Predictions

[contentrenter]

I made a $100 bet with a coworker today that real SD home prices will decline 20% within three years. What do you think?

[lendingbubblecontinues]

I think you will lose because your prediction is WAY too conservative. I hope you said %20 percent or more.

[powayseller]

I bet a bottle of champagne that prices will decline by 50% over 5-6 years. I made the bet with a couple who got out of the SD housing market a couple years ago and has been renting since. Now the wife is tired of renting, and I think he’s going to cave and buy her a house when they move to San Francisco this summer.

[4plexowner]

Here’s a fun game to play.

Figure out how many ounces of gold you could buy if you sold your real estate today. (Gold closed around $550/oz today)

Gold will be at least $1650/oz before 2010 which means the value of your real estate will decline by a factor of 3 compared to gold.

Another way of stating this is that your million dollar property today will be worth $333K before 2010 if you price it in real terms (gold and silver are the only real money).

Going from $1 mil to $333k is a 66% drop but it might take 4 years instead of 3.

My points above only address debasement of the US fiat dollar (the price of gold is a measure of this debasement as it has been throughout history). There will also be a decline of house prices in nominal terms so the end result will be even worse.

It blows my mind that anyone is buying real estate these days!!!

[barnaby33]

I take umbrage with the statement that gold and or silver are the only real money. When you get right down to it money is merely an idea. Nothing is really money if no one will accept it, and the mere fact that most but not all societies have historically based their currencies on the relative scarcity of gold does not make it real money, anything more than the round cut stones used for money in polynesian cultures. Anything can be money as long as people will accept it in trade for goods and services.

The proof of this is the fact that paper money has not been needed to be backed by gold to hold up as an exchange medium. What I will grant you is this. If there is a systemic shock to our economy people will want to know that their money is worth something and will only trade for things that they know are scarce and desirable. Then gold becomes money. If I can’t walk into Trader Joes and get a bottle of 2 buck chuck half a gallon of milk and a loaf of bread with it, it ain’t money. If I can it is.

Josh

[powayseller]

Well said, Josh, but I would go further and say that if there is systemic shock, the most valuable commodity is food.

The gold bugs are in love with the allure and glitter of gold, but have they ever considered how they would pay rent with the darn thing?

To me gold is not money (at least today), and to 4plexowner it is, so assume we were negotiating the price of my used vehicle, and he wanted to pay me in gold. I wouldn’t make the deal. I would rather have dollars than gold. Thus, we don’t have a medium of exchange. So by definition, how can it be money?

At what point would someone like me become convinced to take gold instead of dollars? When would Trader Joes take gold instead of dollars? Only if there were a widespread acceptance of gold as a medium of exchange.

And I wouldn’t bet my hard earned money that gold will keep going up. Gold is a very volatile commodity. It could go up to $1600, and it could go down to $115. And no one would be able to explain the movement in either direction, except to say investors were excited, or panicked, or the demand for jewelry went down. The greatest demand for gold is from jewelers! So much for it being money. There seems to be no intrinsic value to it.

[4plexowner]

Money serves several purposes. The purpoase that we are most familiar with is money as a medium of exchange. I exchange my labor for the US dollar because the grocery store isn’t interested in my skills as a computer programmer. Paper money, sea shells, wampum, tobacco, cattle – all of these forms of ‘money’ fulfill the purpose of being a medium of exchange and all of these have been used as ‘money’ at some point in human history.

The main aspect of ‘money’ that paper dollars do not fulfill is to be a store of value. That means when I have extra ‘money’ I want to put it away for a rainy day and I want that ‘money’ to have the same purchasing power in the future as it does today.

In 1913 the Federal Reserve was founded and the US dollar has been declining in value since. Today, the US dollar is worth about 3 cents compared to its purchasing power in 1913. This monetary debasement is a hidden tax on the citizens of any country that uses fiat currency and allows that currency to be debased.

Politicians use monetary debasement to finance their welfare schemes (ie, buy votes) and to finance their foreign wars. If they tried to finance these activities via taxes (their only other way of raising money), the citizens would revolt and then the politicians’ games would be over. Since most people won’t learn how the monetary system works (and this info has been intentionally removed from the education systems of western society), monetary debasement is easy to pull off without the citizens taking offense. They even brainwash the population to think that 2 or 3% inflation is necessary and even good!

2 or 3% inflation for 93 years has reduced the value of the US dollar by 97%. It won’t be too much longer before the final 3 cents worth of value is gone.

It is only when monetary debasement becomes extreme that the price of gold begins to rise. And that is where we are today.

Yesterday, the 23rd of March, 2006 was the last time the Federal Reserve is going to publish the M-3 monetary aggregrate numbers or the repurchase agreement numbers. Why is the US Federal Reserve the only central bank in the world that is choosing to hide this critical aspect of its banking system?

Please educate yourself on the monetary system in the US. Start by reading “Creature from Jekyll Island.”

Silver and gold have been used as money for at least 5000 years. I am humble enough to believe that my ancestors probably figured out the best form of money during those 5000 years – ie, if sea shells or wampum or fiat paper was a better form of money than silver and gold we wouldn’t be having this discussion.

[powayseller]

Thanks for taking the time to reply. However, I still don’t “get it”. Wages have gone up, along with prices. So we are not worse off than our ancestors. Actually, we are better off, since we have heating, a/c, running water, access to health care (even if it’s only the ER), and most people have a car and TV. These items were luxuries that not even kings and queens could have. Only a thousand years ago, people spent their days just eking out survival. So we are much better off, and we had to go off gold, because there isn’t enough of it to be used as a medium of exchange. As population increased, and we needed more gold to continue exchanging, there was no more gold available; voila: paper money.

I don’t trust the government on everything either, but buying gold doesn’t seem to improve my personal financial situation; rather, it puts it at risk.

And just because our ancestors did it, doesn’t make it better. That argument doesn’t serve to sway me.

If you have any reason to think that someday everyone will accept gold as payment, let me hear it. What would have to transpire for my landlord/grocer/electric company/IRS to accept gold as payment?

I don’t want to read Jekyll Island. I’d rather just have you tell me how you see that gold could ever become a medium of exchange.

[barnaby33]

Your second point is even more nebulous, money as a store of wealth. Yikes that is one of the great debates of history. Since its really hard to define wealth is, we all see different things as wealth. It is even more derivative to claim something is an effective store of wealth.

I understand some of the historical context of why you would make that statement, but I don’t agree with it. Money, wealth, value, these are all concepts which have tended to vary throughout history. I will end my contributions to this thread by saying this.

Past performance is not an indicator of future results. How we view concepts such as money and wealth are relative to the lives we lead. Unless the context of those lives is changed dramatically our conceptualization will not change dramatically. One generations asset is anothers liability.

Josh

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