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mathjak is right, quantitative easing does not cause inflation. QE does not 'create' money. Banks lending to consumers creates money. Interest rates needed to be kept low during/after the recession because unemployment was high and consumer confidence was low, and the demand for loans was consequently low. Lower interest rates helps make loans more attractive to consumers--a simple case of supply and demand.
It's true that real estate can be a good investment, but it's not always a good investment. As mathjak said, the average appreciation of the stock market has been superior to the appreciation of real estate. In order to make real estate a good investment, you need some way to capitalize on your investment. Renting is a good way to do that, but if you're buying a home to live in then obviously you aren't renting it. You build equity, but unless the value of your property appreciates considerably, your money may be better off in a stock index.
Even if you are renting property, your returns aren't necessarily going to be better than the stock market. There are lots of risks involved and it's possible for a bad tenant to wipe out years of profit.
low rates and low inflation go hand in hand. the money supply is so complex and the effect of contracting and expanding it is not a simple statement like printing money causes inflation. in fact the bond market which is set by the worlds investors is the best judge of inflation and the bond markets say it is pretty low .
there are so many old wives tales out there as well as mis-informaton.
somehow real estate got a reputation as being a good inflation hedge because inflation plunged and real estate held its inflated values .
but it was the falling inflation that made real estate turn out okay. had inflation stayed high and or gone higher it would have sucked as an investment to own in high inflation .
real estate sucks in time of low inflation when we have recession or depression type scenerios since its values are related to wage growth and job markets . it also sucks during high inflation once inflation has mortgages much above 8%...
it really needs a sweet spot to do well .
Last edited by mathjak107; 10-22-2013 at 01:49 AM..
mathjak is right, quantitative easing does not cause inflation. QE does not 'create' money. Banks lending to consumers creates money. Interest rates needed to be kept low during/after the recession because unemployment was high and consumer confidence was low, and the demand for loans was consequently low. Lower interest rates helps make loans more attractive to consumers--a simple case of supply and demand.
It's true that real estate can be a good investment, but it's not always a good investment. As mathjak said, the average appreciation of the stock market has been superior to the appreciation of real estate. In order to make real estate a good investment, you need some way to capitalize on your investment. Renting is a good way to do that, but if you're buying a home to live in then obviously you aren't renting it. You build equity, but unless the value of your property appreciates considerably, your money may be better off in a stock index.
Even if you are renting property, your returns aren't necessarily going to be better than the stock market. There are lots of risks involved and it's possible for a bad tenant to wipe out years of profit.
the equities markets blew away personal real estate over almost all time frames except the last speculative run up before the great recession in 2008-2009.
while my home i bought in 1987 for 169k rose to 335k when i sold it in 2003 the same amount in my simple mix of fidelity funds was 1.8 million.
today that mix is over 2 million while the house is around 425k. not even a close comparison if you included all the rent that would have been spent over that time frame.
you could subtract out all the rent you would have spent over those decades and bought 2 houses today.
no one knows what the future will bring so we can only talk about the past with any certainty .
to do well in real estate you need to make most of your profit on the buy. natural appreciation without some special situation taking hold is never been great in real estate.
you needed to have bought in harlem when no one wanted to own there as an example. then harlem goes through gentrification and bingo, nice profits. but had you bought on a street in kew gardens you would have seen nothing but the natural glide path and that wasn't much compared to alternative investments.
I am not sure what you guys mean when you talk about, around and through INFLATION.
But I share the meaning used in the first sentence of WIKIPEDIA:
Quote:
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
All else is excuses, political balderdash and obfuscation. And of course the most hysterical obfuscation is the goofy cover-up term, QUANTITATIVE EASING.
Talk about pissing on someone's head and calling it rain.
Interest rate, in economic terms, is essentially the value society places on holding money. When it falls to zero the money becomes not worth holding. When money becomes not worth holding it is spent on ANYTHING that might increase in value and this ANYTHING is bid higher and higher and higher. The only thing not worth holding is CASH.The huge excess of credit that has kept this economy looking like it is functioning SINCE 2000 is doing nothing but driving up prices of nearly everything. And God knows, it sure AIN'T creating jobs.
It is only fools who keep doing the same thing over and over and over again expecting a different result. But yet, society after society uses the SAME rapid increase in the money supply resulting in an Inflation that can only be cured by a massive retrenchment, tight money, and starvation for those at the bottom.
But the fools do it over and over and over again, usually for political cover.
And then the great shock when the bullet is finally bitten with usurious interest rates and conversion of "one hundred OLD pesos" for "One shiny NEW one."
