Sunday, November 30, 2008
The Paradox Of Plenty
If we all managed economic wealth responsibly we would never, ever have to go through periods of recessions in North America.
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There has never been the shadow of a doubt in my mind that if one of those little green aliens flying UFO’s way up there in the sky were to add all the brainpower our North-American societies are so very plentiful of, he or she would definitely think twice before considering Homo Sapiens an undeveloped, undereducated, undercivilized, underachieving and overall somewhat primitive creature. If this little alien were to take into account all the intelligence that our Presidents, Prime Ministers, Congressmen, Members of Parliament, Senators, Chairmen of the Boards of a plethora of Corporations large and small, luminaries of all sorts and walks of life and indeed each and everyone of us put in behind the economic and business decision-making processes we make on a daily basis, he or she would crank up the engine of the UFO (possibly fuelled not by oil or other fossil derivative) and shoot away in the Universe all the way back to Alpha Centauri or wherever he or she came from in the first place.
But then, if in fact in this great continent of ours we are all so smart and capable at figuring out the overall economic picture, why is it that every so often we have to go through periods of economic downturns? For one thing, monetary policies reflect valuations of what we have in terms of economic resources and how we use them and, to a certain extent, they are also a reflection of who we are. They are Capitalism way of dealing with national wealth in an all-encompassing fashion, which in turn determines our economic stability or instability for years to come.
Take for instance the situation wherein windfalls flow in from exports fuelled by excessively low interest rates, which ultimately push up the value of currencies and in turn decimate other areas of the economy, most notably manufacturing. Overall growth suffers as the “easy money” resource sector crowds out more productive sectors, thereby tending to bring in economic stagnation and, in the limit, de-industrialization. Or, more perniciously, the other situation wherein wealth is increasingly bestowed rather than earned, as it has been the case in recent times with speculative trends in both the Stock Market and in Real Estate, where winners came to dominate losers, at least in financial terms or, by way of another example, with excessive access to credit on the part of consumers that has resulted in the spread of debt, as opposed to distribution of wealth, to endemic proportions.
In fact, it can be safely stated that lack of an even distribution of wealth through sectors of society is a main underlying cause of recessions. When resources are harnessed in such a manner so as not to promote general economic vigour, this is the time when economic expansion sooner or later will come to a halt. What economists define as the “polarization of wealth” may come in different forms, but it is more typically present when governments’ ability or otherwise willingness to resist short term grab–and-run tendencies and temptations is impaired. This particular economic concept, it must be noted, is a far cry from the parallel but dissimilar political doctrine of “redistribution of wealth” first enunciated by Karl Marx and Friederich Engels in their Communist Manifesto of 1848, and most recently and so successfully re-enunciated by President-elect Obama during the 2008 electoral campaign, hopefully with a different nuance. With the difference consisting mainly in the fact that the economic concept of polarization of wealth lacks the reference to struggles between the ruling class (capitalist bourgeoisie) that owns the means of production and the working class (proletariat) that labours for a wage, which is present in the political doctrine. In fact, in capitalist economic theory capital and wages complement and are intertwined with each others.
Wealth dependence on speculation, as opposed to production and investment, creates the illusion of prosperity which is, in ultimate analysis, destabilizing for the economy. Speculators, more often than not, reduce liquidity by inflating prices. This has the deleterious effect of reducing the pool of buyers, thus hampering demand and reducing prices even further. By comparison, instead, investors buy and hold capital assets, which are not consumed instantaneously but rather are to be used at a later date. Thus, for example, the purchase of a house to be used as one’s primary domicile and place of residence is an investment and much more beneficial for the economy than, say, the purchase of a second or third house with the intent of flipping it or otherwise re-selling it for a hefty profit in the short term.
