9 ms·

The problem is ultimately the fact that money is an infinite resource, therefore it's a poor store of value. Property is a more stable / smarter store of value

The problem is ultimately the fact that money is an infinite resource, therefore it's a poor store of value. Property is a more stable / smarter store of value because it's actually needed by everyone in life and is relatively finite (in that land is finite). We've had unprecedented global quantitative easing over the past decade, so it's quite natural that house prices globally will meet and surpass all time highs. This is what happens when you keep printing money and set precedents such as bank bail outs and debt write offs. If all money woes can be solved simply by printing money it begs the question why don't we just keep printing more? And the realisation soon hits home that if you were to do that, the price of everything would rise, the rich would get richer and they could simply hoard all land and property indefinitely while sucking every last cent out of people starting out in life... It works up until the bit where people start getting angry and create a toxic environment in which nobody wants to live or do business...

zxcmx 9y ago
But that would be... inflation! High inflation would affect collective bargaining agreements, benefit increases, super increases and all sorts of measures designed to keep compensation increases in line with increased cost of living. Central bank keeps telling us that inflation is "on target" at just 2% or 3% p/a for about the last 5 years. Meanwhile, housing inflated more like 40% (70% in Sydney!)[2] over that time, so how does that work? OH WAIT, housing was excluded from CPI[3]. I wonder who decided that, and whose interest(heh) that might possibly be in? [1] https://www.rba.gov.au/inflation/inflation-target.html https://www.rba.gov.au/inflation/inflation-target.html [2] http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows-just-how-ridiculous-sydney-house-prices-are_a_21903757/ http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows... [3] http://www.abc.net.au/news/2017-04-20/inflation-data-suffers-from-exclusion-of-housing/8457718 http://www.abc.net.au/news/2017-04-20/inflation-data-suffers...
- skybrian 9y ago
  I don't know about Australia but if it's like the US, housing is not excluded entirely but there is a lag based on how long it takes for rents to rise. People are not all affected by changes in housing prices immediately. If you own your home or pay below market rent you won't be affected until later. A survey asking how much people actually pay will have a built-in lag.
  - sbenitoj 9y ago
    People generally don’t borrow money to pay their rent, so rent prices are restricted by local salaries. People borrow the vast majority of the cost of a house to buy it, so housing prices are largely only restricted by how much banks are willing to lend and how much it costs to borrow — all of which is heavily influenced by central banks.
    - seanmcdirmid 9y ago
      Also, no one speculates on real estate by renting. It isn’t just how much money buyers can borrow, even if they are paying for it all in cash and don’t plan on living in the property, it also about perceived upside.
    - christophilus 9y ago
      That is an obvious statement, and yet it has never occurred to me. I now (finally) understand why renting is generally a better decision than buying.
      - sbenitoj 9y ago
        Glad to hear it helps! The NYT has a good “buy vs rent calculator” that’s worth checking out: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... Even though the calculator is useful, it’s important to have a really good understanding of why housing is so much more expensive today (as a percentage of avg annual income) than it was 50-60 years ago. For that I recommend a short, but extremely useful book, The Housing Trap: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
  - branchless 9y ago
    No do not confuse land prices with rents. Rents are set by wages. Land prices are set by loose credit.
    - 9y ago
- conanbatt 9y ago
  Interesting idea, but bear in mind stocks and other investment vehicles also have highest historical prices. We could consider that the inflation that was supposed to happen with QE ended up just inflating assets prices. But that would still be an overall good thing, because asset prices are not what harm the greatest body of people, nor affect their wages like regular inflation does. People will not be thrown into poverty because apple has historic highs. In terms of housing, we should look at rental prices more than housing prices. Is that going up as fast as house values? I dont think so.
  - scythe 9y ago
