as world order shifts away from U.S. hegemony.

It is a matter of when – not if – these events will change the U.S. financial landscape forever.

As SHTF has warned, major events are taking place, and no one can say if stability will be here tomorrow.

Stay vigilant, and prepare yourself and your family as best as you can.

Read more:

Pay Attention To The Economy Right Now, Because A Disturbing Series Of Events Seems To Be In Motion

Here’s How We Got Here: A Short Primer On The History Of The Petrodollar

Shock Report: China Dumps Half a Trillion Dollars: “Something Is Very, Very Wrong”

Dollar Moves Shake the World: “Federal Reserve Could Start a Currency War”

by Mac Salvo | SHTF Plan

Why The Fed Has To Raise Rates

Summary

• No empire has ever prospered or endured by weakening its currency.

• Those who argue the Fed can’t possibly raise rates in a weakening domestic economy have forgotten the one absolutely critical mission of the Fed in the Imperial Project is maintaining U.S. dollar hegemony.

• In essence, the Fed must raise rates to strengthen the U.S. dollar ((USD)) and keep commodities such as oil cheap for American consumers.

• Another critical element of U.S. hegemony is to be the dumping ground for exports of our trading partners.

• If stocks are the tail of the bond dog, the foreign exchange market is the dog’s owner.

 

• No empire has ever prospered or endured by weakening its currency.

Now that the Fed isn’t feeding the baby QE, it’s throwing a tantrum. A great many insightful commentators have made the case for why the Fed shouldn’t raise rates this month – or indeed, any other month. The basic idea is that the Fed blew it by waiting until the economy is weakening to raise rates. More specifically, former Fed Chair Ben Bernanke – self-hailed as a “hero that saved the global economy” – blew it by keeping rates at zero and overfeeding the stock market bubble baby with quantitative easing (QE).

On the other side of the ledger, is the argument that the Fed must raise rates to maintain its rapidly thinning credibility. I have made both of these arguments: that the Bernanke Fed blew it big time, and that the Fed has to raise rates lest its credibility as the caretaker not just of the stock market but of the real economy implodes.

But there is another even more persuasive reason why the Fed must raise rates. It may appear to fall into the devil’s advocate camp at first, but if we consider the Fed’s action through the lens of Triffin’s Paradox, which I have covered numerous times, then it makes sense.

The Federal Reserve, Interest Rates and Triffin’s Paradox

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

The core of Triffin’s Paradox is that the issuer of a reserve currency must serve two quite different sets of users: the domestic economy, and the international economy.

Those who argue the Fed can’t possibly raise rates in a weakening domestic economy have forgotten the one absolutely critical mission of the Fed in the Imperial Project is maintaining U.S. dollar hegemony.

No nation ever achieved global hegemony by weakening its currency. Hegemony requires a strong currency, for the ultimate arbitrage is trading fiat currency that has been created out of thin air for real commodities and goods.

Generating currency out of thin air and trading it for tangible goods is the definition of hegemony. Is there any greater magic power than that?

In essence, the Fed must raise rates to strengthen the U.S. dollar (USD) and keep commodities such as oil cheap for American consumers. The most direct way to keep commodities cheap is to strengthen one’s currency, which makes commodities extracted in other nations cheaper by raising the purchasing power of the domestic economy on the global stage.

Another critical element of U.S. hegemony is to be the dumping ground for exports of our trading partners. By strengthening the dollar, the Fed increases the purchasing power of everyone who holds USD. This lowers the cost of goods imported from nations with weakening currencies, who are more than willing to trade their commodities and goods for fiat USD.

The Fed may not actually be able to raise rates in the domestic economy, as explained here: “But It’s Just A 0.25% Rate Hike, What’s The Big Deal?” – Here Is The Stunning Answer.

But in this case, perception and signaling are more important than the actual rates: By signaling a sea change in U.S. rates, the Fed will make the USD even more attractive as a reserve currency and U.S.-denominated assets more attractive to those holding weakening currencies.

What better way to keep bond yields low and stock valuations high than insuring a flow of capital into U.S.-denominated assets?

If stocks are the tail of the bond dog, the foreign exchange market is the dog’s owner. Despite its recent thumping (due to being the most over loved, crowded trade out there), the USD is trading in a range defined by multi-year highs.

The Fed’s balance sheet reveals its basic strategy going forward: maintain its holdings of Treasury bonds and mortgage-backed securities (MBS) while playing around in the repo market in an attempt to manipulate rates higher.

Whether or not the Fed actually manages to raise rates in the real world is less important than maintaining USD hegemony. No empire has ever prospered or endured by weakening its currency.

by Charles Hugh Smith in Seeking Alpha

High Stakes in Dracula’s Transylvania

House hunters are turning to Romania’s central region of Transylvania, popularized by the tale of Count Dracula. Restrictions were lifted this year on local purchases of local real estate by European Union nationals. Bran Castle, above, in Bran, Brasov county, is marketed as the home of Count Dracula, but in reality it was a residence of Romanian Queen Marie in the early 20th century.Romania draws foreign buyers looking for historic mansions and modern villas in resort areas

Count Dracula, the central character of Irish author Bram Stoker’s classic vampire novel, eagerly left for England in search of new blood, in a story that popularized the Romanian region of Transylvania. Today, house hunters are invited to make the reverse journey now that Romania is a member of the European Union and that restrictions were lifted this year on purchases of local real estate by the bloc’s nationals.