Capitalism, of course, does not condemn making a profit – and neither do I. But it is the speculative excesses that we have witnessed in both the stock markets and real estate these past few years that have altered and skewed the relation between personal income and capital appreciation in favour of a few to the detriment of the many, particularly when fuelled by easy access to credit. And all this has resulted ultimately in a gross mismanagement of national wealth for which we now have to pay the cost.
Greed, like just about everything else, has a price.
Luigi Frascati
But then, if in fact in this great continent of ours we are all so smart and capable at figuring out the overall economic picture, why is it that every so often we have to go through periods of economic downturns? For one thing, monetary policies reflect valuations of what we have in terms of economic resources and how we use them and, to a certain extent, they are also a reflection of who we are. They are Capitalism way of dealing with national wealth in an all-encompassing fashion, which in turn determines our economic stability or instability for years to come.
Take for instance the situation wherein windfalls flow in from exports fuelled by excessively low interest rates, which ultimately push up the value of currencies and in turn decimate other areas of the economy, most notably manufacturing. Overall growth suffers as the “easy money” resource sector crowds out more productive sectors, thereby tending to bring in economic stagnation and, in the limit, de-industrialization. Or, more perniciously, the other situation wherein wealth is increasingly bestowed rather than earned, as it has been the case in recent times with speculative trends in both the Stock Market and in Real Estate, where winners came to dominate losers, at least in financial terms or, by way of another example, with excessive access to credit on the part of consumers that has resulted in the spread of debt, as opposed to distribution of wealth, to endemic proportions.
In fact, it can be safely stated that lack of an even distribution of wealth through sectors of society is a main underlying cause of recessions. When resources are harnessed in such a manner so as not to promote general economic vigour, this is the time when economic expansion sooner or later will come to a halt. What economists define as the “polarization of wealth” may come in different forms, but it is more typically present when governments’ ability or otherwise willingness to resist short term grab–and-run tendencies and temptations is impaired. This particular economic concept, it must be noted, is a far cry from the parallel but dissimilar political doctrine of “redistribution of wealth” first enunciated by Karl Marx and Friederich Engels in their Communist Manifesto of 1848, and most recently and so successfully re-enunciated by President-elect Obama during the 2008 electoral campaign, hopefully with a different nuance. With the difference consisting mainly in the fact that the economic concept of polarization of wealth lacks the reference to struggles between the ruling class (capitalist bourgeoisie) that owns the means of production and the working class (proletariat) that labours for a wage, which is present in the political doctrine. In fact, in capitalist economic theory capital and wages complement and are intertwined with each others.
Wealth dependence on speculation, as opposed to production and investment, creates the illusion of prosperity which is, in ultimate analysis, destabilizing for the economy. Speculators, more often than not, reduce liquidity by inflating prices. This has the deleterious effect of reducing the pool of buyers, thus hampering demand and reducing prices even further. By comparison, instead, investors buy and hold capital assets, which are not consumed instantaneously but rather are to be used at a later date. Thus, for example, the purchase of a house to be used as one’s primary domicile and place of residence is an investment and much more beneficial for the economy than, say, the purchase of a second or third house with the intent of flipping it or otherwise re-selling it for a hefty profit in the short term.
Capitalism, of course, does not condemn making a profit – and neither do I. But it is the speculative excesses that we have witnessed in both the stock markets and real estate these past few years that have altered and skewed the relation between personal income and capital appreciation in favour of a few to the detriment of the many, particularly when fuelled by easy access to credit. And all this has resulted ultimately in a gross mismanagement of national wealth for which we now have to pay the cost.
Greed, like just about everything else, has a price.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
Wednesday, April 23, 2008
The Curse Of The Crude
In 2006 the world's oil rigs pumped out crude at a rate of nearly 85.5 million bbl. a day. They haven't come close since, even as prices have risen to USD 115 per barrel and are forecasted to reach USD 150 per barrel twelve months from today (source: www.oil-price.net ). All of which raises a question of potentially epochal significance: is it all downhill from here?
