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Can you elaborate on your last paragraph please? What is the fundamental cause in your opinion? Or are you saying it's like turtles all the way down?

narrator 11y ago
The last paragraph is just speculation as to what they might find based on some investment research I've done while traveling in various developing countries. My speculation is that land prices in America are vastly inflated because there is so much credit available to buy them while in developing countries there is very little credit available for borrowing against land. In Argentina and most of Latin America for example, most real estate purchases are done with cash. Thus, in order to buy land you have to save for years till you have the full purchase price. The cost of renting is much higher vs the land value. Less credit = lower prices. Profits and savings from productive businesses and wages have much more power in the economy than bank loans. It's a bit like what happened to higher education in the U.S. We rapidly increased the amount of loans available and the costs skyrocketed. Same goes for the housing bubble. You increase the credit available for houses, the price goes up. You decrease it, the price goes down. This is the game we play with money in this country because everyone will always take our dollars and we can QE as many as we want. There's a lot of arbitrage of this via buying real estate in foreign countries. Lots of retirees sell their inflated home and buy in Costa Rica and all that money drives up the prices there. We've got the dollar spigot in this country and everyone else in the world has to drink off what leaks out the trade deficit. It's a global game and the people who have made tons of money off that game go and manufacture stuff in China for impossibly cheap where the leaky dollar spigot has not deluged and import it back to the U.S. This is where the whole export led economy thing comes from. If you are a publicly traded company in the U.S, you get to benefit from the enormous amounts of dollar spigot that floods into the S&P 500 via the banks diversifying after they receiving money from the Fed's purchase of MBSs from the banks, that then get parsimoniously dolled out to factories in Asia and elsewhere by these big companies.
- littletimmy 11y ago
  But then it is not land prices itself but rather the availability of the credit that seems to be the fundamental disparity, isn't it? And you could question why there's such a big difference in credit availability, which comes down to accumulated capital and to productivity/technology. Not to disparage your argument, but aren't you just saying more productive/advanced regions have more expensive stuff?
  - narrator 11y ago
    I think American financial institutions and their clients have a slight advantage when it comes to getting dollar credit than financial institutions in developing countries. That's why when American companies get cheap money it does so much more overseas.
    - turar 11y ago
      Why do American banks and their clients get this advantage? Does it come down to the historical fact that the US Dollar is a currency with a unique worldwide status?
- kspaans 11y ago
  And, you know wages are way lower in those developing countries with cheap land. You may want to adjust for average and median wages when comparing the cost of living in various countries.
  - narrator 11y ago
    Wages are lower because expenses are lower. Mexican immigrants who can't earn enough to live in the U.S move back to Mexico. Expats living in low rent countries will underbid those living in high cost countries, even with equivalent skills.
- yenant 11y ago
  There is definitely some (currently poorly explored and undefined as far as my efforts to locate scholarly research went) Tsiolkovsky rocket equation-like [1] effect going on with land pricing on a PPP basis. I, too, have been stymied by the "just so" pat answers economics gives to the questions you raised, and the entire field ducks reflexivity and quantification issues, even when modern Internet-driven tools and data are available to start empirically addressing the questions with potentially trillions of data points each week to mine. [1] https://en.wikipedia.org/wiki/Tsiolkovsky_rocket_equation https://en.wikipedia.org/wiki/Tsiolkovsky_rocket_equation

narrator 11y ago

The last paragraph is just speculation as to what they might find based on some investment research I've done while traveling in various developing countries. My speculation is that land prices in America are vastly inflated because there is so much credit available to buy them while in developing countries there is very little credit available for borrowing against land. In Argentina and most of Latin America for example, most real estate purchases are done with cash. Thus, in order to buy land you have to save for years till you have the full purchase price. The cost of renting is much higher vs the land value. Less credit = lower prices. Profits and savings from productive businesses and wages have much more power in the economy than bank loans. It's a bit like what happened to higher education in the U.S. We rapidly increased the amount of loans available and the costs skyrocketed. Same goes for the housing bubble. You increase the credit available for houses, the price goes up. You decrease it, the price goes down. This is the game we play with money in this country because everyone will always take our dollars and we can QE as many as we want. There's a lot of arbitrage of this via buying real estate in foreign countries. Lots of retirees sell their inflated home and buy in Costa Rica and all that money drives up the prices there. We've got the dollar spigot in this country and everyone else in the world has to drink off what leaks out the trade deficit. It's a global game and the people who have made tons of money off that game go and manufacture stuff in China for impossibly cheap where the leaky dollar spigot has not deluged and import it back to the U.S. This is where the whole export led economy thing comes from. If you are a publicly traded company in the U.S, you get to benefit from the enormous amounts of dollar spigot that floods into the S&P 500 via the banks diversifying after they receiving money from the Fed's purchase of MBSs from the banks, that then get parsimoniously dolled out to factories in Asia and elsewhere by these big companies.

littletimmy 11y ago
But then it is not land prices itself but rather the availability of the credit that seems to be the fundamental disparity, isn't it? And you could question why there's such a big difference in credit availability, which comes down to accumulated capital and to productivity/technology. Not to disparage your argument, but aren't you just saying more productive/advanced regions have more expensive stuff?
- narrator 11y ago
  I think American financial institutions and their clients have a slight advantage when it comes to getting dollar credit than financial institutions in developing countries. That's why when American companies get cheap money it does so much more overseas.
  - turar 11y ago
    Why do American banks and their clients get this advantage? Does it come down to the historical fact that the US Dollar is a currency with a unique worldwide status?
kspaans 11y ago
And, you know wages are way lower in those developing countries with cheap land. You may want to adjust for average and median wages when comparing the cost of living in various countries.
- narrator 11y ago
  Wages are lower because expenses are lower. Mexican immigrants who can't earn enough to live in the U.S move back to Mexico. Expats living in low rent countries will underbid those living in high cost countries, even with equivalent skills.
yenant 11y ago
There is definitely some (currently poorly explored and undefined as far as my efforts to locate scholarly research went) Tsiolkovsky rocket equation-like [1] effect going on with land pricing on a PPP basis. I, too, have been stymied by the "just so" pat answers economics gives to the questions you raised, and the entire field ducks reflexivity and quantification issues, even when modern Internet-driven tools and data are available to start empirically addressing the questions with potentially trillions of data points each week to mine. [1] https://en.wikipedia.org/wiki/Tsiolkovsky_rocket_equation https://en.wikipedia.org/wiki/Tsiolkovsky_rocket_equation