    >But that would still be an overall good thing, because asset prices are not what harm the greatest body of people I think it takes a lot of gall to post this, considering that asset prices hurting people is the topic of the thread and the gist of GP's post. I would say it's certainly not an overall good thing; it's good for the landed class and hurts everyone else.
    - conanbatt 9y ago
      The OP talks about inflation indexes not taking into account house values, and thus somehow not reflecting what the actual situation of the people is. Inflation typically doesnt take into account investable assets, it just accounts for the requirements of daily living. Rental prices is one of those, housing prices are more tangential. Its reasonable to exclude the last. > it's good for the landed class and hurts everyone else. If it were cheaper and more people purchased land, then the landed class would be bigger. There is some paradoxical notion to saying the rules you have favors the 'rich' and they should change so there are more 'rich'.
      - scythe 9y ago
        There is no paradoxical notion there. Expanding the landed class and benefitting the landed class are opposites. Homeownership brings freedom; making freedom accessible is a noble goal, while rewarding only those who already have it is counterproductive. That anyone could believe otherwise smacks of too much time in ivory towers and not enough time in shitty apartment complexes which teach through omission the value of homeownership.
- noddy1 9y ago
  Also, QE has involved giving banks trillions of dollars. The banks then either sit on the money, or use it to inflate the stock market and property markets. The stock market triples or quadruples and everyone says the economy is going well. The money never makes it to non-asset owning working stiffs, and consumer prices as measured by central bank mandated CPI measures don't really change. So the central bank and Keynesian economists brag that "inflation is under 2%! QE stimulus really is a no downside perpetual motion free growth machine!". And the press states that "nobel prize laureates" call for and support these measures, and politicians and the public assume that a "nobel prize laureate" in economics is like a "nobel prize laureate" in hard science, where awards are given for settled progress in science that everyone agrees on. And people don't realise that macro-economics and monetarism are nowhere near settled science, and that there are PLENTY of people still calling bullshit from the austrian/chicago school. Sadly it looked like this silliness was going to continue forever. Fortunately, the market has given us inflation-proof cryptocurrency, and these central banking bastards are finally going to have to test their theories and put their ideological balls on the line in a free market with the ability of nation states to control currency as the price for shitty science. Good luck to them - they will need it.
  - alt2501 9y ago
    Are you saying that you see crypto as a possible solution to this problem? Can you elaborate at all on that?
    - yyyyip 9y ago
      Previously the only real options we have to use as "money" are nation-state derived and under the control of central bankers. For various reasons, nothing else (eg. gold, stocks, property) presented a practical alternative to state issued money in fulfilling the core functions of: - medium of exchange - unit of account - store of value Central banks and governments always ended up debasing their currencies. They ranged from super-corrupt to just believing weird keynsian-stimulus stuff, and always end up printing money and debasing the currency. QE given to corrupt politicians as happens in africa enriches the politicians at the cost of everyone else holding or earning the currency. QE given to bankers as in USA enriches asset owners at the cost of savers and wage earners. Finally, cryptocurrencies with fixed, limited inflation schedules provide a competitive non-inflationary alternative to state issued currency.
- rm445 9y ago
  Exactly. Inflation is calculated based on a basket of goods that excludes all kinds of expensive and illiquid assets that the average person doesn't buy often or at all. I guess it's fine if people want to describe that situation as low inflation with an asset bubble. But I think what is actually happening is that, although much of the world now gets to eat well and enjoy consumer goods, all kinds of assets (property, artwork, luxuries and anything requiring rare resources) are moving up and up out of people's reach).
stevenmays 9y ago
If money were an infinite resource it would have no value. Sure, governments have the ability to print more but they are constrained by inflation targets. And sure, more liquidity was put into the markets but that's because the markets had no liquidity and we were on the brink of financial disaster and deflation was on the verge of occurring. In deflationary events no one buys anything because the price tomorrow is cheaper then the price today so everyone waits to buy while businesses are unable to move their products and tons of people lose their jobs. There are other circumstances at work here then more money in circulation, such as land use restrictions, building codes, nimbyism, credit costs/restrictions, tax policies, etc. If investors can build housing and make money they will certainly do it. It's not just the supply of money, but also the supply/demand of a product that effects prices.