It's not as if nobody predicted this. Survivalists, despisers of capitalism, a few billionaire investors and a lot of respectable geologists have long cited the middle to the end of this decade as the likely turning point. Governments and the oil industry have typically dismissed such talk as premature. There have been temporary drops in oil production before, after all. In most official scenarios, production will soon rise again, peaking at more than 110 million bbl. a day around 2030.
But the official scenario doesn't seem to hold water - oil if you prefer - anymore. Even taking the 2030 deadline as true, the implication is that the optimists think we have less than three decades to go. But the fact of the matter is that the word from producers is getting gloomier by the day, to the point that many of them openly agree that oil production will never top 100 million bbl per day. The International Energy Agency warns that new capacity additions will not keep up with declines at current oil fields and the projected increase in demand, forecasted at 1.5 percent more in 2008 or 1.3 million barrels a day.
This isn't quite the same as saying that oil production has peaked and is about to start declining sharply. The big issues are not so much geological as political, technical, financial and even human-resource related. All these factors delay the arrival of oil on the market, meaning that production would not so much peak as plateau. But with demand rising sharply, especially from China and India, even a plateau could be precarious.
The world is not running out of oil. There are massive reserves available in the Alberta tar sands, Colorado shale, Venezuelan heavy oil and other unconventional deposits. The problem is that most of this oil is difficult and expensive to extract and even harder to refine, and is not likely to account for a significant share of global production anytime soon.
Almost everybody agrees that the pumping of conventionally sourced oil outside OPEC has peaked already or will peak soon, a reality that even discoveries like the recent 8 billion-bbl. find off the coast of Brazil cannot alter, because production from so many existing fields is declining.
The big question mark is OPEC, which represents the oil powers of the Middle East and a few other big exporters, and which currently accounts for 41 percent of world oil production. Every optimistic scenario assumes that this share will rise dramatically in the coming years. And of course the implication of this is that if things turn out well, North America and Europe will become substantially even more dependent on middle-eastern oil.
Then there is the gloomy view, postulating that Saudi Arabia - OPEC's top producer - cannot pump much more oil than it does now. In fact, in recent times Saudi out put has dropped from 9.6 million bbl. per day to 8.6 million, despite rising prices.
So far the answer from OPEC leaders has been that high prices are the fault of speculators and the falling dollar, not low production. They cite stats after stats showing that there is more than enough oil for sale right now. The price pressure, they point out, is coming from financial participants in futures markets. All this may be true, but the reality of things, however, is that if OPEC members are not able to boost production in the coming years, it will be impossible to keep blaming the traders as prices rise.
Voices are loud out there that cheap oil is the essential fuel of modern capitalism, which will founder without it. On the other hand, a more hopeful take is that innovation is the essential fuel of capitalism, so that high oil prices will drive rapid advances in conservation and alternative energy. Either way, the beginning of the end of the oil era may be upon us well ahead of schedule.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
Sunday, April 15, 2007
The Economics Of Brain Power
Investigating whether in these times of globalization, those of us who are left behind living in North America are in fact a bunch of morons – the whole 330 millions of us.
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Is Economics a matter of opinion?
Well, we do our best not to make it as such, but then politicians come around and ruin pretty much everything we do. For instance, the recent stats of economic indicators showing a progressive slowdown of the economies in North America has gotten politicians of all colors, shape and form up in arms and crying out loud that both the United States and Canada are losing not only jobs, but indeed also talented people to the emerging economies.
Recently released figures from the Bureau of Labor Statistics show that whereas the median income in the U.S. finally ticked upwards in 2005 after a steady decline spanning throughout the previous five years, that is good news only for the top twenty percent of earners - those making more than USD 90,000 a year. Below that, everyone lost ground to inflation.
Likewise, household income has increased, but individual earnings have actually decreased. The likely explanation is that more members of households are working to make ends meet. Moreover, the real estate boom of the past several years has made Americans and Canadians feel richer, since millions of people have used their home equity like credit cards. But now that home prices are reversing and the equity shrinking, the money pool looks more and more like a sterile pond.
