Why every country is broke AF
Its real estate
The reason why every country is so damn broke despite workers being so much more efficient today at getting things done has to do with real estate.
I know many people complain about house prices increasing faster than wages. It's not just your imagination. Every indicator shows that houses are increasing in value.
- Price / rent
- Price / wage
- Price / SQFT
But how does that make countries go broke?
Accounting gimmick of the century
If you're not sleepwalking through life and actually bothered with accounting, finance, and running your own business, you'll learn that most material goods are assumed to depreciate / amortize in value over time.
Cars, machine, computers, etc.
Somehow, houses are an exception despite generating no GDP of its own. In fact, houses are assumed to INCREASE in value. How crazy is that?
Look at the amount of cope the comments are getting on this topic. 1
"Poor stupid kid, it's land that's appreciating in value! You can't create more land! That's why it's appreciating!" -- every real estate investor I meet.
Yeah? If land is finite in supply, then suppose population grows by 3%, land should appreciate in value by 3% after adjusted for inflation to account for the competition of finite resources.
That is not what's happening.
In fact, in countries with SHRINKING population (SK, JP, Euro-zone), house and land prices continue to INCREASE!
The math is not mathing
Suppose population decreases by 1%, but house/land prices increases by 5%, there is a 6% deficit that must come from somewhere to justify this reckless bidding.
Maybe it comes from national borrowings. Maybe it comes from labor productivity. Either way, you can't bid for what you can't pay (or what they can't pay). 2
"Its luxury housing, AirBNB, labor demand, zoning laws, red tapes! You cant blame on monetary policy and accounting policy!"
Sure, you can always push the causality to some other problem. But you can't ignore the disconnection from the most basic logic of what supply/demand does to prices in a zero-sum situation (land in our case).
Then how did we mathed?
You mean how we designed a financial system that allows houses to appreciate in value perpetually?
We created a central bank that allows us to borrow from the future / print more fiat money, which eventually introduces enough money in circulation to bid up houses prices 3
Every mechanism that allows houses to appreciate in value over time is not invented over 100 years ago. Meaning this financial engineering is so modern none of our ancestors even understood it.
This is what's causing a big budget hole. You have to be creating money out of nothing to continue pumping and increasing the valuation of a "financial sink" known as -- "capital good that is exempted from standard accounting practice".
It's not who is greedy. It is not who is corrupted.
It is a simple reality check that this is what happens when every part of the world agrees to turn a wall of bricks into a financial instrument and speculation opportunity.
Flash quiz: Who paid for the renovations?
For the last 50 years, people just decided that if you buy a home, sit on it, do nothing, you magically make enough money to renovate it for free.
How?
First, real estate regularly gets appraised at a new value by the government.
If enough capital appreciation has happened to the real estate, owner is allowed to refinance the property at newer rates from their mortgage underwriter (banks).
This means the owner can take out the cash from the bank from the difference between present prices and when they first bought it, and use that money to renovate the house for "free"
It does not make any sense at all, yet somehow it is the reality.
So who paid for the renovation? 4