Britain’s Prince Charles, for one, unwinds every year in Zalanpatak. The mud road leading to the remote village stretches for miles, with the clanging of cow bells accompanying tourists making the trek.

Elsewhere in the world, the heir to the British throne occupies great castles and sprawling mansions. In rural Romania, he resides in a small old cottage. His involvement, since 2006, in the restoration of a few local farmhouses has given the hamlet global popularity and added a sense of excitement about Transylvania living.

A living room in Bran Castle, a Transylvania property marketed as Count Dracula’s castle. The home is for sale, initially listed for $78 million.A living room in Bran Castle, a Transylvania property marketed as Count Dracula’s castle. The home is for sale, initially listed for $78 million.

Transylvania, with a population of more than seven million in the central part of Romania, has a number of high-end homes on the market. And, yes, one is a castle. Bran Castle in Brasov county is marketed as the home of Count Dracula. In reality it was a residence of Romanian Queen Marie in the early 20th century. In 2007, the home was available for $78 million. The sellers are no longer listing a price, said Mark A. Meyer, of Herzfeld and Rubin, the New York attorneys representing the queen’s descendants, but will entertain offers.

Foreign buyers had been focused on Bucharest, where there was speculative buying of apartments after the country joined the EU in 2007. But Transylvania has been luring house hunters away from the capital city.

A guesthouse on the property in Zalanpatak, Transylvania, that is owned by Britain’s Prince Charles. His presence has boosted interest in Romanian real estate.A guesthouse on the property in Zalanpatak, Transylvania, that is owned by Britain’s Prince Charles. His presence has boosted interest in Romanian real estate.

Transylvania means “the land beyond the forest” and the region is famous for its scenic mountain routes. Brasov, an elegant mountain resort and the closest Transylvanian city to the capital, has many big villas built in the 19th century by wealthy merchants. A 10-room townhouse from that period in the historic city center is listed for $2.7 million. For $500,000, a 2,200-square-foot apartment offers rooftop views of the city and the surrounding mountains.

A seven-bedroom mansion in the nearby village of Halchiu, close to popular skiing resorts, is on the market for $2.4 million. The modern villa features two huge living rooms, a swimming pool, a tennis court and spectacular views of the Carpathian Mountains.

The village, founded by Saxons in the 12th century, has rows of historic houses across the street. Four such buildings were demolished to make way for the mansion, completed in 2010.

A $2.4 million mansion is for sale in Halchiu village.A $2.4 million mansion is for sale in Halchiu village.

“Rather than invest a million or more to buy an existing house, the wealthy prefer to build on their own because construction materials and work is cheaper,” said Raluca Plavita, senior consultant at real-estate firm DTZ Echinox in Bucharest.

Non-EU nationals can’t purchase land outright—although they may use locally registered companies to circumvent the restriction—but they can buy buildings freely, said Razvan Popa, real-estate partner at law firm Kinstellar. High-end properties are out of reach for many Romanians, who make an average of $500 in monthly take-home pay.

The country saw a rapid inflation of real-estate prices before 2008, on prospects of Romania’s entry to the EU and the North Atlantic Treaty Organization, as well as aggressive lending by banks. Values then fell by half during the global financial crisis.

The economy is stronger now, with the International Monetary Fund estimating 2.4% growth this year. But the country is still among Europe’s poorest. Its isolation during the dictatorship of Nicolae Ceausescu gave it a bad image.

The interior of the seven-bedroom Halchiu mansion, which was built on the site of four traditional Saxon homes.The interior of the seven-bedroom Halchiu mansion, which was built on the site of four traditional Saxon homes.

“Interest in Romania isn’t comparable with Prague or Budapest where some may be looking to buy a small apartment with a view of Charles Bridge or the Danube,” said Mr. Popa, the real-estate lawyer.

The international publicity around Prince Charles’s properties offers a counterbalance to some of the negative press Romania has received in Western Europe, which is worried about well-educated Romanians moving to other countries to provide inexpensive labor.

The Zalanpatak property is looked after by Tibor Kalnoky, a descendant of a Hungarian aristocratic family. The 47-year-old studied in Germany to be a veterinarian and, after reclaiming family assets in Romania, has managed the prince’s property and has hosted him during his visits.

These occasional visits are enough to attract scores of tourists throughout the year to the formerly obscure village in a Transylvanian valley. The fact that few street signs lead there, that the property offers no Internet or TV and that cellphone signals are absent for miles, seems only to add to the mystery of the place.