My second short take for today has to do with the housing market and the stock market.
For those of you that don't pay attention to these particular markets here in the United States,
let me tell you that in recent years they have been zooming upwards so much so
that a very scary word has come to be widely used to describe what's happened: a bubble.
A housing bubble and a stock market bubble. This word 'bubble' is used when someone's
judgment is that the prices have risen so far so fast that it's not sustainable
and that the minute the mood changes for whatever reason, you're going to see a crash,
a collapse, a movement down as frighteningly overdone as the movement up was.
Housing prices have gone nuts in this country over the last two years.
Not just the price of a home if you own it, but also the price of an apartment if you rent it.
And yet, what we're about to see is a population that cannot afford these prices. That is, the gap
between affordability (how much income you have) and the price of your home has gotten wider
and wider. And the reason we measure that is because you reach a point, a tipping point if
you like, where a majority of the people can no longer afford [it], and what that means is
that you're on the edge of a cliff. As people start to be unable to afford it,
well then suddenly the houses have to be sold because these people can't keep up their mortgage,
or the house has to be abandoned because they're fleeing their obligations to pay,
or the apartment has to be abandoned. And we are happy having this happen when? At the same time
that the government has ended the ban on eviction. So that, the landlords are now in a position
not only to raise the rents as they've been doing but to evict those who cannot pay.
We are looking at a potential tsunami of homelessness in this country, and we already have
a serious problem of homelessness in this country. And finally, the Federal Reserve,
to try to cope with the inflation generally, is raising interest rates.
The mortgage rate in this country has shot up in the last month and a half
meaning that the price of the house and the home is higher than ever, and the borrowing
cost to buy it is higher than ever. Either one of those alone could crash the housing market.
The two together at the same time? Watch out. And now the stock market between November
of 2021 and May of 2022, the largest stock market in this country, the NASDAQ market,
dropped by 25 percent. That's not a crash coming. That's not a burst to the bubble coming. That is
the bubble bursting. The stock market has had remarkable drops across the month of April,
and it's continuing in the month of May. This is a very serious problem.
Either the housing market or the stock market with crashes will have extraordinary
fallout effect across the system. Not just the United States but globally.
The notion that the economy of the United States is strong, which is what our leaders tell us,
is recovering from the crash and pandemic of 2020 and 2021?
This is one of the great examples of wishful thinking that I can think of in world history.
My advice to all of you: be very careful. Be very cautious. The gap between
fantasy and reality in economics is reaching frightening proportions.