Mish has a much better explanation as to what is behind the disaster happening in the real estate market.
Fallacy of Wage Growth and a Housing “Shortage” in Pictures
He wastes no time pinpointing the real issue here.
Blame the Fed, Congress, Nixon
- Blame Nixon for closing the gold window in 1972; that allowed Congressional deficit spending at will.
- Blame the Fed for insisting on 2% inflation in a technological price-deflationary world.
- Blame Congress for massive fiscal deficits every year.
- Blame fractional reserve lending for being the enabler of trillions of dollars worth of mortgage and other loans, constituting money borrowed into existence chasing rising asset prices.
- Blame the media and academics for parroting the ridiculous notion that there is a benefit to rising prices. In the real world, standards of living improve when goods are cheaper.
We couldn’t agree more.
According to the latest jobs report the unemployment rate is at 4%. In years past that has constituted full employment. Yes, we have argued before that the number above is highly distorted, but that’s beside the point here.
The real question is why, considering full employment, the wages are not going up?
Well, because the FED’s recent disastrous monetary experiment (zero interest rates and QE) sparked massive inflation in all the wrong places. Instead of wages and commodity related assets spiking higher, money flowed to highly speculative assets. Stocks, bonds, real estate, bitcoin, etc…..
It is only reasonable to assume that as soon as this monetary experiment blows up, real estate prices will revert back to their mean, making this so called housing crisis a non issue. If you would like to find out when the stock market will finally crack, based on our timing and mathematical work, please Click Here.
