By Nick Sorrentino
We are now 2 years into the “Great Recession and real estate looks increasingly bad. New home purchases dropped by 17% last month. Prices in most places are still trending down. And guess what? Credit scores for the country continue to come down, therefore making a tight credit market seem even tighter from an aggregate perspective.
Add to this the new rules for down payments on housing purchases, which may require as much as 20% down. The real estate industry is freaking out over this, but you shouldn’t. Now is a time to put things into perspective.
Time is money. Money also time, or can be.
What is most valuable to you? Is it time with your family, furthering ideas that you hold dear, talking with interesting people, helping to make you corner of the world a bit better? Or is getting a bigger house, a bigger car, more stuff, which you buy on credit from a bank that gets money from a central bank at 0% interest while charging you much more?
I guess that’s what really gets me. The big banks got free money, piles of it, though they managed their books like a degenerate gambler, as the wise guys say.
What’s worse is that we continue to let it happen because we have been told that a world without the big banks would not be a world we’d want to live in. Chaos would reign in the streets. We’d be begging the banks to come back and lend us the money they got for free. But it’d be too late because we let them die. We the people would be much worse off.
This is not true. Had the banks been allowed to collapse there would have been severe disruption to be sure. It would have been ugly. Things would have changed. For many however, things likely would have been better.
Don’t get me wrong, the stock market would have gotten hammered even more. But the dead underbrush of the economy would have been burned away. Soon, probably about now, real “green shoots” would have emerged.
But as we know it didn’t happen that way. The Fed did it’s best to keep the dead wood of the economy from burning, so now even more fuel litters the economy. The next fire will be much bigger than the last one. The big dead trees, the old inefficient companies, remain just waiting to ignite. The next fire will burn even hotter than the one in 2008.
It’s not all bad though. During times such as these, even as the Fed (which will ultimately fail) seeks to keep the old boys in power, the new kids are finding interesting and new ways to do business. These folks are America’s best hope. The next wave of entrepreneurs have the potential to much good for America and for the world.
I see so much potential in the young people of the world who understand markets on a fundamental level. They have grown up with voting videos and articles up or down. They understand the nature of spontaneous order, and understand that it is not something to fear. It’s in their DNA.
Perhaps over time this generation which is just starting to come into it’s own will embrace a free economy as a more just and sustainable route to prosperity. If the next economic wildfire doesn’t kill them off, the world has a chance.