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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: David Jones who wrote (26440)	1/5/2005 12:51:03 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

A normal economy is controlled by a balance between supply and demand for money. When the demand for money, say for real estate mortgages, rises precipitously - interest rates rise to allocate the limited supply of money. But in a Monetarist economy the Central Bank creates an infinite supply of money. As the demand for money increases, the supply of money increases accordingly and interest rates, the price of money, declines as the sea of money supply rises. As I have noted previously my housekeeper, who earns $50 for a day's work, owns two homes. She lives in one with her construction worker husband and two children and the rent out the other. Only the two children speak English. Another couple from Romania, who earn a similar nominal wage every other Saturday to keep the garden in nice condition, own eight rental homes! Two weeks ago he told me he is under a lot of financial pressure as the rents he can charge for these homes have been declining, so they're on the edge financially. This all reminds me of Joe Kennedy's shoe shine boy giving him stock tips in 1929. Kennedy claimed this is what prompted him to sell-short before the stock market crash. The Fed is currently attempting the nearly impossible - they are raising short-term interest rates without limiting the creation of money, like commanding the price of peaches to rise during a peach glut. Banks will comply, in a minimal manner. This will lower their profit margins, by paying savers more for their money that the banks don't really want and have little use for. In a way, this is just another method to push additional money into the economy, creating the illusion of economic health, by paying savers welfare interest when creating new money is essentially free. We have all seen on television the crate loads of new $100 bills the military is using to pay for everything in Iraq. Literally billions of dollars worth of newly printed hundred dollar bills. By under-reporting inflation, a declining economy creates the statistical illusion of growth. Someone posted a website which makes an attempt to estimate real economic growth after taking into account the real inflation rate. They estimate the economic growth per worker over the past 36 years at minus 19%. This certainly comports better with what people notice on a daily basis than do government statistics. freebuck.com This does not end well. .