- mrob 9y ago
  >In deflationary events no one buys anything because the price tomorrow is cheaper then the price today Computer prices have been rapidly deflating since before I was born, but I've bought several computers. Deflation only prevents purchases when the savings from waiting outweigh the cost of not having the item.
  - pakitan 9y ago
    When someone says "no one buys anything", deflation proponents always twist that as if it's meant literally. The economy doesn't halt when there is a deflation. It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on.
    - AznHisoka 9y ago
      "It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on" .. which frees up resources into products/industries people value more. Why is that a bad thing vs people overspending a lot to buy things they might not need? To much deflation is bad but how about a stable money supply with very low (if any) injection of money by the government?
wallace_f 9y ago
Notable historical figures who gave the central banking cartels the finger are in the minority. They include interesting mix like Abraham Lincoln, Hitler and Gadaffi. After Lincoln won they just weasled their way back in. The Fed can just electronically debit an account and create money out of thin air. However, the power to control the US money supply is a constitutional right of Congress. We should take that back. It should be done via a k-percent algorithm. Get rid of fractional reserve banking while you're at it.
- grogenaut 9y ago
  Could you explain your last paragraph and why you think it's a good idea?
  - wallace_f 9y ago
    Milton Friedman did a much better job of this than I could here. I don't agree with him on all things, but there are good reasons behind these ideas. The fact the Fed's balance sheet swelled to 4.5trillion with free money is just outrageous. Wall St, nor the Fed, can regulate themselves and they their "dual mandate" is financial alchemy at best.
- WalterBright 9y ago
  > However, the power to control the US money supply is a constitutional right of Congress. Actually, it isn't. The Fed was created as an end run around the Constitution. The Constitution does not grant this power because of the experience with the Continental Congress and their profligacy at printing money. > Get rid of fractional reserve banking while you're at it. Nothing wrong with that. Its excesses are held in check under a free banking system.
  - wallace_f 9y ago
    If I am not mistaken, the right to print and regulate money is explicitly written in the constitution. I did some Googling, and it is in Article 1 Section 8. >"The Constitution contains only two sections dealing with monetary issues. Section 8 permits Congress to coin money and to regulate its value. www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/money-and-the-constitution.php
beaverkiwi 9y ago
and what happens when you allow the land you live on to be traded as an asset in the global marketplace, suddenly your not competing against your neighbor for that big house down the street, your competing against 8 billion. Land should be for locals only (exception the business district).
- T2_t2 9y ago
  The problem with property is that property uniquely spans the personal, the deeply economic (interest rates are used to mediate inflation and growth), deeply emotional (I own this), usually the single most important asset for the vast majority of people, and one where all these factors compete. The problem with only locals buying property are many, but mainly that prices stagnate. That is not bad per se, but there is a voting sector that doesn't want price stagnation (older people basically). Governments in Australia have used foreign investment rules as a kind of secondary economic switch to keep prices going up, to the benefit of some, the chagrin of others, and ultimately maintain a status quo that benefits politicians. It's a tough problem, property prices, and one with no clear right or wrong answer.
  - m0llusk 9y ago
    There may be no clear and complete answer, but there is one very robust partial answer. Land Value Taxation makes a lot of sense and appears to function as more or less as intended where it is adopted. There are many other factors involved, but moving away from unbalanced subsidies like the mortgage interest deduction toward systematically appropriate taxation could help a great deal.
timthelion 9y ago
