By Cole Adams
Housing prices in the US are officially off the charts. But why is that the case, as it wasn’t that long ago that homes were affordable. Like all other economic crises, this one has its roots in government policies.
Inflation
Savings Erosion
Debt Dependence
Rate Reversal
When credit is mandated and subsidized, the price goes up.
And this is mostly what our government has been doing for the last two decades. And still are doing:
Same dynamic as higher end: give everyone a subsidized (nay, guaranteed!) loan to pay for college and all of a sudden college costs WAY more than makes sense.
Sure houses are nicer/bigger/better than they were -- as are college dorms and cafeterias -- but that's because all of a sudden everyone could pay for more. So everybody does pay for more and voila, it costs more.
Healthcare too. Subsidize insurance and all you get is the same amount of healthcare but for higher cost
So many of our society's ills are symptoms of peak fiat
Yeah, but healthcare sucks. Even with insurance I never want to use healthcare services because they're so miserable and useless most of the time.
At least with those other things you get more up front.
Price houses in gold, house prices haven't changed...
Price labor in gold, compare multiplier to houses... Labor has collapsed
The only thing depreciating faster than the dollar is the value of labor
The labor market's been broken for a long time, and it's getting worse fast, but no one has offered a great fix yet.
We know that improved matching between employers and employees would be enormously valuable, though.
This might actually be a headwind, the technology that can match people makes it easier to train and replace people
I'm not sure there's a fix to be had, increasingly complex economies with depth ultimately require "specific knowledge"
Yeah, it might be intractable. There's certainly been lots of intellectual energy expended on it by people who understand both matching problems and labor markets in great depth.
They deploy some of these experiments within the econ job market, but that just keeps getting worse and it's a much simpler problem.
Heard something the other day that sounds a little UBI'ish at a glance, but I need to ponder the meaning a little more.
Having to do with the scale of systems and integrated cost structures, like AI and datacenters effect on the grid, that at a certain point it doesn't even make sense to bill households for electricity up to a certain point because household use becomes a rounding error. Espescially when you consider other programs that already help people keep the heat on and the tax credits that go into datacenter construction. Household energy might just be part of the equity locales have in assets in their backyard, it kills two birds by solving the NIMBY problem... don't want a micronuke or datacenter in your town? what if you get free electricity? Changes the balance of everything.
I recall someone, maybe @kr, posting about this a while ago.
It seems plausible to me that electricity could become more of a subscription service if the marginal unit cost becomes trivial. You'd still pay a fee to cover maintenance and whatever else, similar to how cell plans changed to deemphasize minutes or streaming services moved away from pay per view.
Yes, in such a situation the "last mile" becomes the only real cost. You still need someone to come out and fix a line when trees fall into powerlines, transformers blow, etc.
In theory small, hermetically sealed mini-nuclear reactors could also become a thing so instead of a mega GW nuclear reactor serving an entire city, imagine 50 mini reactors spread around serving a couple thousands homes each....
There are lots of neat power generation technologies on the horizon.
Yea I could foresee paying a flat rate to the utility just for them to maintain the hookup, and perhaps that comes with a whole home battery that the utility uses to buffer peak load. That would change the incentives and cost structures quite a bit, and I think for the better.
What I take away from the concept even more though is the equity component, ties in with what we discussed recently #1404823
The stock accounts for newborns, sovereign wealth fund / the government stake in Intel, SBR, tariff dividends, and so on... all sniff of equitizing citizenship.
If we frame states as corporations in an globally anarchic system, then citizens are shareholders, and "UBI" becomes a shareholder dividend. Not sure how to label such a system, Populism with American Characteristics?
Man ain’t this the truth!!
Houses are seen as an investment asset. Many wealthy people own multiple luxurious homes and use them as SoV assets.
Equally the middle classes own housing and see it as their safest path toward financial security.
While this has been a great ride for those who rode it since the price of money began declining around 1990, it no longer is.
The price of money is now stuck in a narrow band between 0-5% and cannot move much outside that band without collapsing the fiat monetary system.
When the interest rates were at their peak in the late 1980s the game began- and ever since then until Covid when the price of money reached its lowest point property was a great asset to speculate upon using fiat debt.
That is no longer the case- the outlook for property prices in general is stagnant to negative.
Buy a home if you want the stability of ownership but not if you expect great gains in value- those days are almost certainly over.
Home prices in most western economies are set to decline over the coming decade...and the decline could be extensive and of considerable duration.