I don't understand why economists automatically assume that
housing must always be escalating in value or the economy is not doing
well. They have chosen the largest big
ticket item and decided that people should always be paying more and more for
it as a system to base their economies on endless growth.
Their economy is based on escalating real estate costs and
the benefit to the people is that they can then borrow money against this
sudden unearned equity in their property.
They assumed that this possibility is a short term good because it
circulates money but it takes a lot longer to pay it back than it does to spend
it. That's called a recession, one
caused by excessive credit or by another name the future was mortgaged and the
payback time is the recession.
Late night TV suggests that rents are now being raised and
there will be a big rental squeeze in order to charge sky high rents. So now the foreclosed upon will be faced with
high rents, no credit and no way to provide for their families. Sounds like a recipe for civil unrest to
me.
How about an alternative scenario where housing remains more
or less static in price? What would that
do to the economy? Perhaps the sliding
scale interest on mortgages is a bad idea because it causes uncertainty for the
homeowner. Whatever happened to fixed
rate mortgages? Perhaps the types of
mortgages should be limited to those that promote the long term health of the
economy.
If property remained static in price and the mortgage
payments were on a constant amount, perhaps more personal financial planning
could occur that is not based on property equities, like more savings, more
predictable discretionary spending and maybe even more education as an
investment. Having to plan for constant
inflation destroys equilibrium. Mr.
Bernanke plans for 2% inflation, which means savings is worth 2% less every
year and items purchased cost 2% more.
Why do they say this is beneficial?
