DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - The rich are getting richer much, much faster.

**letmelogin** · 05-22-2012, 01:33 AM

So you've changed your mind about interest rates. Apparently you no longer believe the government has infinite flexibility in controlling the interest rate. They don't have infinite flexibility, but they are using what they do have to keep interest rates low, well below the inflation rate.

But unless you think the supply of houses is completely inelastic, which is an absurd assumption, the price increase is not enough to fully offset the subsidy. True, but it does hurt the overall value of money, and negates a substantial proportion of the subsidy. It makes money itself less valuable. Not having the subsidy in the first place, keeps the money supply down, and keeps the housing price down. Looking at education - it used to cost about 3 months wages, each year for my father. Now it costs about a full year's salary for each year. So even taking into account for inflation - the subsidy itself gets eroded away. A subsidy is valuable if few people get it and worthless if everyone does.

05-22-2012, 01:33 AM	#30
letmelogin Join Date Oct 2005 Posts 452 Senior Member	So you've changed your mind about interest rates. Apparently you no longer believe the government has infinite flexibility in controlling the interest rate. They don't have infinite flexibility, but they are using what they do have to keep interest rates low, well below the inflation rate. But unless you think the supply of houses is completely inelastic, which is an absurd assumption, the price increase is not enough to fully offset the subsidy. True, but it does hurt the overall value of money, and negates a substantial proportion of the subsidy. It makes money itself less valuable. Not having the subsidy in the first place, keeps the money supply down, and keeps the housing price down. Looking at education - it used to cost about 3 months wages, each year for my father. Now it costs about a full year's salary for each year. So even taking into account for inflation - the subsidy itself gets eroded away. A subsidy is valuable if few people get it and worthless if everyone does.
	Quote