You know you have finally hit the bottom of the barrel when otherwise intelligent people begin even redefining terms like profligate money creation and even the term INFLATION.
Again, INFLATION is a rapid increase in prices. All other definitions are poppycock.
And of couse, my giggle for the day: Quantitative Easing. I gotta get to Macy's and do some Quantitative Easing with my American Express Card.
We just about always have a normal positive range of inflation built into our system. But you are not talking about the normal 2-3% or so you were talking high inflation and its effect on real estate.
I am not sure what you guys mean when you talk about, around and through INFLATION.
But I share the meaning used in the first sentence of WIKIPEDIA:
All else is excuses, political balderdash and obfuscation. And of course the most hysterical obfuscation is the goofy cover-up term, QUANTITATIVE EASING.
Talk about pissing on someone's head and calling it rain.
Interest rate, in economic terms, is essentially the value society places on holding money. When it falls to zero the money becomes not worth holding. When money becomes not worth holding it is spent on ANYTHING that might increase in value and this ANYTHING is bid higher and higher and higher. The only thing not worth holding is CASH.The huge excess of credit that has kept this economy looking like it is functioning SINCE 2000 is doing nothing but driving up prices of nearly everything. And God knows, it sure AIN'T creating jobs.
It is only fools who keep doing the same thing over and over and over again expecting a different result. But yet, society after society uses the SAME rapid increase in the money supply resulting in an Inflation that can only be cured by a massive retrenchment, tight money, and starvation for those at the bottom.
But the fools do it over and over and over again, usually for political cover.
And then the great shock when the bullet is finally bitten with usurious interest rates and conversion of "one hundred OLD pesos" for "One shiny NEW one."
You know you have finally hit the bottom of the barrel when otherwise intelligent people begin even redefining terms like profligate money creation and even the term INFLATION.
Again, INFLATION is a rapid increase in prices. All other definitions are poppycock.
And of couse, my giggle for the day: Quantitative Easing. I gotta get to Macy's and do some Quantitative Easing with my American Express Card.
Quantitative easing and inflation are not the same thing--not at all. Quit pretending they are. You're only deluding yourself and at worst, misinforming readers of this thread who don't know any better.
BTW I haven't had any more bedbugs, if you remember that thread. DE dust + sealing the baseboards + pest control spraying the bedroom + washing/drying at high heat all the sheets and clothes in the house did the trick.
I am not sure what you guys mean when you talk about, around and through INFLATION.
But I share the meaning used in the first sentence of WIKIPEDIA:
All else is excuses, political balderdash and obfuscation. And of course the most hysterical obfuscation is the goofy cover-up term, QUANTITATIVE EASING.
Talk about pissing on someone's head and calling it rain.
Interest rate, in economic terms, is essentially the value society places on holding money. When it falls to zero the money becomes not worth holding. When money becomes not worth holding it is spent on ANYTHING that might increase in value and this ANYTHING is bid higher and higher and higher. The only thing not worth holding is CASH.The huge excess of credit that has kept this economy looking like it is functioning SINCE 2000 is doing nothing but driving up prices of nearly everything. And God knows, it sure AIN'T creating jobs.
It is only fools who keep doing the same thing over and over and over again expecting a different result. But yet, society after society uses the SAME rapid increase in the money supply resulting in an Inflation that can only be cured by a massive retrenchment, tight money, and starvation for those at the bottom.
But the fools do it over and over and over again, usually for political cover.
And then the great shock when the bullet is finally bitten with usurious interest rates and conversion of "one hundred OLD pesos" for "One shiny NEW one."
You know you have finally hit the bottom of the barrel when otherwise intelligent people begin even redefining terms like profligate money creation and even the term INFLATION.
Again, INFLATION is a rapid increase in prices. All other definitions are poppycock.
And of couse, my giggle for the day: Quantitative Easing. I gotta get to Macy's and do some Quantitative Easing with my American Express Card.
not quite, when rates go to near zero the problem is the opposite. people are holding on to their money and do not wish to spend it.
they may seek higher returns in other assets but that does not create general inflation. only spending it and borrowing will.
gdp is down, consumer spending is down ,corporate spending and borrowing is down.
that does not look like folks rather spend money than hold money. in fact corporate cash levels are at record levels and they wish to spend it on nothing.
we have had even lower rates and negative gdp in our recession , we were approaching deflation at the peak of the debacle.. that is proof enough low rates alone do not cause inflation.
I think you need a refresher on econ 101.
Last edited by mathjak107; 10-22-2013 at 09:27 AM..
most people can't afford all this new real estate and high rents.
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