160708

Greetings,

I was not surprised by my recent increased house tax assessment. Afterall, new neighbors were paying twice the value of what I thought the houses were worth. But I was shocked when my assessment jumped 47.22%! Is math behind these two related surprises? If so, does it portend good or bad?

In buying a house, one's math begins with the affordable monthly payment. With record low interest rates due to central banks propping up economies with floods of money, lower monthly payments means one can pay a higher purchase price. Market forces have responded to this consistent, now structural, increase in the money supply by initiating another inflationary bubble of property.

No one will or can stop this new round of Greenspan's "irrational exuberance." Yelsin, the latest Federal Reserve Chair, knows she cannot increase lending rates without causing a recession or worse. There will be no "quantitative easing" to stop the developing hyper-inflation except for popping the pimple.

In the early 1980s, I wrote "Homeowners don't beat inflation" wherein I said rising home prices would drive up food prices and taxes. Then, I pointed out that the U.S. was driving up home prices by exporting our unemployment and economic problems with "monetary colonialism." Trade deficits colonize the sweat and labor of others causing economic instabilty and inflation for both colonizer and colonized. A financial crisis was inevitable. 

The U.S. runs trade deficits because we have the world's currency which our habitual politicians print at will via T-bills. Exported dollars are bundled by foreign business owners to come back to inflate U.S. property prices, e.g., Chinese parents buying homes for their college-bound kids. Today, we still have the inflation of monetary colonialism along with central banks' usury mentality, that is, quantity not quality of money.

With a cradle-to-grave timistic analysis (measurements in time), home inflation is a losing proposition. The real value of anything is not the fools gold of funny number on funny paper. The real value is the time you receive from others when you sell something to them. In 1968, my grandfather sold his average, middle-class home to my younger brother for $20,000 which would have bought five years in a nursing home. Today, the average home is ten-times the funny number value but only 40% of the time value, that is, $200,000 will only buy two years in a nursing home. Likewise, the middle-class earns more dollars but has less free time than ancestors. To have the same middle-class lifestyle of 1980, one must work ten weeks longer--that a 20% longer workyear.

My favorite inflation gauge is a bag of chips at the checkout counter. In 2000, a four-ounce bag cost $.29. The last time I purchased chips, it was $1.49 for 3.5 ounces--a five-fold price increase! In 2007, my bi-weekly food cart cost $50. Now, it is over $200. I will have to give up my bags of chips since my monthly tax just jumped $60. If you believe the claims of no inflation at the grocery store then you must be on hunger strike.

A house should be viewed as a home not as a bank with equity loans. Therein is the basis of the next financial crisis: Rising housing prices will encourage the foolish to borrow and live beyond their means. Like all inflationary bubbles, excessive liquidity puts property under water. Already, again, business writers are repeating the mantra that we have a new economy in which the old rules no longer apply. Igknowance of Mother Nature's law is no escape.

Homeowners don't beat inflation. The #1 middle-class economic lie is that a house is a source of wealth. Our real wealth is the meaningfulness of our time in solving life's problems, not fueling foolish falsehoods. Rising market prices--not value--are a sign of disappearing buying power. Inflationary bubbles steal our time. Fools and their time are soon parted.

Thanking you in advance for any time and consideration,

Robert S. Barnett
3600 Anne Street
Richmond, VA
804-233-7541

P.S. If you think this is too long, but worthwhile, could you forward to OpEd page editor? Or, it makes wonderful kindling for the fireplace.

Just for the fun of it:

INFLATION: AN INFLATED WORD

'Twixt old apples and oranges now on sale,
Lie inflated gestures of hidden gold.
Inflation's gist? A harsh and schizoid word,
Wreaking havoc on fools, both blind and bold.

Against endless pain of unstopped 'flation,
Dins flattery, harping empty hedges.
Flares cries for strikes, but no gain of substance,
'Cept again, the middleman who fudges.

Before ancient reawaken groans will fade,
The flatulence of minds confused must pass.
Ask not of pols, long-winded talks possessed,
From them, again, you'll buy colluded gas.

Can "up and down" be found to sprout,
From a singular semantic seed?
Faults so planted yield fruits not ripe nor cured;
Blooms but benumbing stale, noxious weed.

Of all things both inflated and cheapened,
"Inflation" flames above as most abused.
Our sad singeing, suffering slide will stop,
When bifid 'flation's tongues are fused.