Housing prices would rise even if money wasn't being printed. Because when I buy a house, the money doesn't disappear, it goes to the seller. Imagine there was only one bank, we'll call it Banky Mc Investment Inc. or BMI. Fred wants to buy a house. That house "costs" $1 trillion dollars. Bob owns the house and decides to sell. Fred goes to BMI and says, "can I have a loan for $1 trillion?" BMI says "sure thing Fred" and BMI transfers "$1 trillion" to Bob's account. BMI then goes to Bob, and says "hey Bob, it looks like you've got a lot of cash in your account. Would you like to invest it in the BMI morgage investment pool, ultra low risk, backed by valuable real-estate? Bob says "sure thing!" and BMI's books balance. Sure, Fred now has a lot of debt, but there is no reason why this couldn't happen, even with a "limited money supply". You don't need cash to put IOUs on the books.
- aangjie 9y ago
  you're correct. And that's why the fractional reserve lending system creates problems.(To be fair, it creates more credit and risk-taking behaviour).
KKKKkkkk1 9y ago
How does printing money make the rich richer? Isn't it exactly the opposite?
- inpdx 9y ago
  With salaries not rising enough to keep up with inflation, the money ends up at the top.
- branchless 9y ago
  the rich are not in cash, they are in assets. Workers lose out under inflation (and I mean real inflation not some bullshit figure the state concocts).
- conanbatt 9y ago
  The real winners of classic inflation are debt holders. The high inflation in the 70's contributed enormously to a generation that purchased a home and paid a lot less in real terms.
- Spooky23 9y ago
  Rich people borrow lots of money and buy assets. Look at Donald Trump’s son in law as an example — I use him not to make a political point but because there’s alot of public information out there. He uses cheap capital to buy lots of cash flow in the form of apartment complexes. Being deeply in debt means that his liabilities get discounted by inflation, while inflation allows his company to escalate rents. If you have cash or equity now, the smartest move you can to make is to borrow as much as you can afford and buy assets like real property or businesses that generate cash flow. Businesses like laundromats are probably more valuable than tech investments in the next decade.
sgt101 9y ago
Money isn't infinite, fiat currency is a token of future tax raising power. The solution to the rich hording everything is taxation and redistribution.
- conanbatt 9y ago
  > The solution to the rich hording everything is taxation and redistribution. How did that work out in countries with almost 100% tax and full distribution policies?
  - Spooky23 9y ago
    Mostly, they laundered their money in the United States!
  - SturgeonsLaw 9y ago
    Surely there is middle ground before we get to 100% taxation? "I don't get it, people like drinking water but they don't like drowning"
    - conanbatt 9y ago
      I'd say that if the solution to the problem, given unlimited solutions, made the problem worse, then it will also fail in smaller applications. "The only reason I am in debt, is because i can't ask for a big enough loan"
  - sgt101 9y ago
    The lesson is that extremes and monocultures are generally failures. Moderate and diverse economies are probably better fit to long term success; in the short run ideology can generate massive benefits - like war communism did. I would argue that many of the economies of the developed world have swung far to far toward plutocracy and injustice.
wz1000 9y ago
> We've had unprecedented global quantitative easing over the past decade, so it's quite natural that house prices globally will meet and surpass all time highs. QE is not "printing money". It is exchange of interest bearing assets from the financial assets like government bonds from the private sector, for non interest bearing assets(cash). The net financial assets(money) owned by the private sector remain exactly the same, so there is no direct correlation with inflation. QE is a strategy to manipulate/lower long term interest rates by changing the asset portfolio of the private sector. Traditionally, central banks only directly controlled short term interest rates. However, in the wake of the financial crisis, credit markets were still tight despite central banks reducing overnight interest rates to zero(the "liquidity trap"). Since you really cant go (much) lower than zero, new techniques were needed to stimulate the economy. QE does not (directly) lead to inflation, as is further reinforced by the West post 2008 or even Japan in the 2000s. Inflation has consistently stopped short of target during QE. The precise changes to the risk portfolio of the private sector, along with the conditions of the economy means QE can have either inflationary or even deflationary effects. https://www.princeton.edu/ceps/workingpapers/204blinder.pdf https://www.princeton.edu/ceps/workingpapers/204blinder.pdf

