Written by Jeff Nielson Saturday, 11 October 2014 14:50
For the majority of Western populations; real estate is considered to be the ultimate “hard asset”, and thus the most-desirable financial shelter in times of economic peril/uncertainty. Ironically, it is precisely this attribute (and attitude) which makes real estate the ultimate wealth-trap – at the hands of unscrupulous bankers/governments.
First readers need to familiarize themselves with some of the economic dynamics associated with real estate. As a finite, hard asset (there is only so much usable land in the world), supply is limited. It is because of this limited supply that people trust real estate to preserve its value, and thus preserve their wealth. But the implicit assumption in this equation is that we have legitimate, properly functioning markets and economies.
As regular readers understand; nothing could be further from the truth. Our markets are literally nothing more than rigged casinos. Our economies are literally nothing more than (ridiculously unstable) Ponzi-schemes. This can be seen clearly, simply by comparing the present economic/market insanity with normal, historic conditions.
Under normal economic conditions (with legitimate markets), there are specific economic dynamics which help to ensure that real estate values do not get over-inflated, turning a financial shelter into an asset-bubble – and a wealth-trap. In times of “high inflation”, which is one of the principal fear-factors which make people look toward real estate; the tendency is for people to flock into real estate markets, thus driving prices up to unsustainable, dangerous levels.
However, in times of high inflation; all legitimate governments raise interest rates. Raising interest rates is the most-effective blunt-force monetary tool in dampening prices, in any/all markets. Thus the push into real estate driven by high inflation is countered by the pull of higher interest rates, driving people away from real estate, due (mostly) to significantly higher mortgage costs.
It is here we see the irredeemable corruption of the governments of the Western bloc. As prices spiral higher today in the two most-important price categories – food and housing – these corrupt governments tell us that inflation is near zero. Indeed, these shameless liars now have the audacity to claim that inflation is “too low” (something which is economically impossible).
It is because of this Great Inflation Lie that these puppet-governments claim to be justified in keeping interest rates permanently frozen at near-zero levels. Here readers need to understand the insane recklessness of near-zero interest rates, and why we have never, ever seen such monetary insanity at any time in the previous history of Western nations.
Near-zero interest rates translate into free money for the Big Banks, who are the recipients/conduits for all the “capital” entering our capitalist system. Such “free money” represents an inexhaustible supply of cheap credit. This is nothing less than rocket fuel for any credit-based economic system like our own.
In even semi-functional economies; near-zero interest rates would quickly trigger an economic boom that was so explosive that our economies would begin growing too fast. The problem here is our markets. Such rapid, rabid economic growth always triggers even more-dramatic explosions in our markets. Prices catapult higher, turning virtually all markets into exponentially soaring, out-of-control, asset bubbles.
But what do we see in our own economies? Barely perceptible twitches of life, where “economic growth” can only be feigned with the most-egregious perversion of economic statistics. Having been mismanaged to the point of utter ruin; even near-zero interest rates can no longer coax any life into these zombie-economies.
But such reckless/insane interest rates can produce (and have produced) no shortage of asset-bubbles, and (in particular) real estate bubbles. Simultaneously (and for the first/only time in history) we have the two, ultimate drivers of real estate bubbles: high inflation and (ultra) low interest rates.