Wednesday, September 01, 2021

Can the consumption / production cycle run fast enough to justify rising property values?

Property values, stocks and the long term store of wealth has been rising fast. This pushes up things like rent and the cost of first time home purchases.

To pay these costs, the economy must run at a faster and faster pace creating goods and services so people can earn enough at jobs to pay these costs.

To justify the expectation of accumulated wealth, ongoing production and consumption has to keep up. The vehicle used to do this is jobs.

Too much consumption can be detrimental to both the environment and the human spirit burdened by all this clutter and speed. We will probably have to keep creating new money, out of thin air; like happened during the pandemic, to keep up this sense of accumulated wealth.

The economy is expected to support the wealth of the extremely wealthy, the retirement expectations of the average person, the perceived value of property purchased and the expectations that people place on government ranging from public safety to infrastructure.

If we could find a way to allow for a slower economy without becoming behind in the rent; so to speak, it would be easier to reduce the carbon footprint.

Progress could still be made in science and new technologies that could bring greener wealth, but a lot of what we are doing now, just to keep up with the rents and the bills, is pure waste.

Much of that waste is related to excess property value being pushed ahead by low, low interest rates.

Low interest money pushes up values and it also means that people don't use regular banks to save wealth. With interest rates so low, people invest in property and stocks as the means to "park" their wealth.

The regular economy of consumption and production has trouble keeping up with all this stored wealth. This was especially evident during the pandemic, but it's also a problem related to climate change.

I think the perception of wealth is now having to be subsidized more and more with the creation of new money out of thin air. Our old justification for wealth; which has been the production / consumption cycle; isn't able to keep up.

This is also true as more people are retired and more apt to be living off wealth versus their own economic production.

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