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A collapse or real estate would be a good thing for the economy. It would free up middle class paychecks to be spent on more goods, driving long term growth of

A collapse or real estate would be a good thing for the economy. It would free up middle class paychecks to be spent on more goods, driving long term growth of our businesses. The risk is without the correction you end up like many EU countries whos main GDP growth is real estate which only takes you a few generations to fall apart.

andsoitis 3y ago
> The risk is without the correction you end up like many EU countries whos main GDP growth is real estate which only takes you a few generations to fall apart. What is an example country whose main GDP growth stems from real estate? The EU economy as a whole is driven mostly by the services sector, which accounted for 70% of value added in 2020. https://www.visualcapitalist.com/16-trillion-european-union-economy/ https://www.visualcapitalist.com/16-trillion-european-union-...
- cm2012 3y ago
  China right now. Massive real estate crisis brewing. Local government in China is funded by land sales, which encouraged rampant speculation.
  - the_optimist 3y ago
    Perhaps, though this potential Ponzi has been brewing for nearly two decades. If they grow out of it, it’s definitionally not a Ponzi.
    - onlyrealcuzzo 3y ago
      Hard to grow out of it when they already have more built sqft per person than Europe, and they're projected to have about half the population in 60 years...
- ttul 3y ago
  Canada’s real estate sector is massive. The economy seems to run on digging things out of the ground to sell to other countries, buying nice things made abroad, and then selling houses to each other. All of this fun is backstopped by a government only too keen to keep the good times rolling.
ClumsyPilot 3y ago
> main GDP growth is real estate Its an abberation. This is a failure of GDP as a measurement tool. Growth in realestate prices makes us poorer This is like saying that economy has geown because food got more expensive, so people can lo longer save. its like saying that when I give poor people mt used clothes, I am damaging the economy because they no longer have to buyt clothes, so gdp will go down.
- the_gastropod 3y ago
  It really is incredible how damaging it is that we use GDP as a measure for how well a society is doing. Heart surgery? Yay! GDP! The endless hamburgers, Doritos, and misc junk that helped contribute to heart surgery being needed: also great little GDP contributors. We need a better measuring stick.
- onlyrealcuzzo 3y ago
  GDP growth is reported in REAL terms. If existing home prices go up 4% - that should be discounted from REAL growth. If land prices go up 4%, that should also be discounted from REAL growth.
- adhesive_wombat 3y ago
  Bill Bryson had it right. > Here's another arresting thought. None of this really matters because GDP is in any case a perfectly useless measurement All that it is, literally, is a crude measure of national income - 'the dollar value of finished goods and services', as the textbooks put it - over a given period. > Any kind of economic activity adds to the gross domestic product. It doesn't matter whether its a good activity or a had one It has been estimated, for instance that the O.J. Simpson trial added $200 million to America's GDP through lawyers' fees, court costs, hotel bills for the press and so on, but I don't think many people would argue that the whole costly spectacle made America a noticeably greater, nobler place. > In fact, bad activities often generate more GDP than good activities. I was recently in Pennsylvania at the site of a zinc factory whose airborne wastes were formerly so laden with pollutants that they denuded an entire mountainside. From the factory fence to the top of the mountain there was not a single scrap of growing vegetation to be seen. From a GDP perspective however, this was wonderful. First there was the gain to the economy from all the zinc the factory had refined and sold over the years. Then there was the gain from the tens of millions of dollars the government must spend to clean up the site and restore the mountain. Finally, there will be a continuing gain from medical treatments for workers and townspeople made chronically ill by living amid all those contaminants. > In terms of conventional economic measurement, all of this is gain, not loss. So too is overfishing of lakes and seas. So too is deforestation. In short, the more tirelessly we use up natural resources, the more the GDP grows. > As the economist Herman Daly once put it, 'the current national accounting system treats the earth as a business in liquidation.' Or as three other leading economists dryly observed in an article in the Atlantic Monthly last year 'By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce.' > So why do we persist with this preposterous gauge of economic performance? Because it's the best thing that economists have come up with yet. Now you know why they call it the dismal science
karaterobot 3y ago
The middle class didn't really benefit much from the real estate collapse in 2008, what do you think would make the next one different? Residential vs. commercial real estate is one difference, I guess, but how would a commercial real estate crash free up middle class paychecks anyway?
rsync 3y ago
"A collapse or real estate would be a good thing for the economy." I disagree. Periodic recessions and repricings would be good for the economy - just as periodic small fires are healthy for forests. But we snuffed out all of the recessions in the same way we snuffed out all of the small fires - and now we have accumulated so much "fuel load" that the inevitable fire will be an uncontrollable catastrophe. (I love this analogy, by the way) So it will occur but it won't be good or healthy. A large number of otherwise healthy business firms and otherwise reasonably employed people will all get burned while they would have survived a series of smaller recessions.

