Monetary inflation is the disease. Price inflation and bubbles are the symptoms of the disease.
Just like fever and other symptoms are the bodies response to infection, recession is the economy’s response to the disease of monetary inflation.
Recession is simple the liquidation of malinvestment. The malinvestment is caused by monetary inflation which throws off natural economic signals.
The only way that recession can be permanently prevented is to eliminate inflation, which can only happen if we switch to a 100% reserve banking system.
Inflation is a feature (not a bug) of both free banking systems and coordinated fractional reserve systems, so there will always be recessions with both.
You’re only looking one direction. Now consider the thousands of homes that have been built or partially built but unsold. Now people can’t afford to buy them. Then consider those that want to sell their home? Who can afford to buy it? The payment affordability is the most constant factor in the equation so if the interest rate goes up, the price must come down.
As I said, you’re only looking one direction and not considering the whole.
July 19, 2023 ‐ The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential construction statistics for June 2023: NEW RESIDENTIAL CONSTRUCTION JUNE 2023 Building Permits: 1,440,000 Housing Starts: 1,434,000 Housing Completions: 1,468,000 Next Release: August 16, 2023
People who have low interest rate mortgages are not moving. That’s 90% with below 6%.
However there are people who still want to buy, even at these high rates. Enter new home builders. They can build more homes that are not owned occupied and allow those buyers an opportunity to buy a home.
No my friend. You’re looking at one side of the coin and oblivious to the other. Those builders borrowed all that cash to buy land, turn it into lots, lay plumbing and construct houses. That’s called operating capital and if these homes don’t turn, they’ll go bankrupt…crash!
These homes are being built during times of inflated costs. That’s in part what is motivating existing homes to appreciate. Now add a profit to each, combined with an interest rate that has greatly increased from the time the housing project began, to the time it’s on the market to be sold and the payments are not affordable. Now…think…either people must increase their payments or interest rates must come down or the builders must sell at a lower price? Interest rates are on an increasing trend, not decreasing and incomes are stagnant. The only thing left is lowering the price and at what point does it become a loss? Now add the factor that these unsold homes are competing with each other and it’s a recipe for a housing crash, a huge financial loss and will come mostly out of the pockets of banks and their customers’ pockets. Now…do you understand this?
US Housing Starts Fall More than Expected
Housing starts in the US declined by 8% month-over-month to a seasonally adjusted annualized rate of 1.434 million in June 2023, below market expectations of 1.48 million. Single-family housing starts, which account for the bulk of homebuilding, dropped by 7% to 935 thousand and starts in buildings … more
2023-07-19
Housing Starts Drop, Mortgage Rates Climb
I HOPE you are right. I don’t think so. But I do hope you are.
There’s more to it. Construction jobs are flailing. There’s about to be a lot of layoffs. One million auto loans are in default. More are on the way. That’s another bubble.
There’s the open borders, VERY expensive. Way too much crime. VERY expensive. Those also are bubbles. It will crash the economy when all 3 go down at once, or even close together. One will hasten the collapse of the other.
LISTEN to the democrat mayors and governors. They are now saying the immigrants are going to crash their areas. They aren’t even dealing with 10% of what the south is! NY has 10,000 a month, Texas has 130,000 - 200,000 a month. It’s simply not sustainable.
Several companies are starting mass layoffs. It’s just the start. When enough people don’t have jobs, the economy goes south.