Low interest rates have made everything cheap but the supply of housing (specifically land) is extremely inflexible. You can make more cars but not land. The location value of your house skyrockets at the expense of everyone else.
However, make no mistake. The problem isn't money. Even if you buy your house with Bitcoin you will run into the same problem. The problem is that location is a a monopoly. You can tax it or let it run wild.
I’m not making any mistake, cheap money is absolutely the biggest problem that we have today.
My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year. That appreciation isn’t due to inflation or the constrained supply of homes — it’s always been constrained. It’s due to increased demand fueled by excess capital.
There’s no money in traditional banking. Even with negligible interest, the spread is very tight. The only way to compete is with volume, aggregation and fee for service, and the only way to get volume is to lower standards.
IMO, we’re in an economic time period similar to the 1860’s.
> My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year.
That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
There are limited production run cars from that era that underwent similar price inflation.
For someone who wants to live in Nantucket, there is literally no substitutable good!
> That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
We’re arguing the same thing. Everyone wants to go to the beach. The ability to get cash to do so increased demand.
But the number of people that can pay 3.5 million dollars for an house is much smaller than the number of people that can take have a 3.5 million house financed. If interest rates were sufficiently low (maybe negative) everybody would be in the second category.
Having more people willing to pay contributes to price increases
Not a 19th century scholar; can you provide a couple links to the current situation?
Or reference the points you are trying to make to make it easier to search? For instance, most of my results right now are pertaining to the civil war economies of the north / south United States
I think the the internet and technology is the equivalent to the railroads and industrialization in the 19th century. You also have the currency issues with silver and gold standards which may play out similarly to some of the crypto issues of today.
I’ve worked in a large enterprise for a long time, going from project to project that essentially automated away some semi-professional human work with automation at a 50-90% savings. Over 15 years, there’s about 35% fewer people doing 50% more work.
That trend is only speeding up. I don’t see how the current model of using cheap money to prop up real estate is a sustainable economic model.
Take with appropriate grain of salt. I’m not an economist, and my understanding is that of a layman.
Lots of land exists, the issue is desirable cities, and western countries have gotten really bad at making those.
China spent the first decade of the 21st century creating urban cities left and right, ignore the western propaganda of "ghost cities", and also spent time urbanizing what America would consider "suburban" towns.
Meanwhile western nations are dead set on never increasing the # of desirable urban environments, and then it is all surprise Pikachu when house prices skyrocket.
Nothing that a wealth tax on the current value of land won't fix. Make property taxes to the value of the number of people that land should support in a highrise configuration, and let the current owners pay it.
However, make no mistake. The problem isn't money. Even if you buy your house with Bitcoin you will run into the same problem. The problem is that location is a a monopoly. You can tax it or let it run wild.