zxcmx 9y ago

But that would be... inflation! High inflation would affect collective bargaining agreements, benefit increases, super increases and all sorts of measures designed to keep compensation increases in line with increased cost of living. Central bank keeps telling us that inflation is "on target" at just 2% or 3% p/a for about the last 5 years. Meanwhile, housing inflated more like 40% (70% in Sydney!)[2] over that time, so how does that work? OH WAIT, housing was excluded from CPI[3]. I wonder who decided that, and whose interest(heh) that might possibly be in? [1] https://www.rba.gov.au/inflation/inflation-target.html https://www.rba.gov.au/inflation/inflation-target.html [2] http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows-just-how-ridiculous-sydney-house-prices-are_a_21903757/ http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows... [3] http://www.abc.net.au/news/2017-04-20/inflation-data-suffers-from-exclusion-of-housing/8457718 http://www.abc.net.au/news/2017-04-20/inflation-data-suffers...

skybrian 9y ago
I don't know about Australia but if it's like the US, housing is not excluded entirely but there is a lag based on how long it takes for rents to rise. People are not all affected by changes in housing prices immediately. If you own your home or pay below market rent you won't be affected until later. A survey asking how much people actually pay will have a built-in lag.
- sbenitoj 9y ago
  People generally don’t borrow money to pay their rent, so rent prices are restricted by local salaries. People borrow the vast majority of the cost of a house to buy it, so housing prices are largely only restricted by how much banks are willing to lend and how much it costs to borrow — all of which is heavily influenced by central banks.
  - seanmcdirmid 9y ago
    Also, no one speculates on real estate by renting. It isn’t just how much money buyers can borrow, even if they are paying for it all in cash and don’t plan on living in the property, it also about perceived upside.
  - christophilus 9y ago
    That is an obvious statement, and yet it has never occurred to me. I now (finally) understand why renting is generally a better decision than buying.
    - sbenitoj 9y ago
      Glad to hear it helps! The NYT has a good “buy vs rent calculator” that’s worth checking out: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... Even though the calculator is useful, it’s important to have a really good understanding of why housing is so much more expensive today (as a percentage of avg annual income) than it was 50-60 years ago. For that I recommend a short, but extremely useful book, The Housing Trap: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
- branchless 9y ago
  No do not confuse land prices with rents. Rents are set by wages. Land prices are set by loose credit.
  - 9y ago
conanbatt 9y ago
Interesting idea, but bear in mind stocks and other investment vehicles also have highest historical prices. We could consider that the inflation that was supposed to happen with QE ended up just inflating assets prices. But that would still be an overall good thing, because asset prices are not what harm the greatest body of people, nor affect their wages like regular inflation does. People will not be thrown into poverty because apple has historic highs. In terms of housing, we should look at rental prices more than housing prices. Is that going up as fast as house values? I dont think so.
- scythe 9y ago
  >But that would still be an overall good thing, because asset prices are not what harm the greatest body of people I think it takes a lot of gall to post this, considering that asset prices hurting people is the topic of the thread and the gist of GP's post. I would say it's certainly not an overall good thing; it's good for the landed class and hurts everyone else.
  - conanbatt 9y ago
    The OP talks about inflation indexes not taking into account house values, and thus somehow not reflecting what the actual situation of the people is. Inflation typically doesnt take into account investable assets, it just accounts for the requirements of daily living. Rental prices is one of those, housing prices are more tangential. Its reasonable to exclude the last. > it's good for the landed class and hurts everyone else. If it were cheaper and more people purchased land, then the landed class would be bigger. There is some paradoxical notion to saying the rules you have favors the 'rich' and they should change so there are more 'rich'.
    - scythe 9y ago
      There is no paradoxical notion there. Expanding the landed class and benefitting the landed class are opposites. Homeownership brings freedom; making freedom accessible is a noble goal, while rewarding only those who already have it is counterproductive. That anyone could believe otherwise smacks of too much time in ivory towers and not enough time in shitty apartment complexes which teach through omission the value of homeownership.
noddy1 9y ago
Also, QE has involved giving banks trillions of dollars. The banks then either sit on the money, or use it to inflate the stock market and property markets. The stock market triples or quadruples and everyone says the economy is going well. The money never makes it to non-asset owning working stiffs, and consumer prices as measured by central bank mandated CPI measures don't really change. So the central bank and Keynesian economists brag that "inflation is under 2%! QE stimulus really is a no downside perpetual motion free growth machine!". And the press states that "nobel prize laureates" call for and support these measures, and politicians and the public assume that a "nobel prize laureate" in economics is like a "nobel prize laureate" in hard science, where awards are given for settled progress in science that everyone agrees on. And people don't realise that macro-economics and monetarism are nowhere near settled science, and that there are PLENTY of people still calling bullshit from the austrian/chicago school. Sadly it looked like this silliness was going to continue forever. Fortunately, the market has given us inflation-proof cryptocurrency, and these central banking bastards are finally going to have to test their theories and put their ideological balls on the line in a free market with the ability of nation states to control currency as the price for shitty science. Good luck to them - they will need it.
- alt2501 9y ago
  Are you saying that you see crypto as a possible solution to this problem? Can you elaborate at all on that?
  - yyyyip 9y ago
    Previously the only real options we have to use as "money" are nation-state derived and under the control of central bankers. For various reasons, nothing else (eg. gold, stocks, property) presented a practical alternative to state issued money in fulfilling the core functions of: - medium of exchange - unit of account - store of value Central banks and governments always ended up debasing their currencies. They ranged from super-corrupt to just believing weird keynsian-stimulus stuff, and always end up printing money and debasing the currency. QE given to corrupt politicians as happens in africa enriches the politicians at the cost of everyone else holding or earning the currency. QE given to bankers as in USA enriches asset owners at the cost of savers and wage earners. Finally, cryptocurrencies with fixed, limited inflation schedules provide a competitive non-inflationary alternative to state issued currency.
rm445 9y ago
Exactly. Inflation is calculated based on a basket of goods that excludes all kinds of expensive and illiquid assets that the average person doesn't buy often or at all. I guess it's fine if people want to describe that situation as low inflation with an asset bubble. But I think what is actually happening is that, although much of the world now gets to eat well and enjoy consumer goods, all kinds of assets (property, artwork, luxuries and anything requiring rare resources) are moving up and up out of people's reach).