andsoitis 3y ago

> The risk is without the correction you end up like many EU countries whos main GDP growth is real estate which only takes you a few generations to fall apart. What is an example country whose main GDP growth stems from real estate? The EU economy as a whole is driven mostly by the services sector, which accounted for 70% of value added in 2020. https://www.visualcapitalist.com/16-trillion-european-union-economy/ https://www.visualcapitalist.com/16-trillion-european-union-...

cm2012 3y ago
China right now. Massive real estate crisis brewing. Local government in China is funded by land sales, which encouraged rampant speculation.
- the_optimist 3y ago
  Perhaps, though this potential Ponzi has been brewing for nearly two decades. If they grow out of it, it’s definitionally not a Ponzi.
  - onlyrealcuzzo 3y ago
    Hard to grow out of it when they already have more built sqft per person than Europe, and they're projected to have about half the population in 60 years...
ttul 3y ago
Canada’s real estate sector is massive. The economy seems to run on digging things out of the ground to sell to other countries, buying nice things made abroad, and then selling houses to each other. All of this fun is backstopped by a government only too keen to keep the good times rolling.

ClumsyPilot 3y ago

> main GDP growth is real estate Its an abberation. This is a failure of GDP as a measurement tool. Growth in realestate prices makes us poorer This is like saying that economy has geown because food got more expensive, so people can lo longer save. its like saying that when I give poor people mt used clothes, I am damaging the economy because they no longer have to buyt clothes, so gdp will go down.

the_gastropod 3y ago
It really is incredible how damaging it is that we use GDP as a measure for how well a society is doing. Heart surgery? Yay! GDP! The endless hamburgers, Doritos, and misc junk that helped contribute to heart surgery being needed: also great little GDP contributors. We need a better measuring stick.
onlyrealcuzzo 3y ago
GDP growth is reported in REAL terms. If existing home prices go up 4% - that should be discounted from REAL growth. If land prices go up 4%, that should also be discounted from REAL growth.
adhesive_wombat 3y ago
Bill Bryson had it right. > Here's another arresting thought. None of this really matters because GDP is in any case a perfectly useless measurement All that it is, literally, is a crude measure of national income - 'the dollar value of finished goods and services', as the textbooks put it - over a given period. > Any kind of economic activity adds to the gross domestic product. It doesn't matter whether its a good activity or a had one It has been estimated, for instance that the O.J. Simpson trial added $200 million to America's GDP through lawyers' fees, court costs, hotel bills for the press and so on, but I don't think many people would argue that the whole costly spectacle made America a noticeably greater, nobler place. > In fact, bad activities often generate more GDP than good activities. I was recently in Pennsylvania at the site of a zinc factory whose airborne wastes were formerly so laden with pollutants that they denuded an entire mountainside. From the factory fence to the top of the mountain there was not a single scrap of growing vegetation to be seen. From a GDP perspective however, this was wonderful. First there was the gain to the economy from all the zinc the factory had refined and sold over the years. Then there was the gain from the tens of millions of dollars the government must spend to clean up the site and restore the mountain. Finally, there will be a continuing gain from medical treatments for workers and townspeople made chronically ill by living amid all those contaminants. > In terms of conventional economic measurement, all of this is gain, not loss. So too is overfishing of lakes and seas. So too is deforestation. In short, the more tirelessly we use up natural resources, the more the GDP grows. > As the economist Herman Daly once put it, 'the current national accounting system treats the earth as a business in liquidation.' Or as three other leading economists dryly observed in an article in the Atlantic Monthly last year 'By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce.' > So why do we persist with this preposterous gauge of economic performance? Because it's the best thing that economists have come up with yet. Now you know why they call it the dismal science

karaterobot 3y ago

The middle class didn't really benefit much from the real estate collapse in 2008, what do you think would make the next one different? Residential vs. commercial real estate is one difference, I guess, but how would a commercial real estate crash free up middle class paychecks anyway?

rsync 3y ago

"A collapse or real estate would be a good thing for the economy." I disagree. Periodic recessions and repricings would be good for the economy - just as periodic small fires are healthy for forests. But we snuffed out all of the recessions in the same way we snuffed out all of the small fires - and now we have accumulated so much "fuel load" that the inevitable fire will be an uncontrollable catastrophe. (I love this analogy, by the way) So it will occur but it won't be good or healthy. A large number of otherwise healthy business firms and otherwise reasonably employed people will all get burned while they would have survived a series of smaller recessions.