And as to job growth, although the unemployment rate stood at a low 4.7 percent in September, that does not include people who have given up looking for work. What is worse, the percentage of the working-age population that is employed remains below its January, 2001 level.
At the root of it all many in the political entourage seem to be saying that we are losing jobs because we are losing talent - that is those of us skilled, intelligent, educated and entrepreneurial enough to create jobs in the first place - to the emerging economies. Which then by proximate causation leaves the rest of us, the morons, out in the cold.
One great misconception is that the number of jobs is fixed, so that if some of them move abroad there must be fewer left at home. This is, of course, absurd in that the economy is in continuous movement and jobs appear and disappear on a daily basis. But even if the number of jobs were fixed, the fears of a great job migration are highly exaggerated.
The McKinsey Global Institute (http://www.mckinsey.com/mgi/) has conducted a large-scale study of the offshoring markets and has concluded that constraints on both the demand and supply side will keep the number of service and managerial jobs moving offshore much lower than it is widely believed. More specifically, the aggregate number of jobs will likely rise from 1.5 million in 2005 to 4.1 million in 2008, representing 1.2 percent of the demand for managers and labour in the developed world.
Contrast this with the normal job turnaround in North America where 4.6 million individuals start with a new employer every month.
As to our brainpower going abroad, especially the brain drain from science and engineering, that also is too exaggerated. Particularly the concern that our colleges and universities are not up to par with their counterparts abroad, both in Asia and in Europe, and the concern that we generate fewer students willing to grapple with difficult scientific problems and that there are too few teachers qualified to teach them are also nonsensical.
Many of the figures that have set alarm bells ringing - those millions of Chinese engineers, for example - are misleading. The McKinsey Global Institute calculates that in 2004 there were far more young engineers in North America who were capable of working for multinational corporations than China - 540,000 against 160,000. There are problems with cultural and language skills in China, and the quality of education is often inadequate as well. China may very well have twice as many engineering graduates as America, but only ten percent of them are equipped to work for Western multinational conglomerates. And as to Chinese teachers and their level of skill, it pays to remember that in 1966 - 1976 the brightest and sparkiest people were dumped into labour camps.
China's biggest problem is a culture of deference - for many Chinese it is bad form to question superiors. Because of this, China has so far been much more adept at borrowing other people's ideas than producing its own, particularly when it comes to high-tech innovation.
In fact, North America has still an overwhelming advantage in the war for talent. One is the quality of the universities, which regularly dominate global league competitions. The second is the quality of the business environment, from the ready availability of venture capital to the skilful management and the willingness to pay for the best people. The top eight regional ‘knowledge economies', measured by such things as patent registrations, investments in R&D and the proportion of knowledge workers are all in North America.
If economic stats are less than satisfying, the fault may be found in places other than the intellectual and educational capabilities of our society. Perhaps they can be discovered in the shortcomings of our political cadre, with the lack of leadership, the penchant for procrastination and the continuous partisan bickering, all but futile, misguided and counterproductive. But be as it may be, dear politicians, if in fact We the People are still the best intellects the world has to offer, then that leaves by exclusion only one group holding the North-American Golden Trophy Of Stupidity - you.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
Tuesday, February 13, 2007
Shifting Gears: The Increasing Power Of The Emerging World
Examining the change of the world's economic power structure.
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Globalization - unquestionably a democratic concept that puts all mankind on the same platform.
In Economics there is a special sentence to describe this process of equalization, referred to by politicians as ‘globalization': economists call it ‘Democratization of Wealth'. The democratization of wealth among nations is theoretically almost a perfect concept, save and except for only one drawback: as poorer countries are getting richer, richer countries are getting poorer.
