> by making real estate cheap again among other things
If this happens at scale, the system collapses. There's a reason The US Federal Reserve's target is positive 2% inflation. Why not 0? Why not negative 2%?
The reason is the financial system is dependent on "appreciation". Imagine a bank approving a loan and the collateral falls in value? And asset the loan acquired falls in value. Boom! The whole system is under water.
The USA has a housing supply problem for similar reasons. Property owners want the value of their assets to appreciate. Increase supply and that slows or stops.
Like it or not it's a Ponzi Scheme, and this is why the population crunch is a concern.
I went to a book tour stop of for this author + book and Princeton Univ a few months ago. Definitively recommended.
> Imagine a bank approving a loan and the collateral falls in value? And asset the loan acquired falls in value. Boom! The whole system is under water.
Not really, you just have to use different collateral. After all personal loans are already based on taking a loan against a different collateral.
Yes, really. Those assets are falling in value as well. Banks can't write down everything. Banks don't like such ugliness on their balance sheets.
The Feds target is 2% because it's a CYA for the entire system.
Note: 2% inflation - if they are lucky enough to stay on target - will cut your spending power in *half* in ~35 yrs. Let that sink in. The Fed's stated goal is to cut you in half every 35 yrs. Why? Because in the context of the current system 0 or less would be a disaster.
As someone who lived through both 1979 (14% inflation) and 2008 (fear of a deflationary collapse), I'll take 2% inflation any day. If you can't see that that's the least-bad option, I don't know what to tell you.
Yeah, if I don't invest my money that grows in value, it will lose half its value in 35 years. Yes, that's not ideal. No, it's not the catastrophe that you're making it sound.
You'll take it? You / we have no choice. But that's not what's being discussed. The discussion is about the financial / economic system and a shrinking / deflationary run.
It would be a disaster. How could it be otherwise? If the system's fuel is up, not down.
Another way to look at it is this: we've gotten all kinds of technology. We've seen efficiency and productivity improve. And yet, prices keep increasing. Efficiency and productivity should mean dropping prices, at best break even. And yet no? There's a reason for that.
That is, assets losing value will lead to the house of cards collapsing. Groupthink to the contrary is just head in the sand naivete.
Japan has had deflating real estate for decades and has not collapsed. In fact it’s been great for their culture. They have a lot of other problems but this is not one of them.
Japan is the canary. Aging population, lack of immigration for backfill, etc.
The important detail is, that Japan is not burdened with the cost of maintaining a aging infrastructure. Japan got a semi fresh start after WW II. The same can not be said for other parts of the world (e.g., USA).
Finally, Japan has also benefited from the rest of the world not *yet* contracting. It is a single outlier. It's not wise to extrapolate The Japan Story as on that will work on a global scale.
I was intrigued until I realized this book is just shilling for Bitcoin from an analyst who sits on the board of Swanbitcoin.com. I realize this is HN and all, but no thanks.
She’s on the board of swanbitcoin? Where can I confirm that information? I didn’t see her mentioned on the page where 6 people affiliated with the company are listed, but I don’t think that is a list of people on the board, so I don’t think it would. How do you know she’s on the board?
If this happens at scale, the system collapses. There's a reason The US Federal Reserve's target is positive 2% inflation. Why not 0? Why not negative 2%?
The reason is the financial system is dependent on "appreciation". Imagine a bank approving a loan and the collateral falls in value? And asset the loan acquired falls in value. Boom! The whole system is under water.
The USA has a housing supply problem for similar reasons. Property owners want the value of their assets to appreciate. Increase supply and that slows or stops.
Like it or not it's a Ponzi Scheme, and this is why the population crunch is a concern.
I went to a book tour stop of for this author + book and Princeton Univ a few months ago. Definitively recommended.
https://www.lynalden.com/broken-money/