Real Estate and the Federal Reserve
San Juan Capistrano, CA · Member since 2013 · 4 posts · 0 votes
http://cashtalks.co/how-the-federal-reserve-printing-money-affects-you/
Basically says Real Estate will be a good bet as inflation continues to increase because of unregulated money printing. Thoughts?
I believe the article displays a fundamental misunderstanding of the US monetary system. It states flately that each dollar printed dilutes the value of the Dollar. I think the best way to equate this especially in a real estate forum lense is this. Every Dollar an investor puts into a property is one less Dollar that the investor can make on the property. We know this to be false as we purchase a property for a certain price and lut more money into the property so that the value increases and we can turn a profit. Now this is not to say that some money could be wasted. An investor could put a $10,000 floor in a kitchen that would never return more than 30% of that value or paint the same walls multiple times, you get the idea. In this same way as the Federal Reserve prints currency for the Benefit of the United States it wlIll have many positive uses and its share of negatives as well. The Federal Reserve returns the vast majority of its profits to tge US Treasury as well. The Federal government controls fiscal policy where as the FED controls monetary policy. Another inaccurate comparision is the mention of Zimbabwe and Weimar Mark. These currencies were not destroyed because they printed too much money, I argue that that was the symptom to main problems of an overthrown government, a war ravaged or otherwise incapacitated economy and maybe most importantly owning national debts in something other than the currency in which they are the monopoly supplier of.
As for precious metals, I do not see them as a long term store of value. People seem to be nostalgic about the gold standard but fail to realize that the US is a fiat currency system and actually needs to operate as such in order to fully utilize its potential. I think the US Dollar and the US economy will continue to remain strong as we continue to innovate and remain verh competative with the US infrastructure. As for real estate investment I am obviously biased but I believe it will be a great long term investment for a variety of reasons.
If the Federal Government someday believes that it can no longer spend or possibly run out of money then no investment will really be safe but in the end I do not believe that that will happen, not because they know better but because it would be politically difficult. Lastly the referenced article states that the Federal Reserve is printing money and it is backed by thin air. It is looked at as this is a bad thing and how this is a huhe change. Every single Dollar ever printed was from thin air.