“Inflation is everywhere and always a monetary phenomenon. It is always the result of money growing more rapidly than is output, because money, in its fiat form, only represents value, it has no value on its own.”

This is the standard Friedmanite description of inflation: more money than output, more inflation. It isn’t quite right, though, as the most_recent episode with real estate shows (a previous episode was the S&L “crisis” in the mid-1980’s–it showed it too, but that’s another story, how so many people missed it.)

In the great property bubble, all that was necessary to get a mortgage funded was to show that the property up for sale was worth some value as determined by an entire network of (self-interested) players. This is hard to try to cram into a single sentence, but every player–the seller, the real estate agent, the buyer, the appraiser, the mortgage lender–all had a strong incentive to get the mortgage approved. Only builders were involved in any sort of “output” as it is commonly understood.

In each case, every player in the game had an incentive to maximize their return by behaving in a certain way.

The seller made more money by selling the property at the highest price possible, obviously.

The real estate agent made more money because he was paid on commission–higher price, higher commission.

The buyer wanted the property so that he could sell it later to a “greater fool” (and the buyer was subsidized in this belief if lived in the house for at least 2 years then the capital gains -up to $500,oo for a couple-would be tax-free).

The appraiser wanted to please the mortgage company, so he was inclined to go along with the highest appraisal possible. (I say this because I actually experienced this attitude when we refinanced our mortgage.) It also came to me from an appraiser that if he wanted to keep working , he’d keep appraising at the high end of the estimates.

The mortgage lender (the original mortgage lender, that is) wanted to create a mortgage as high as possible because he could then sell the mortgage for more money.

Maximize profit, all along the line. Turned out to be a major disaster.

Because the price of housing isn’t based on “estimated value” of any sort, but is instead based on the ability of the buyer to pay the mortgage. About 3 times gross annual earnings is all that a buyer can pay for a house. That’s reality.

And now trillions of dollars of that supposed “wealth” just vanished.

An earlier comment that you made regarding the restraint on the creation of money was absolutely right. It has always been very hard to keep the creators of the money in check, especially when creating more money might get them reelected.

But tying the supply of money to the supply of gold and/or silver only represents the supply of gold/silver that a nation has. We need money that represents the economy, and is should be created by the Congress. That is the Constitutional mandate.

Is it not time to move on and realize that one must not expect to gain at somebody else’s expense? Why the rest of the world has not invaded and taken over this country, subsequent to the massive financial fraud perpetrated, is beyond me. We threaten to nuke any country who dares to look at us the wrong way. This is why our time at the top has come to an end.

I would like to thank, from the bottom of my heart, the business and political leadership in the United States, for squandering two centuries of goodwill for your own pathetic insecurities. You are truly the essence of everything corrupt our forefathers left Europe over. Take yourselves and your central bank and go back from whence you came and leave us the hell alone, or one of these days, we will point those weapons of yours, at YOU!!

the TIPS spread has been widening out..

better there, than getting widened out in some Long-Only ‘Equity’ Fund run by some guy who’s merely looking to lend stock to Shorts..

Trend reversal.
New leadership.
Positive policy shift.
Improving global fundamentals (discounting the tripe reported by thumb-sucking book-talking CNBC, Bloomberg and other media talking heads, pumpers and touts).

This rally is bullshit.

Not owning a NYC shoebox may yet prove to be a wise decision.
Supply can be a bitch, in the absence of demand, I am told.
At Schadenfreude Asset Mgmt, the shoebox exchange is a market we watch with interest and no little relief.

I hear you, it’s too bad there isn’t ETFs of those thing you listed, they, too, are heading South, in Real terms..

esp. those ’shoeboxes in the sky’

though, to DL’s point, re: CPI, it’s a big Reason I don’t care for TIPS, note the USTreas isn’t soo stupid as to link those Bonds to something they can’t, most readily, control..if only they’d extend the portfolio duration of their Borrowing, one could, almost believe they were wearing the Uniform w/ R, W &B..