Economics and politics have been always integrated, dependent and intertwined with one another, but whereas politics - and politicians - focus on momentum and balance of power in hopes of writing history for posterity, economists provide the backbeat. Economics does not determine history per se, but it does provide the environment for politicians to move around and, thus, write history - or trying to.
Let me make an example. Only a short fifteen years ago or so the world looked much, much different. The political landscape consisted of two powerful, monolithic assemblies of nations: us - the ‘Free World' - and them - the ‘Communist Bloc'. The United States and Western Europe formed the bulk of the countries of the Free World while Soviet Russia, Eastern Europe and Maoist China formed the bulk of the Communist Bloc. As to the remainder of the countries, which did not belong neither to the Free World nor to the Communist Bloc, they were collectively referred to as the Third World. If Western strategists during the Cold War era can be found guilty of something, it is that they probably spent too much time worrying about the Soviet Union's military clout and too little time analysing its economic frailties. But it was economics, not politics, which ultimately brought the soviet bear down to its knees.
And another lesson that politicians never seem to learn, is that history - far from being new and exclusive - invariably repeats itself. For instance, until the mid-19th century China and India were the world's biggest economies. Then the West, through technological prowess, spirit of freedom and sound economic principles took a giant leap ahead. But today we are assisting at the restoration of the old order.
The emerging world already accounts for over half of global economic output measured in purchasing-power parity, which allows for lower prices in poorer countries. And, moreover, a barrage of statistics shows that economic power is shifting away from the ‘developed' economies - such as North America, the Euro Zone, Japan and Australasia - towards emerging ones, especially in Asia. Developing countries chew up over half of the world's energy and hold most of its foreign-exchange reserves. China has amassed more than USD 450 billion in foreign-exchange reserves and India too has seen a marked rise in international reserves, to roughly USD 200 billion.
The share of exports of the emerging economy has grown exponentially from twenty percent in 1970 to forty-five percent today. And although Africa still lags behind, the growth is fairly broadly spread. They may be the most talked about, but according to the World Economic Council Brazil, Russia, India and China account for only two-fifths of emerging world's output.
Clearly, no social or economic change of such an enormous size can take place without friction, and perhaps the most evident and ominous sign of it is the uproar about jobs being ‘outsourced' to India, China and, to a lesser extent, Mexico and South America. Not surprisingly, many perceive the growing competition especially from China and India as a significant threat. And some are wondering how anyone can compete against countries that have such huge pools of cheap labour and, at the same time, access to the latest technologies.
It was a combination of demand for inexpensive products and domestic competition that has spurred companies to open subsidiaries to produce goods and services in China and India, so as to take advantage of an almost inexhaustible pool of cheap human resources. Outsourcing, however, from a strict economic perspective is not an entirely negative phenomenon. Robust economic growth in Asia, which is lifting hundreds of millions of people out of poverty, is creating more demand for goods and services from the industrialized countries, thus providing a much-needed boost to global economic growth. Indeed, preliminary data suggest that China has vaulted into third place among the world's most important importers, behind only the United States and Germany. Globalization is not a zero sum game: Mexicans, Indians and Brazilians and Chinese are not growing at the expenses of Americans, German, Japanese and the British.
There are, furthermore, wider ramifications of a political nature as well. For one thing, China's rise has helped push India and even Japan closer to the sphere of influence of the United States, and South Korea farther away from it. Likewise the West, as well as hundreds of millions of people in the developing countries, has benefited and continues to benefit from the growth of the emerging world. Besides political alliances, as consumers of the emerging countries get richer they will become more educated and their societies more stable. In a way, democratization of wealth is also democratization of societies, and perhaps the greatest contribution to the annihilation of those few tyrannical political systems that still pervade the planet and enslave their own people into submission.
The world is on course for its fastest ever decade of growth in GDP per capita, which has been powering ahead at an annual rate of 3.2 percent since the onset of the millennium - one of the most accelerated ever in the political and economic history of humanity. Let us only hope that our great leaders and politicians of all colors be wise enough to appreciate the fact that a world in which most people enjoy prosperity and opportunity is surely better than one in which eighty percent of them are mired in economic stagnation.