stevenmays 9y ago

If money were an infinite resource it would have no value. Sure, governments have the ability to print more but they are constrained by inflation targets. And sure, more liquidity was put into the markets but that's because the markets had no liquidity and we were on the brink of financial disaster and deflation was on the verge of occurring. In deflationary events no one buys anything because the price tomorrow is cheaper then the price today so everyone waits to buy while businesses are unable to move their products and tons of people lose their jobs. There are other circumstances at work here then more money in circulation, such as land use restrictions, building codes, nimbyism, credit costs/restrictions, tax policies, etc. If investors can build housing and make money they will certainly do it. It's not just the supply of money, but also the supply/demand of a product that effects prices.

mrob 9y ago
>In deflationary events no one buys anything because the price tomorrow is cheaper then the price today Computer prices have been rapidly deflating since before I was born, but I've bought several computers. Deflation only prevents purchases when the savings from waiting outweigh the cost of not having the item.
- pakitan 9y ago
  When someone says "no one buys anything", deflation proponents always twist that as if it's meant literally. The economy doesn't halt when there is a deflation. It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on.
  - AznHisoka 9y ago
    "It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on" .. which frees up resources into products/industries people value more. Why is that a bad thing vs people overspending a lot to buy things they might not need? To much deflation is bad but how about a stable money supply with very low (if any) injection of money by the government?

wallace_f 9y ago

Notable historical figures who gave the central banking cartels the finger are in the minority. They include interesting mix like Abraham Lincoln, Hitler and Gadaffi. After Lincoln won they just weasled their way back in. The Fed can just electronically debit an account and create money out of thin air. However, the power to control the US money supply is a constitutional right of Congress. We should take that back. It should be done via a k-percent algorithm. Get rid of fractional reserve banking while you're at it.

grogenaut 9y ago
Could you explain your last paragraph and why you think it's a good idea?
- wallace_f 9y ago
  Milton Friedman did a much better job of this than I could here. I don't agree with him on all things, but there are good reasons behind these ideas. The fact the Fed's balance sheet swelled to 4.5trillion with free money is just outrageous. Wall St, nor the Fed, can regulate themselves and they their "dual mandate" is financial alchemy at best.
WalterBright 9y ago
> However, the power to control the US money supply is a constitutional right of Congress. Actually, it isn't. The Fed was created as an end run around the Constitution. The Constitution does not grant this power because of the experience with the Continental Congress and their profligacy at printing money. > Get rid of fractional reserve banking while you're at it. Nothing wrong with that. Its excesses are held in check under a free banking system.
- wallace_f 9y ago
  If I am not mistaken, the right to print and regulate money is explicitly written in the constitution. I did some Googling, and it is in Article 1 Section 8. >"The Constitution contains only two sections dealing with monetary issues. Section 8 permits Congress to coin money and to regulate its value. www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/money-and-the-constitution.php

beaverkiwi 9y ago

and what happens when you allow the land you live on to be traded as an asset in the global marketplace, suddenly your not competing against your neighbor for that big house down the street, your competing against 8 billion. Land should be for locals only (exception the business district).

T2_t2 9y ago
The problem with property is that property uniquely spans the personal, the deeply economic (interest rates are used to mediate inflation and growth), deeply emotional (I own this), usually the single most important asset for the vast majority of people, and one where all these factors compete. The problem with only locals buying property are many, but mainly that prices stagnate. That is not bad per se, but there is a voting sector that doesn't want price stagnation (older people basically). Governments in Australia have used foreign investment rules as a kind of secondary economic switch to keep prices going up, to the benefit of some, the chagrin of others, and ultimately maintain a status quo that benefits politicians. It's a tough problem, property prices, and one with no clear right or wrong answer.
- m0llusk 9y ago
  There may be no clear and complete answer, but there is one very robust partial answer. Land Value Taxation makes a lot of sense and appears to function as more or less as intended where it is adopted. There are many other factors involved, but moving away from unbalanced subsidies like the mortgage interest deduction toward systematically appropriate taxation could help a great deal.

