I've noticed that houses seem to be rather expensive in the UK, US and Canada.

I was wondering if artificially increasing residential real estate prices would bolster/inflate an economy in a noticeable way?

Or am I completely lost on the subject?

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your pearl casting hero

Yes...

http://en.wikipedia.org/wiki/Wealth_effect

However, in my opinion the true value of houses isn't what is increasing...The value of the paper money in these countries is actually DECREASING because the governments of these countries print more money every year...making things more expensive.

Last edited by Capitalizt on May-05-2007 at 00:26

Most of it starts after a period of low mortgage rates and people perceive that they can afford to up size their residence or take out a loan for an investment property. Then you get a period of what I could only really describe as mass hysteria where people jump at it to beat rising prices (thinking they'll miss out on something) and it gets quite frantic for awhile with the buying and selling of houses.
That does cause inflation, but not on it's own, usually there's a fair few other economic factors at work where people are likely to be spending rather than saving, good exchange rates encouraging importation do have an influence there.

Eventually that dies off in housing booms and people realise that once prices start to slide back down to a lower average it influences their spending habits to go into saving mode again.

Is there an economic theory that argues something along the lines of:

In the global marketplace the safest economy is one that where a large portion of income goes to taxation?

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your pearl casting hero

quote:

Originally posted by Subey Is there an economic theory that argues something along the lines of: In the global marketplace the safest economy is one that where a large portion of income goes to taxation?

Hell no.
Taxation drives out business (large and small) and with that go the jobs.
Pretty hard to tax people that don't have incomes...

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quote:

Originally posted by Fir3start3r Hell no. Taxation drives out business (large and small) and with that go the jobs. Pretty hard to tax people that don't have incomes...

Aren't taxes in Canada around 50%?
If you add income tax + sales tax + property taxes + hidden taxes (i.e. gasoline taxes, licensing, etc.) it has to be pretty close.



P.S. Did you hear Nortel got the wireless contract for the Vancouver Olympics... money can only go 2 places... within a nation or out. If it is without then it's less likely to find its way back.

Taxation guarantees more money will spend more time bouncing between hands internally.

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your pearl casting hero

quote:

Originally posted by Subey I've noticed that houses seem to be rather expensive in the UK, US and Canada. I was wondering if artificially increasing residential real estate prices would bolster/inflate an economy in a noticeable way? Or am I completely lost on the subject?

Whether REIT prices are artificially inflated or not, the percieved increase in wealth would increase borrowing and spending which would bolster the economy.

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quote:

Originally posted by Subey Taxation guarantees more money will spend more time bouncing between hands internally.

Taxation for the sake of keeping money in the country would end up doing the exact opposite of what it intends to do. If companies were to be taxed in this way they'll just close up shop and move to another country where they dont have to pay such taxes.

Besides, government couldnt organise a root in a brothel, let alone be trusted with knowing what's best for a country.

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New Question

I understand how value is added to products, but I think the key to economics is how value is added to money. And the key to that seems to be located here:


Could someone explain to me how the world changed when Banks went from having a 1 : 1 ratio of money in its vaults to a Cash reserve system. I'm not able to conceptualize it.

And philosophically, is there anything wrong with opening up my own bank, issuing myself my own mortgage, and then giving myself an interest free mortgage (using my mortgage down payment as the cash reserve on the loan)?

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Last edited by Subey on May-06-2007 at 15:50

I'm too lazy to explain...hopefully this is a good jumping off point for ya:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

I've finished half my work on Economics... immigration is the engine of Western Economies!

quote:

Originally posted by Capitalizt I'm too lazy to explain...hopefully this is a good jumping off point for ya: http://en.wikipedia.org/wiki/Fractional-reserve_banking

I'll read it, but could you just answer my philosophical question?

quote:

philosophically, is there anything wrong with opening up my own bank, issuing myself my own interest free mortgage using $5,000 of my own savings as the cash reserve on the loan?

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Last edited by Subey on May-06-2007 at 16:12

quote:

Originally posted by Subey And philosophically, is there anything wrong with opening up my own bank, issuing myself my own mortgage, and then giving myself an interest free mortgage (using my mortgage down payment as the cash reserve on the loan)?

So, you're taking out two mortgages from your own bank?

If you want to know something like that, ask a loan officer.

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