Tax Return Preparation

Honest economists do not consider home, as objects of investment (excluding cases where the house is also part of business, such as guest houses, or when the property is leased). In Russia, where rising real estate prices in many years, honest views of economists unlikely prizhivutsya (because it seems that they are contrary to reality), but very useful to know their views.

Kyosaki fans certainly know the difference between home and home-asset-liability. Roughly speaking, whether the house consumpts money or provide it. But honest economists, especially Bill Bonner, much more accurately describe the whole situation (this one of the few teams that just talking about bladder in the real estate market as early as 2004-2006, when everyone was optimistic and cheerful, as the congresses United Russia) .

House for honest economists no more than housing. Non-productive asset. In other words, house, unlike a machine, does not produce anything. It is pertinent to compare the house (or apartment) to the hotel. The house or apartment does not earn money. There are residents who spend money on housing (to maintain it in the right state). Hotel, in fact, the same house – but it serves another function. Therefore hotel generit money.

But this is only a superficial explanation. The second important component is that irrespective of whether you live in an apartment, rent or lease it to the (make cash) – Investment in real estate have zero effect on productivity. The new machine can increase the productivity of working with 10 parts per hour to 100. Computers and software can do so. But building a new factory or old, but with gold toilet bowls, has no effect on productivity.

I already wrote about optimization mistake. It is one of those chips, which often do not understand even smart people (my post almost no one understood). Therefore, people are hard to understand why the construction boom in housing may be evil. It would seem – what could be wrong with construction boom? More work. Higher salaries. It comstrustion robust financial infrastructure – realtors, mortgage workers, finishers, kitchen furniture. About construction boom always write about how much of the economic recovery.

But if you look at most hypertrophied construction boom recent past (USA), then realize the enormity situation. Prosrany trillions of dollars. Rather than be investing in the real economy (that gives the growth in labour productivity), this money were invested in granite tabletops, verandas, Jacuzzi, three toilets, wardrobe room, garage for three cars – in short, if you lived in the west, you understand me.

All these money buried. You can not have a positive from the construction boom in the form of fat salaries realtors and building materials stores growth, with no negative. Trap optimization in the classical form.

And, it must be noted that all this was done on credit. Again, take loans to productive assets and non-productive assets – are two big differences. One case in the loan to buy a new tractor or milking apparatus, which would allow time for a unit to produce more work and, consequently, faster pay with credit. Be another matter for the castle in England, which is constantly in need of repair, which does not bring money, but for which you pay taxes every year in real estate.

While real estate prices rose, the fact that residential property does not bring money (in itself) and does not produce anything, was not so important. But now the West has committed (perhaps) the same fatal mistake, and that the Soviet Union. We lost money for a non-productive asset (weapons) and they are on the other.
We in Russia (and other countries of the former USSR, excluding the Baltic States) would be avoided rigid forms of housing crisis – because we have a chronic housing shortage. However, the real estate crisis raises another interesting question.

In the USSR given free housing. Wait accounted for 20 years often have very small apartment, but then for them do not have to pay. In a sense, the Soviet model of housing was almost 100% reflects an honest economy. How could so much and built. And therefore had to wait so much and apartments were so small.

Although the market economy somehow magically (religious), the must do everything better, we have a terrible situation in the west now.

An enormous amount of unnecessary homes. More than 2 million homes in the U.S. now stand empty. Because of the mortgage crisis has started a wave of evictions. Hundreds of thousands of houses are now either rotting or stealing in poor neighbourhoods. Direct sabotage, roughly.

And this is just the beginning. We’ll see both an increase in people thrown away from home for non-payment, and the number of empty houses (apparent ineffectiveness). More people on the street and more empty houses. Moreover, these empty houses will be destroyed – many of them, in any case. This will occur until prices are not reduced to normal levels.

But the most interesting thing is that homes in the west are bought on mortgage loans for 20-30 years. People spend a lot of money very well all these years – this is almost as slavery. For crises Soviet model was prepared better. When the Customs-asses, then nobody none of the apartments are not evicted (if not take the ethnic conflict zone). The U.S. is simply impossible – for non-payment raised, and the house will go bad until sold to a new owner.

And the finishing touch – in the USSR was a lot of parasites. And productive forces working for themselves and for that guy, as they say. Few understood that the housing market in the U.S. is increasingly becoming a Soviet. While there, most transactions – mortgages, state agencies Fannie Mae and Freddie Mac provide 50% of all money on mortgages. After the crisis, that figure had risen to 90% (data for last month). De-facto state subsidizes the mortgage.

Now Fannie and Freddie is scribe. Most likely they will be nationalized. After that taxpayers pull the entire consignment of unproductive investments. This burden is simply enormous (and not a fact that the Americans will be able to drag him). But such a development would mean that they have embarked on a Soviet way, when we were little, because all pay such a way for free housing.

Therefore, economists soon could dramatically rethink the role of residential property in economic theory and to listen to what honest economists wrote years.

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