Re:Is the Fed creating a housing bubble by keeping rates low?
by imtringued on Tuesday August 31, 2021 @03:45AM
(#28364982)
Ah yes, capitalists and mortals can't handle abundance so they blame a central institution managing a interest rate that has no natural market forces in the case of abundance. Once there is deflation interest rates have to become negative but people can take their money out which raises the risk free return even though sitting on a pile of cash does absolutely nothing for the economy.
Awareness about our monetary system has gotten so bad people think the central bank is the source of interest and that debtors are just a fictional entity equivalent to the tooth fairy. Interest rates are raised according to the availability of solvent debtors the same way stock prices go up when the company is earning more profits.
When interest rates are lowered future income streams become more valuable. That means non reproducible assets like land become more valuable and it is not just a speculative fluke if you make money off of it since land is needed to live, work and eat. Every single plot of land has a monopoly on its location. You can't manufacture location. The only thing weakening that monopoly is the government allocating more land to residential zoning, meaning sprawl. Just like inflation and low interest rates weaken the monopoly of money.
The solution is permanent ground leases from the government or just progressive land taxes where individual home owners pay capital gains on land when they sell and anyone above a threshold pays the full land value tax on all his land holdings.
Alternatively we start a war, destroy all the sources of abundance and suddenly interest rates are 10% because investors have 2 billion potential borrowers, whose population is increasing, standing in front of ruins that need to be rebuilt. Yes, that is the time in which boomers lived. Our benchmark for success is a destroyed world that quickly recovered. How long until the next war to satisfy investors?
Awareness about our monetary system has gotten so bad people think the central bank is the source of interest and that debtors are just a fictional entity equivalent to the tooth fairy. Interest rates are raised according to the availability of solvent debtors the same way stock prices go up when the company is earning more profits.
When interest rates are lowered future income streams become more valuable. That means non reproducible assets like land become more valuable and it is not just a speculative fluke if you make money off of it since land is needed to live, work and eat. Every single plot of land has a monopoly on its location. You can't manufacture location. The only thing weakening that monopoly is the government allocating more land to residential zoning, meaning sprawl. Just like inflation and low interest rates weaken the monopoly of money.
The solution is permanent ground leases from the government or just progressive land taxes where individual home owners pay capital gains on land when they sell and anyone above a threshold pays the full land value tax on all his land holdings.
Alternatively we start a war, destroy all the sources of abundance and suddenly interest rates are 10% because investors have 2 billion potential borrowers, whose population is increasing, standing in front of ruins that need to be rebuilt. Yes, that is the time in which boomers lived. Our benchmark for success is a destroyed world that quickly recovered. How long until the next war to satisfy investors?