Let’s go back to 2008 for a moment. I’m not interested in conspiracy theory, simply looking at what happened. What happened to the price of real estate? They dropped and in some places significantly. Why? Forget politics and use common sense. What caused the prices to go up? The availability of debt! What caused the prices to come down? The inability to obtain debt. This is simple, if we apply common sense.
You ever have someone give you a card on your birthday showing the prices of items when you were born compared to the prices of items now? Have you ever asked why?
Now, let me ask you another question. Who is helped when prices go up? Are you? Am I? As a financial planner for 18 years, helping people plan for the future, we were taught of a multitude of risks that every family has to be aware of; market risk, political risk, longevity risk, and interest rate risk. Another was inflation risk. What is inflation? What causes it?
In economics, we are taught about supply and demand. If the supply is too high with little demand, the price of an item will drop. If demand is high, but supply is low, the seller can charge a higher price. So, if dollars are easy to borrow, what happens to the price of stuff in high demand?
I’m going to continue with questions in hopes that it will cause you to think. Is it easier for us to build a house today than it was 30 years ago? Can cars be produced faster and easier now than in the past? Is it possible to achieve a college degree from the comfort of your own home?
What if no loans were available for a house, a car, or a college education? What would happen to the prices? What if were content with where we are until those prices came down? Could you be disciplined enough to as NO to any new debt?
Again, keep it simple. Who borrows the money? We do! Then who controls the money supply? We do!
When we figure this out as a people and act on it, we have a chance to free ourselves and our children from the burden of debt. This is a fight that we can win together if we use Common Sense!