Thread: No one talking about Real Estate as Final Defense Against Inflation

Originally Posted by VacantHomeIns

All these post on this forum and I don't see anything about this. This needs to be stressed and may be the most important reason to buy real estate in the next 10 years. Our government is printing money and basically creating money and liquidity out of thin air.

Economics 101 means that inflation is coming unless the goverment takes a very aggressive stance on raising interest rates and they show no signs. If Inflation takes off owning anything you can drop on your foot wins over owning paper.

This subject has been discussed as I have personally spoken about it as one of the most important points of owning real estate. Real estate is on a commodity and is made up of commodities. Since commodities inflate in value during times of inflation real estate makes a very good inflation hedge. I think you missed a huge point though with your post.

This is a very rare time in the history of commerce in this nation. We are looking at both the downside and upside play are the same. You need to hold commodities, commodity based assets, or companies that control commodities or commodity based assets. I argue this point because the federal deficiet has gotten so large that if the worse comes true and we have an all out depression then the feds will be forced to default on treasuries. If our government defaults on treasuries you will see super hyper inflation as the dollar will become near worthless. This is because the only value the dollar has as a fiat currency is the credit of the federal government. Having the federal government default on their creditors will massively diminsh the world's view on the U.S. credit worthiness. Therefore bye bye dollar's value.

Now I would say that ownership of real estate on the downside play is much more important. But if things get markedly better we will see substantial global inflation as the Euro zone, England, China, and most other federal banks have all been printing money and devaluing their currencies. Which says the upside is inflation which means real estate is a good play as you have said.

I agree in principle, but you're carrying the inflation scenario to its logical extreme (failure of the dollar). The most likely scenario in my opinion, however, and the one I'd be willing to use as a basis for investment in any type of income producing asset, is that the government will do everything within its power to prevent worst case situations. It has already acted to prevent failure of individual companies such as AIG, Fannie Mae and General Motors; it will therefore certainly act to prevent failure of the currency upon which the entire ecomonic system of the world is based. It will also act to keep interest rates relatively low, (although perhaps not quite as low as what we see now), in recognition of the fact that low interest rates have been a key ingredient of economic growth over the past two decades. One of the differences going forward will be that some of the sources of potential abuse will be cut out of the system, so that the growth that does occur will be the result of fundamentally sound and economically rational decision making by all parties involved. Yes, I do believe that real estate markets are presently are in a time of unprecedented opportunity to "buy right" that may not be seen again in decades to come. But the days of fast lending to unqualified flippers with no personal economic stake in the deals are likely gone forever. Thanks.