And let us further hope that our great leaders and politicians - and indeed the leaders and politicians of all nations - may come to terms with the ultimate truth that cooperation and dialogue, not confrontation and war, are the solutions to mankind afflictions.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
Tuesday, January 23, 2007
Outsourcing And Domestic Demand: The Case For Real Estate Capital Growth
A paper spotlighting how outsourcing benefits domestic real estate growth.
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It is an undisputed fact that market economies, in Capitalism, are moved by the supply and demand for goods and services. Specifically as it relates to the Real Estate sector, the basis for the real estate market is the demand by households, businesses, governments and institutions for space and shelter to conduct activities. And moreover, since according to the National Association of Realtors the aggregate size of residential real estate markets in the United States measured by sales volume accounted for almost USD 57 billions in 2005 alone, the impact of households' demand for residential real estate products is huge.
When people acquire income they tend to invest it, and the more people that acquire income the more people that tend to invest it. Therefore, there is a correlation between capital and employment in real estate or, if you will, between income and labour. An increase in levels of consumption sets forth an increase in prices caused by a corresponding increase in demand, in itself generated by a commensurate increase in the income-employment factor.
It follows, therefore, that growth is derived by the equilibrium of capital and investment with labour and employment. And since, furthermore, production is in direct function of consumers spending which increases as unemployment falls, it follows that capital accumulation increases as employment rises and capital accumulation decreases as employment falls. Which fact, therefore, brings up to light the importance of the conditions of domestic job markets for real estate. All the more so at a time when - due to an ever more efficient process of economic globalization - we are witnessing a constant migration of jobs from North America to emerging economies abroad.
Globalization and outsourcing were, in fact, the focus of the annual symposium held by the Federal Reserve Bank in Kansas City. The topic being floored and examined by the top minds of the economic world was how the rise of China, India and other countries is reshaping employment and wages within the North American economy.
It is commonly believed that wages of workers in rich countries are being depressed by the shift of jobs to low-wage countries, but the debate undertaken at the symposium has offered a much rosier view, with economists arguing that off-shoring can actually increase the wages of domestic workers. The general feeling was that outsourcing boosts firms' productivity and profits, thereby enabling them to expand and, consequently, to take on more workers at home to perform jobs that cannot be easily moved abroad. In essence a line is being drawn between low-paying, unskilled jobs that can be transferred to emerging economies like those of China, India and, to a lesser extent, Russia vis-à-vis higher-paying, skilled jobs that remain in North America.
Clearly, whereas low-paying, unskilled jobs have a minimal to zero effect on the consumption of domestic real estate products, the scenario changes drastically with higher-paying jobs.
Outsourcing and jobs migration is a topic that has just as many political connotations as it has economic reverberations. Critics of outsourcing are quick to point out that between 1997 through 2004 the streamlining of companies through off-shoring was not enough to create sufficient higher-paying jobs at home to offset the outflow of low-paying jobs abroad. And that evidence does exist, furthermore, to the extent that in America, the Euro Zone and Japan total wages have actually fallen, in real terms, to their lowest shares of national income whereas the share of corporate profits has surged. An obvious indication that many ‘leaner' firms have opted for retaining their earnings as opposed to re-investing them in the domestic work pool.
Specifically because of this, Prof. Ben Bernanke, the Chairman of the Federal Reserve System, has argued at the symposium that the scale and pace of globalization is unprecedented and that the overall gains will be huge. But he has also warned that there is a risk of social and political opposition as some workers lose their jobs. The Chairman has urged policymakers, therefore, to ensure that the benefits of global integration are sufficiently widely shared through the echelons of the economy, so as to maintain support for free trade and enhance the democratization of wealth.
