Re: Money and Land Price

Mark M. wrote:

Money represents both prior production value and non-production asset value.

No represents a medium of exchange. It has no value in of its self under a fiat system.

Land price is carried up by mortgage lenders to benefit mortgage lenders who reap basically risk-free returns on land loans which don't represent prior labor.

I don't think you have that right. The money lenders only increase price because they provide resource for those who value the land to be able to obtain it. It is the demand for the land that drives prices up not the mortgage companies. In fact, the fact interest on the loans must be paid keeps prices lower than they would be if people did not have to borrow to buy land. The cost of land is increased by the interest we have to pay on the loan which means we will not pay as much if we had the resources.

Compare a pipe dream where every one had the financial capital to buy any land they wanted to reality where the money often has to be borrowed. Prices would higher under the pipe dream becuase people would pay more not having interest to pay back.

Land loans may be lower risk than other assets but they are not risk free. The market for land has upturns and downturns like any other market. Swings in interest rates greatly affected the market. The bank still risk default on the loan during depressed conditions and have to sell the land at less than the principle.

Land price could not appreciate the way it has without funds entering the economy through mortgage lending.

Nor could a more even distribution of who owns the land exist.

There has not been a corresponding increase in goods and services to purchase, nor has there been a general inflation of goods and services prices.


You obviously aren't talking about reality here.

Although government has a role to play in monetizing rising asset values,

why?

money is ultimately created by mortgage lending.

As well as lending for cars, loans for building a factory, small business loans, etc.

Without the possibility of land price increase the central banks would need a new way to introduce money.

No there are plenty of other loans out there. Besides the central banks don't use loans for land to introduce money. They buy assets like gold and government bonds to increase the money supply. The money created ends up in banks and turns into more loans for everything from tractors to cars.

And without land price appreciation there would be nearly no demand for ever expanding credit for non-production assets which is the basis for fractional reserve banking.


Land is not the only thing loaned. Credit is given for everything from college expenses to new cars to new equipment for a plant.

Land appreciation is not need for loans either. If there is risk of deprecation the interest rates just rise to cover the risk.
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