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I think finance was already mostly untethered from productive work - at least in the anglosphere. Just look at what banks are lending for these days. It's most
by tmnvix 9y ago
I think finance was already mostly untethered from productive work - at least in the anglosphere.
Just look at what banks are lending for these days. It's mostly mortgages. By giving people money just to transfer ownership of unproductive assets we've created a speculative asset boom which has had all sorts of downsides for productivity.
- toomuchtodo 9y agoThose assets are productive as long as the mortgage is being paid, either by the owner or the tenant. Why are loans being originated for properties with values that have decoupled from realistic wage multipliers? That’s an important fianance question.
- pishpash 9y agoBecause the Fed supports housing prices so banks can always take their liens in.
- tmnvix 9y agoYes, that was badly worded on my part - the mortgaged properties can and are likely to be productive. What I was trying to get at was that the lending of money to bid up the prices of those assets beyond prices that can be justified by their income earning potential is unproductive.
- deleted 9y ago[deleted]
- JamesBarney 9y agoAre you asking why single family homes have a high p/e ratio relative to other assets?
- aoeusnth1 9y agoAgreed that overpriced housing is bad for productivity, and also bad for local governance (see SF). But - easy access to credit also has the effect of increasing liquidity of the housing stock by allowing people to arbitrage across time. By that, I mean by borrowing money, the purchaser exchanges future capital for current housing. This is usually a productive trade which would otherwise be impossible to take advantage of without easy access to credit. I don’t think it’s clear that low priced mortgage rates are a net negative.