I think what Ben is referring to is not inflation so much as foreign exchange. Here is another investopedia article on that subject.
https://www.investopedia.com/ask/ans...weakdollar.asp
As for how much a bj cost in 1635, that was before my time. Check with CK.
James
Loving life in Austin
Zero. But that was before the definition of consent came into play...Originally Posted by chloevankatie
I watched the whole thing. That is the kinda exciting stuff I do on a Saturday night.
My own mother says I am boring, lol.
I found some comfort in Palihapitiya explaining why we won't collapse, which was one of my fears, and he stated that other markets possibly could. And it was interesting, he confirmed some of thing gentlemen here have said, for instance, to look at industries that have been unnecessarily punished by the current circumstances.
I also better understand after watching the videos and posing my questions here, why it's best to wait til there appears to be an upswing on the horizon.
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LOL
As for how much a bj cost in 1635, that was before my time. Check with CK.
Is your mom on this board...???!!!! JK
Collapse is such a strong word!
Humans will act a certain way. If you can predict that with sufficient accuracy you can capture value. Locally. Regionally. Globally.
Last edited by Ben Rhimene; 04-18-2020 at 10:48 PM.
Inflation brings value down for a simple reason, but it gets far more complicated in global economies and with currency exchange.
I'll explain the super simple version of inflation:
Imagine you live in one of a small group of disparate communities in a fictional time and/or government (let's say ~10,000 people in total).
You decide to distribute a type of "currency" to exchange items for and put values on them b/c bartering is just such a hassle.
You create a bunch of pieces of paper and call it a "dollar". People can now freely put values on items like salt, sugar, milk, etc and you can simply buy them with any of the monetary "dollars". We don't have to barter anymore.
Let's just say that you decided to print up a bunch of these dollars b/c you owed one of the neighboring communities after they gave you tons of salt, sugar, milk, etc to keep your community afloat. You print up twice as many dollars as were initially in circulation to pay them back.
This will cause inflation and will in essence lower the value of the dollar (in a closed economy - not going to make it complicated with foreign economies & currency rates).
Why? B/c you have twice as many dollars in circulation now. If there are twice as many dollars in circulation then the price of things like milk, sugar, salt, wheat, etc will go up b/c by virtue of printing more money you have lowered its value; people have more dollars now, but things cost more. That's inflation on a super simple 50,000ft level.
Or imagine if every person you knew had $1000 in their wallet all the time. Imagine there were so many dollars that everyone had that much money just like a person has $1 or $10 in their pocket today. If that were the case why would you do *anything* for say $50? When every person walking around has $1000+ cash in their wallets let alone their bank accounts. You would want way more dollars for any given item or service b/c there are now way more dollars available to everyone. That's inflation.
You can't simply print more money b/c now it just means the price of things have to go up. Consequently this is also why we can't just create a perfect Utopia where everyone makes, say, $50/hr or more.
Why again? Same as above. If everyone had that much money it means the price of things will go up which means those seemingly large salaries are actually worth very little (b/c virtually everyone has that much money now).
Hopefully that helps understand it a little more easily?
-MG
THIS is the issue. Every country's central bank is doing the same!!! That shit is a bandaid-either you are manufacturing value or you are not. Time will tell and markets will respond!
If she knew you were interested, she'd probably be delighted to join.
Humans are insanely predictable.
You know one of my favorite classes in school was anthropology. And I kinda wish I would have just done my entire undergrad degree in Anthropology since undergrad was sort of a throwaway degree for me anyway. I had to do a project where I observed primates and recorded their behaviors. And I remarked to my professor how walking through a Walmart was like observing primate behavior all over again. But the truth is, people really aren't like primates at all. Humans are even more insanely predictable. Humans are like ants. Like an ant, when a human becomes focused on a mission a human being will continue to conduct it's daily activities in pursuit of that mission, even until the detriment of that human for blindly pursuing a worthless mission. Humans predictably live with blinders on. and believe that following a predetermined path is generally always the safest course of action. It is one reason I believe that primates live happier lives than we do, because they live in the moment and don't waste their lives pursuing predetermined failed missions.
Just a reflection I had on the predictability of humanity.
Prolly an internal confluct for at least one of us....
So you really knew the answer before asking?! Thought so...
So my original question...Inflation brings value down for a simple reason, but it gets far more complicated in global economies and with currency exchange.
I'll explain the super simple version of inflation:
Imagine you live in one of a small group of disparate communities in a fictional time and/or government (let's say ~10,000 people in total).
You decide to distribute a type of "currency" to exchange items for and put values on them b/c bartering is just such a hassle.
You create a bunch of pieces of paper and call it a "dollar". People can now freely put values on items like salt, sugar, milk, etc and you can simply buy them with any of the monetary "dollars". We don't have to barter anymore.
Let's just say that you decided to print up a bunch of these dollars b/c you owed one of the neighboring communities after they gave you tons of salt, sugar, milk, etc to keep your community afloat. You print up twice as many dollars as were initially in circulation to pay them back.
This will cause inflation and will in essence lower the value of the dollar (in a closed economy - not going to make it complicated with foreign economies & currency rates).
