I agree – the cause is the availability of capital, not the value of currency. They are different.
Money supply does not have to increase in order for captial markets to open up.
If the decreasing value of currency was the cause of house price inflation, we would see an increase in both rent and home values because they are tied to the same value of use and the same currency and, to some extent, the same supply.
I’m not saying “There is no currency inflation.” I’m just saying that currency inflation is not the exclusive or even major cause of this housing bubble.
If you believe it is, then you must believe that as housing prices come down, the value of your dollar is increasing, which it won’t be.
You must believe that as capital markets tighten up (fewer people willing to lend money), it is because the dollar has become more valuable.
I think captital markets will tighten up and the value of the dollar will continue to decline. Thus, housing prices will fall, rents will increase, and eventually they will meet. i.e. Availability of capital will affect house prices more so than the value of the dollar, and inflation will continue to bring rents up.
