Why real-estate is a
shitcoin
Let's dive into this by exploring some common questions and their generally accepted answers.
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Firstly, why do people purchase houses as assets without any intention of living in them?
Typically, there are two prominent reasons, one: they expect the property's value to increase over time, preserving and potentially enhancing their wealth into the future, and two: they would generate positive cash flow by renting it out.
These reasons are rooted in rational thinking and are easy to understand.
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However, let's push the discussion further with two more questions that might initially seem trivial.
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Firstly, why is a house considered an asset at all?
The answer is straightforward: because it tends to appreciate in value over time.
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Building on this, why does its value increase?
(The response is circular) Because it's considered an asset.
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This leads us into a never ending loop of reasoning. The property appreciates because it's perceived as an asset, and it's perceived as an asset because it appreciates. This cyclical argument doesn't provide a substantial explanation but merely reiterates the classification of real estate as an asset based on its performance in the market.
Another question:
Why is a house considered an asset and not a consumable?
I mean, a quick search of consumer goods necessary for human survival results in some straightforward answers that I'm sure any rational person would agree with; water, food, shelter, clothing, and medicine etc.
The question then arises, what has led to the assetisation of shelter?
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I would like to posit the answer as the failure of government issued fiat currencies, which are unable to fulfil one of the three main functions of money:
1. medium of exchange
2. unit of account, and
3. store of value.
Specifically, it is the store of value function that the government decreed fiat money is unable to fulfil, prompting individuals and investors to turn to real estate as a more reliable alternative.
This shift has transformed our perception of shelter from a basic necessity consumable into a financial asset, it is subtle and has happened over a period of time, most people do not consciously realise that they are doing this as a result of the money being broken, but rather do it intuitively as it’s only rational human behaviour to act in a self preserving manner.
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When President Nixon decoupled the U.S. dollar from gold in 1971, we transitioned from hard money to fiat currency soft money. This change loosened the constraints on the central bank's printer and gave them the ability to print as much money as their hearts desired to fulfil their economic needs (war). This was when real estate began to be viewed not just as a place to live but also as a significant investment or hedge against inflation. This shift was the catalyst for increasing real estate prices, as demand was driven not only by housing needs but also by the investment needs of people trying to preserve their hard earned money.
When a society turns an essentially consumable item such as housing into an asset, several problems arise. One of the most significant issues is that it incentivises people to hoard it, much like investors might hoard gold or art. This distorts the basic function of the commodity which is to firstly provide shelter and help preserve life. Instead prioritises its value as an investment. The resulting scarcity can drive prices up, making housing unaffordable for many, particularly for lower income families . This leads to increased homelessness and social inequality, and the gap widens between those who can afford to invest in property and those who cannot afford basic shelter. The resulting problem cascades and worsens, much like an infected societal wound, because the root cause of the issue is being ignored. Yet! Our wonderful all knowing smart governments proposed solutions typically involve printing more money to combat the problem that was initially caused by money printing in the first place.
Not to mention, this is AGAIN further fuelled by the banking sector's willingness to lend against real estate as collateral, driving prices up and reinforcing its status as a valuable asset. When individuals take out mortgages or leverage mortgages to invest in further real estate, they're injecting more currency into the system as the banks create the money out of thin air. This further inflates the currency, destroying the purchasing power of everyday working class people. This is a hugely destructive cyclic feedback loop that ends in societal breakdown.
Imagine if society treated water, a fundamental necessity for life, in the same way. If water were increasingly viewed as an investment, people might begin to acquire and store vast amounts of it, hoping its value would increase over time. This would restrict access to clean drinking water for the general population leading to a situation where only the wealthy could afford ample clean water, while vast amounts of people would face dehydration and disease resulting in mass death.
The Solution is Bitcoin
When a society opts to use hard money such as bitcoin, real estate prices remain stable. This stability is due to the limited supply of money, which cannot be inflated easily. Property values do not skyrocket because there is no longer a need to use them as a hedge against inflation because the money itself fulfils its function as a stable store of value. Investing in property as a store of value when using hard, deflationary money would actually be counterintuitive and self-destructive, as your house would be depreciating against the native currency, plus you would be incurring unnecessary upkeep and maintenance fees. Properties would be primarily purchased to be used and lived in, as opposed to being hoarded as a store of value. The move to a bitcoin standard would return housing to its natural state as a human consumable, resulting in less homelessness and a more prosperous and flourishing society overall. Not to mention, a hard money drives a higher standard of craftsmanship, as houses are not being built as quickly as possible to facilitate investment needs, they are being built to facilitate an individual's personal standards and taste. The effect of hard money would ripple across and penetrate all areas of society, potentially leading to a renaissance.
Long story short, buy Bitcoin and save a homeless person.