Why? B/c you have twice as many dollars in circulation now. If there are twice as many dollars in circulation then the price of things like milk, sugar, salt, wheat, etc will go up b/c by virtue of printing more money you have lowered its value; people have more dollars now, but things cost more. That's inflation on a super simple 50,000ft level.
Or imagine if every person you knew had $1000 in their wallet all the time. Imagine there were so many dollars that everyone had that much money just like a person has $1 or $10 in their pocket today. If that were the case why would you do *anything* for say $50? When every person walking around has $1000+ cash in their wallets let alone their bank accounts. You would want way more dollars for any given item or service b/c there are now way more dollars available to everyone. That's inflation.
You can't simply print more money b/c now it just means the price of things have to go up. Consequently this is also why we can't just create a perfect Utopia where everyone makes, say, $50/hr or more.
Why again? Same as above. If everyone had that much money it means the price of things will go up which means those seemingly large salaries are actually worth very little (b/c virtually everyone has that much money now).
Hopefully that helps understand it a little more easily?
Real estate would rise then?
If I bought my house for $1 in 1635 (after meeting CK for a BNG), it's worth $200,000 now.
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That you are probably a perv that is interested in my mom?
Last edited by chloevankatie; 04-18-2020 at 11:22 PM.
Three part questions...awesome.
Probably a perv? Most definitely.
Your mom? If she looks like you? Absolutely unless it impacts us.
Real estate is tough, cuz it is viewed as unique. To the extent you find comps they should move in tandem except to extent central bank rates impact global economies.
Real estate value can be unpredictable unlike people, cause you don't know if your neighbor next door is gonna sell for pennies on the dollar (I had an idiot next door do that to me once, ugh), or if the neighborhood will improve or go downhill. But I think I am understanding the concept of liquidity versus assets now, and it makes sense why people pulled their money out of stocks when this whole Covid thing began. That was something I didn't understand, why an infectious disease caused a crash and why I started this thread. But now I get it that they were selling their assets out of fear.
When I started this thread, I didn't understand why on Earth people were dumping their stocks and what were the consequences of it.
Release estate is an odd situation like Ben said. It's not always true they would rise in "value" (respective to the declining US dollar). More likely would be that a foreign investor essentially gets a discount versus the US buyer who has to pay more dollars to get that home.
What happens is that real estate is a unique leveraged asset. With this investment approach in a declining dollar value scenario you can then demand more money from tenants or from potential buyers. Ideally you have invested prior to the devaluing event or not terribly far into it.
A home is a long term investment and useable asset. You will also be in a beneficial position as the dollar devalues but you have a fixed 30yr loan. It's a good investment b/c unlike, for example, a gallon of milk, or even a car, those will be gone in a week or within 5yrs. So, if you bought milk last week at $4/gal, a month later milk could be costing $5/gal due to hyperinflation.
A home though is unique and won't go through that same situation b/c it's a very long term useable asset and it is also leveraged against a banks money. You will not pay more next month or next year (so long as it's a fixed rate loan) regardless of the dollar value. This puts you in a better position b/c you can either weather the storm and pay the same payment during the hyperinflationary event or you can even demand more money (more dollars) from tenants or buyers. In effect this makes fixed rate real estate loans immune to hyperinflation events from the perspective of the leveraged investor (you).
The value doesn't necessarily rise but the cost certainly can and usually will for any new buyer (considering any inflationary or hyperinflationary periods). And there is also always the concept of it being a long term useable asset with the very common trend of increasing value (though this is still very dependent on the location, various economic impacts, features/condition of the home).
That means if you hold the property through the devaluing event you have strong chances of recovering and increasing your homes value ultimately.
-MG
Ah so if I started renting my house out in 1635 at a nickel a month. I could now be getting $1200 a month, but my 30 year mortgage was paid off in 1665. So all the rent I collected from 1665 was profit minus taxes, repairs, etc. And since I originally paid $1 for the house, that's a pretty good profit.
In a perverse way the system benefits the upper middle class and up. Those people buy a long-term asset and "fix" their housing costs for 30 years (which is the smart play unless you have excess liquidity or considering moving in 7 years or less).
Serial renters (lower middle class, 20-somethings) do not have the same benefit. Why? Because the owner of the property also got a loan to buy/build the complex. Except commercial loans do not go out 30 years...3-7 years is where that market sits (also tends to be a floating rate market, but that is another issue and swaps can help that). So the landlord needs to generate cash to pay the loan AND qualify for a refinance in a short period of time! In order to not let themselves get locked in, they keep lease terms short so at renewal they can increase your rates-that is why you cannot lease your apartment for 5 years...those terms are part of the commercial real estate loan behind the scenes.
Even more perversely the system helps the lower class. Imagine a true dumpy apartment you drive by that has a cheap "for rent" sign. That property has been paid for (probably 3-4 times) and so the rent the landlord charges needs to cover his/her profit, inflating taxes and maintenance costs, but NOT any debt service.
All of that is dependent on a growing economy. Downward spikes can be tolerated, but when mortgages are close to 20% interest (late 70s) or the local real estate market crashes because of lower values (2007-2012 in most "hot" locations like Vegas, Phoenix etc.) then it can REALLY hurt to be a real estate speculator if your timing is unlucky.
I too enjoyed college anthropology. My professor taught us all about Gorillamydreams.
James
Loving life in Austin
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