timthelion 9y ago

Housing prices would rise even if money wasn't being printed. Because when I buy a house, the money doesn't disappear, it goes to the seller. Imagine there was only one bank, we'll call it Banky Mc Investment Inc. or BMI. Fred wants to buy a house. That house "costs" $1 trillion dollars. Bob owns the house and decides to sell. Fred goes to BMI and says, "can I have a loan for $1 trillion?" BMI says "sure thing Fred" and BMI transfers "$1 trillion" to Bob's account. BMI then goes to Bob, and says "hey Bob, it looks like you've got a lot of cash in your account. Would you like to invest it in the BMI morgage investment pool, ultra low risk, backed by valuable real-estate? Bob says "sure thing!" and BMI's books balance. Sure, Fred now has a lot of debt, but there is no reason why this couldn't happen, even with a "limited money supply". You don't need cash to put IOUs on the books.

aangjie 9y ago
you're correct. And that's why the fractional reserve lending system creates problems.(To be fair, it creates more credit and risk-taking behaviour).

KKKKkkkk1 9y ago

How does printing money make the rich richer? Isn't it exactly the opposite?

inpdx 9y ago
With salaries not rising enough to keep up with inflation, the money ends up at the top.
branchless 9y ago
the rich are not in cash, they are in assets. Workers lose out under inflation (and I mean real inflation not some bullshit figure the state concocts).
conanbatt 9y ago
The real winners of classic inflation are debt holders. The high inflation in the 70's contributed enormously to a generation that purchased a home and paid a lot less in real terms.
Spooky23 9y ago
Rich people borrow lots of money and buy assets. Look at Donald Trump’s son in law as an example — I use him not to make a political point but because there’s alot of public information out there. He uses cheap capital to buy lots of cash flow in the form of apartment complexes. Being deeply in debt means that his liabilities get discounted by inflation, while inflation allows his company to escalate rents. If you have cash or equity now, the smartest move you can to make is to borrow as much as you can afford and buy assets like real property or businesses that generate cash flow. Businesses like laundromats are probably more valuable than tech investments in the next decade.

sgt101 9y ago

Money isn't infinite, fiat currency is a token of future tax raising power. The solution to the rich hording everything is taxation and redistribution.

conanbatt 9y ago
> The solution to the rich hording everything is taxation and redistribution. How did that work out in countries with almost 100% tax and full distribution policies?
- Spooky23 9y ago
  Mostly, they laundered their money in the United States!
- SturgeonsLaw 9y ago
  Surely there is middle ground before we get to 100% taxation? "I don't get it, people like drinking water but they don't like drowning"
  - conanbatt 9y ago
    I'd say that if the solution to the problem, given unlimited solutions, made the problem worse, then it will also fail in smaller applications. "The only reason I am in debt, is because i can't ask for a big enough loan"
- sgt101 9y ago
  The lesson is that extremes and monocultures are generally failures. Moderate and diverse economies are probably better fit to long term success; in the short run ideology can generate massive benefits - like war communism did. I would argue that many of the economies of the developed world have swung far to far toward plutocracy and injustice.

wz1000 9y ago

> We've had unprecedented global quantitative easing over the past decade, so it's quite natural that house prices globally will meet and surpass all time highs. QE is not "printing money". It is exchange of interest bearing assets from the financial assets like government bonds from the private sector, for non interest bearing assets(cash). The net financial assets(money) owned by the private sector remain exactly the same, so there is no direct correlation with inflation. QE is a strategy to manipulate/lower long term interest rates by changing the asset portfolio of the private sector. Traditionally, central banks only directly controlled short term interest rates. However, in the wake of the financial crisis, credit markets were still tight despite central banks reducing overnight interest rates to zero(the "liquidity trap"). Since you really cant go (much) lower than zero, new techniques were needed to stimulate the economy. QE does not (directly) lead to inflation, as is further reinforced by the West post 2008 or even Japan in the 2000s. Inflation has consistently stopped short of target during QE. The precise changes to the risk portfolio of the private sector, along with the conditions of the economy means QE can have either inflationary or even deflationary effects. https://www.princeton.edu/ceps/workingpapers/204blinder.pdf https://www.princeton.edu/ceps/workingpapers/204blinder.pdf