When the Big Bubble Bursts....
sam.c...@gmail.com
Prices of real estate have gone up, the question is: Why? Is all this
the result of greed, of a political policy of low interest rates, of
shaky stockmarkets or just of demographics? All this has been discussed
in earlier posts at vario9us groups, such as the Capialism and
Humanities groups, at
http://groups-beta.google.com/group/capitalism
http://groups-beta.google.com/group/humanities
Are there further factors, such as a government bureacracy that makes
it ever harder for new development of land to occur? It seems that
there is plenty of land available in the US for a population that
hasn't grown fast nor is expected to grow fast in future. So, could
that be a contributing factor? Let's realize that the entire demand for
a piece of paper that says that someone was the owner, is actually
fabricated by government. In the end, it's just a piece of paper and
its value hinges on the backup government will and can provide.
So, what can government do? Will government further increase interest
rates to stop the bubble from growing much further? Recent experience
in Britain, Australia and the Netherlands suggests that it doesn't take
a big rise in interest rates for the bubble to stop growing. Making
available more land and raising interest rates are the conventional
instruments government will use to do so. But here's a court ruling
that might just pop the real estate bubble. The Connecticut Supreme
Court ruled today against a group of homeowners who didn't want to sell
their property.
In dispute was the extent of government's power to take property. The
plans were to redevelop a 90-acre parcel into a waterfront hotel and
conference center, office space and 80 residential properties,
following a decision by pharmaceutical giant Pfizer to build a research
facility nearby. The New London city argued that this would generate
thousands of jobs and significant revenue.
The ruling shows that government can and will take away ownership
rights and give them to another person as it pleases, in this case on
the mere perception that this would result in more tax revenue and
employment opportunities.
http://www.usatoday.com/news/nation/2004-09-28-justices-property_x.htm
It's time we realize that ownership of real estate exists only on
paper. Only on paper is the owner the owner, and only for as long as
government will allow the respective owner to be the owner.
Effectively, government simply claims to be the ultimate owner, owning
everything and everyone, making us merely tenants of our own bodies and
the real estate we may believe to be buying.
Similarly, the money issued by government exists only on paper and has
value for as long as this bubble doesn't burst. If the real estate
bubble bursts, that might just happen. The global increase in the value
of real estate over the past five years constitutes the biggest
financial bubble in history. When the stockmarket crashed in 2000,
interest rates were high and the US had a budget surplus.
Today, interest rates are low, leaving little room to lower interest
rates in an effort to avoid a global recession. In the US, government
debts and private borrowing have never before been as high, and there
is a huge current accounts deficit. In addition to cheaper labor luring
many industries abroad, the rise in the cost of land is sending out the
message that bussiness is better off abroad for new industrial
development.
This time, it's more obvious than before that a simple change in
interest rates - combined with Alan Greenspan's warning words - will
not do the trick. We need a more fundamental reform package that
stimulates economic activity, instead of directing our most productive
minds and efforts into a pre-industrial society of feudal landlords and
bureacratic government. We need a shift away from currency manipulation
towards investment in shares. We need a reform package that covers all
sectors of society. We need reform that's based on morality and
positive values, rather than on containment of greed and bubbles!
Sam