Real markets were once a part of everyday life. When we lived in the context of a marketplace, prices were set in mutually beneficial exchanges by what people wanted and could afford. Today, instead we live with monopoly set prices that have destroyed market mechanisms that keep prices where they make sense. It isn’t a better life.
As financialization comes to an end, that is: the technique of making money through financial bets rather than by asset production, low interest loans are ending. That’s important because low interest loans enabled a huge amount of malinvestment and debt that seemed to stimulate economic gambling but that did not stimulate the production and accumulation of real wealth… only large quantities of capital.
What remains in the wake of financialization is a bunch of titanic monopolies and their attendant price distortions toward higher pricing. There’s also terrible corruption in government. This corruption has led to many problems in the justice system, the legislature and the executive branch, all three branches which remain stubbornly determined to subvert the rule of law and the vote in order to remain powerful in the face of the various disasters unfolding around us now.
There’s a lot of talk about higher ends through some high falutin sounding program that will make today’s suffering worthwhile in the distant future, but you should not believe any of it. There have never been beneficial goals for today’s covid 19 emergency or climate change or ESG or whatever to make any kind of real world sense except for them being indicative of a criminal mindset where some want to have everything that belongs to others and be responsible for nothing and no one. Most of what’s unfolding is just a really big heist with a bunch of empty excuses. Large wheels are still in motion. Watch out and don’t get ground down by them if you can help it.
There’s an Indian saying that a person or a lot of people can help an elephant to not fall down until it has finally lost its balance and is falling. In that case just get out of the way. The elephant is now falling.
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To return the discussion now to the tiny house movement, some people have tried to adjust to ridiculously high real estate prices by building according to the tiny house aesthetic. This movement suggests that regular houses cost too much and that ordinary people can get by with significantly less space. Instead of a house that’s 1500 to 2500 square feet, they can begin a new life in 300-700 square feet. It just requires a little sacrifice like less room for hobbies, or a family or pets or other activities. What the tiny house movement suggests to me, however, is that monopoly pricing in real estate has ruined the housing market for most of us. It shows that making ends meet can’t happen while monopolist pricing prevails.
Now we hear that the Federal Reserve must raise interest rates to protect the value of the dollar. Some say that this will cause a recession and that it is meant to reduce inflation by slowing down the economy. Raising interest rates will supposedly shrink down the bubbles in real estate and the stock market which are expected to fall in price as interest rates go up.
Some investors have thought that they can trade their stocks for real estate and then prevent real estate depreciation through corporate house ownership. The idea among investors is that deflation can be prevented and real estate assets can be substituted for financial assets because they have real value in the 3-D world rather than just symbolic value as in the money world. Monopolies in real estate can keep the prices high.
When the stock market falls, investors in this strategy think that they will retain the value of real estate assets they own. But financialization bubbles were blown in most of the economy during the flow of easy money. The high price of assets and capital has now led to demand destruction.
Raising interest rates to protect the dollar can’t slow down the economy where demand destruction has already happened and holding prices at an unreasonably high level will not save the economy from a deflation. Today’s inflation isn’t from an overheating economy. It is from money overprinting and overcirculation and it shows that MMT is a complete failure now as it has been throughout history. Demand destruction will only continue on apace.
Corporations buying into real estate doesn’t allow the asset market in real estate to recover a natural price according to the natural path of supply and demand that was followed with non-corporate home owners. Most people have been priced out of most ordinary sized properties. And the tiny house movement seems like a tiny segment of housing that won’t help to support the high price of the larger corporate owned homes that Americans were formerly accustomed to buying. As the tiny house movement is being portrayed on television, I can’t help but wonder if it signals the end of a consumer lifestyle. If home ownership means living with less that may signal less resilience among homeowners generally. Home buying may never lead Americans out of recession if Americans can’t afford to buy a property that allows them to grow more resilient over time.