“Nothing comes from nothing…nothing ever could…
“So somewhere in my youth or childhood, I must have done something good…”
CNN worries about a “tidal wave of foreclosures” hitting central Florida.
“Orlando has blown up,” says a source quoted by CNN.
The man doing the talking runs a website where desperate sellers can try to get rid of their houses fast. The houses are put up for sale at prices below appraised values…and then marked down systematically until they sell.
“There’s been a 700 percent increase in traffic of people filling out our forms,” he continued. “I could put a bull’s-eye on Orlando and write the headline for what will be going on in January and February.”
Today, dear reader, we take up a profound subject in a superficial way – what is real?
When you need to make a monthly mortgage payment, there is not much fantasy or romance to it. It is real. When you don’t have the money, it is even more real…which is to say, the experience is more intense and more memorable.
In the financial world today, some experiences are much more real than others.
As you know, we are enjoying what Mises called a “Crack-Up Boom”. It’s great fun…as long as it lasts. But it has some very un-real parts to it.
The whole thing is tricked along by money that is, essentially, not real. Central banks create money “out of thin air”. The quantity of money is growing very rapidly, all over the world. Everywhere you look, money is increasing two to 20 times faster than GDP growth. (In Zimbabwe, the increase is infinite…since the money supply is growing by thousands of percent, while GDP growth is negative.)
Can you get something real from something un-real? Does something come from nothing?
We don’t know…
But what we do know is that there are a lot of phoney parts to this boom. In the West, art, stocks, houses – they’re all going up. Just look at a chart of almost any stock market in the world. Or a chart of housing prices. Or a chart of almost any tradable asset class. Asset prices are rising; and the people who own them feel they are much richer. But is this increase real? Are these assets actually worth more? Or are they merely being teased up in price by a higher volume of money? Is a Monet more attractive today than it was 10 years ago? Not really. Does a house give better service? Is the yield from a stock higher? The answer is no. Much of the extra wealth that people think they have is un-real.
Meanwhile, in the East, factories are being built…output is going up…people who used to tend ducks and till the soil by hand are now working on assembly lines and living in air-conditioned apartments in brand new cities. This wealth is real and growing at breakneck speed.
Markets and Money