"House prices declining almost everywhere."
"This will accelerate, as high interest rates make homes less affordable"
https://nitter.unixfox.eu/elonmusk/status/1665761394652839936
Absolutely precious: "When things become cheaper, you can afford less of it. The cheaper things are, the less you can afford them."
I wonder if Keynesians are trying to scam you? 🤔 Such a difficult puzzle. 🤔🤔
First real dynamic: Musk needs artificially very low interest rates so he can sell more cars to people who can't afford a car. (They're American; practically his entire market can't afford a car.) He is therefore [folk-activism]ing in favour of low interest rates. Pure self-absorbed selfishness.
Second real dynamic: it feels like maybe 10% of housing prices is housing demand. In Reality it's probably much higher, like 40%, but regardless house prices are completely dominated by monetary demand.
Americans can't hold USD because it just gets stolen by the Fed via inflation. The smart (=rich) Americans therefore sell USD for various illiquid assets, such as houses. (Fun fact: this is dramatically worse in China, lol.) Further: inflation promotes debt, so smart (=rich) Americans buy debt and use the debt to buy more houses. They leverage to the max. When interest rates go up, they have no safety margin (why would they?) and have to deleverage, meaning monetary demand leaves the housing market and prices go down. (Making them 'unaffordable' lol.)
No wonder America has such big issues promoting house-ownership, the prices are ludicrous with a side of wow that's funny. Americans blasting their own feet off with shotguns, as per usual.
The best part: due to all the monetary demand, ultimately backed by USD debt, housing prices also suffer from inflation and barely hedge against Fed crimes at all. Americans can only pretend to be rich due to USD reserve currency status causing favourable Cantillon effects.
Perhaps this is a second major driver of immigration: they're trying to juice housing demand so house prices aren't completely, totally, and utterly dominated by monetary demand. It's too difficult due to the enormous oversupply of money - just like bank loans aren't limited by fractional reserve anymore but instead by running out of folk who want loans, American demand for immigration outstrips the supply of folk dumb enough to move to America.
Note that BTC doesn't fix this. If all the max-leveraged less-dumb (=rich) pour into BTC, then BTC fundamentally becomes USD-debt-backed, and will become hitched to USD interest rates and USD inflation the way houses and stocks are. The correct thing to do is to ban USD from your jurisdiction entirely, along with every other central-bank currency and along with every instrument heavily involved with central-bank currencies. You have to quarantine your economy from their paper-money-infected economy until the infection runs its course and destroys their society.
In a central-bank pandemic such as the present world, I think you have to make a two-tier currency. Gold also doesn't fix this. If your solid central-bank-free economy comes into high demand, they will want to buy your currency to buy your things, and it's just kind of stupid not to let them make you rich for a living. However, you will then have to issue a separate domestic-only currency, which can't be traded for the rapidly deflating forex currency. Your citizens need a medium of exchange which isn't linked to state price-fixing of interest rates, especially foreign price-fixing.
Which raises a point: no wonder American sanctions on Russia make it richer; it makes the currency more solid. The fewer links between the Fed and your basic economic exchanges, the better.
P.S. Bonus round: the demand that leaves the housing market vanishes into the aether since it was implemented with fake digital dollars poofed into existence, and when the not entirely retarded (=rich) Americans sell houses or housing instruments and pay back the debt, they poof back out of existence.
Best pointer to the core issue of today's "economies", interior and exterior ones. It sounds that the writer can run cycles around the issue, always an indicator of understanding it. My one liner: a dollar worth is not the same for a commoner[food/shelter] as it is for the billionaire[power/networking].
ReplyDeleteSince the US is not necessarily the delimiter of your explanation, this would extend the definition you gave?!
Yes and no. Rich folk demand more money, which is how they get rich in the first place. This means the local per-dollar price is higher. In other words the truly rich crave power/networking at least as much as the pauper craves food. They really do see it as a matter of life and death.
ReplyDeleteIn turn, their demand can go down without immediately taking the supply with it, meaning they have high supply and low demand. Seems like this would be temporary, though: in this case they'll spend the money until supply and demand equilibrates again.
However, I suppose that's not the core American issue. The rich (=smart) take out loans, inflating their own wealth. As always with inflation, it makes each unit good worth less. They don't really want debt or cash or even necessarily assets, they just want to be on the right side of the inflation binary, which means taking out every dollar of debt anyone will agree to give them. Large sums for a commoner will be just noise to them.
I suppose in the end it isn't even about dollars. It really is just about being on the right side of the inflation dynamic. They'll carelessly dump debt (and thus air-quotes "assets") when interest rates go up because everyone else has to do the same. They remain secured against inflation-theft, and indeed remain on the thieving side. The absolute value is meaningless compared to the security dance.
The dumb want dollars - the smart want debt. Negative dollars. The rich actually detest money and want to get rid of all of it if possible. Makes it hard to measure their relative demand for the things dollars can buy at any instant. Do the rich value wealth less because they have higher local supply, or do they have a higher local supply because they value it more? 🤔