Hello mjfdl,
"All markets have bubbles and can be devalued. A home is a hard asset...fiat money is just a paper I.O.U."
Yes a house is a house is a shelter. It always has significant intrinsic value that will defy $ value but consider when the $ 500,000 house in Japan became a $ 140,000 house, the $ 500,000 GIC was still $ 500,000. Other than shelter, the quality of life for the person holding the GIC would be more optimistic.
I feel real savings other than real estate are crucial for security and ultimately "standard of living", particularly in old age, as inflation and the probable sale of the home as a source of revenue come into play.
Another aspect is "what are savings and what are high risk investments?". These items surely need to be separated and recognized for the beasts that they are. One's future depends on it.
You referred to heavily leveraged monster homes. The bear trap of modern life. God forbid it should ever trip.
Yes, economics. Just when you think you got it figured out up pops another variable to teach one a lesson.
Gold...yup, the 5% final disaster insurance.
Regards
C
P.S. In case anyone is wondering "whats the importance of individual savings to a country?" an aspect is that if there is no consumer depth (potential to do some serious consumerism) then there is vulnerability in the country to equity markets sliding for lack of buying. Sliding markets remove significant ability of companies to raise money for things like capital equipment, research & development resulting in productivity malaise. Productivity loss results in lack of competitive advantage, stagnation of wages. Ultimately unemployment increases. Thats why peoples savings and saving rate are important. In the US the savings rate have been very dismal but are starting to improve recently. It is also noted that unemployment has moved up to 6 %. Quad erat demonstratum. |