Real Estate stands to gain the most by a more evenly shared distribution of wealth in North America, both from the standpoint of increased demand and of increased inventory production and supply, for when people feel rich they spend - a psychological effect known in Economics as "The Wealth Effect". Despite the near-term moderation in the number of existing home sales, the housing market can all but continue to benefit from expected positive long-term economic fundamentals including expansion of gross domestic product generated by job creation and investments, coupled by a monetary policy of continued moderate interest rates.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
Saturday, January 13, 2007
Why Does The Real Estate Chronicle Cover Also Topics Of A Political And Economic Nature?
A note to all my readers.
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I have received in recent times several comments from readers of the Real Estate Chronicle with the common denominator of asking why I at times cover matters not inherently related to the topic that readers would arguably believe ought to be discussed in a blog bearing this name – real estate.
I would suggest to all those readers who believe that sometimes I go ‘all over the board’ that the acquisition and sale of real estate capital assets involves but one of the goods contained in what Economists refer to as the ‘economic basket of goods and services’, that is the pool of goods, commodities and services around which the capital flow of money revolves.
Specifically as it relates to North America, furthermore, the exchange of real ownership titles for money is one of the primary and most important goods contained in the foresaid economic basket - certainly the most important one for the vast majority of us.
As the economies of both Canada and the United States are continuously affected, influenced and manipulated, for good of bad, by the judgment of our politicians – or the lack thereof, rather than concentrating on the typical approach used, abused and misused by other real estate bloggers of letting people know that it is, for example, very important that properties be as clean as possible during showings or that, by way of another example, it makes little sense to sell when the market is in recession, I’d much rather try to offer the overall picture in a more encompassing fashion.
In doing so, I must sometimes discuss topics not immediately pertinent to my profession, but always with the underlying understanding that these topics have an influence, albeit indirectly, on the decision-making process of real estate consumers and, thus, on the overall expansion or recession of the real estate markets here in North America, as the case may be.
The ‘real estate market’ per se is a theoretical visualization that covers the sum of all decisions taken by consumers at any given time and in any given city in North America as they relate to the exchange of real estate capital assets. But it must be borne in mind that these consumers reach their respective decisions of purchasing and selling real estate, as the case may be, by perusing a number of factors – many of them relating to the expectations of future general economic and political performance both on a national and international level.
Thus the extended coverage of this blog.
I would suggest to all those readers who believe that sometimes I go ‘all over the board’ that the acquisition and sale of real estate capital assets involves but one of the goods contained in what Economists refer to as the ‘economic basket of goods and services’, that is the pool of goods, commodities and services around which the capital flow of money revolves.
Specifically as it relates to North America, furthermore, the exchange of real ownership titles for money is one of the primary and most important goods contained in the foresaid economic basket - certainly the most important one for the vast majority of us.
As the economies of both Canada and the United States are continuously affected, influenced and manipulated, for good of bad, by the judgment of our politicians – or the lack thereof, rather than concentrating on the typical approach used, abused and misused by other real estate bloggers of letting people know that it is, for example, very important that properties be as clean as possible during showings or that, by way of another example, it makes little sense to sell when the market is in recession, I’d much rather try to offer the overall picture in a more encompassing fashion.
In doing so, I must sometimes discuss topics not immediately pertinent to my profession, but always with the underlying understanding that these topics have an influence, albeit indirectly, on the decision-making process of real estate consumers and, thus, on the overall expansion or recession of the real estate markets here in North America, as the case may be.
The ‘real estate market’ per se is a theoretical visualization that covers the sum of all decisions taken by consumers at any given time and in any given city in North America as they relate to the exchange of real estate capital assets. But it must be borne in mind that these consumers reach their respective decisions of purchasing and selling real estate, as the case may be, by perusing a number of factors – many of them relating to the expectations of future general economic and political performance both on a national and international level.
Thus the extended coverage of this blog.
Thank you for reading the Real Estate Chronicle.
Luigi Frascati
Real Estate Chronicle
Labels: ECONOMICS
