Housing Bubble Is A Contagion that Destroys Wealth - DrJLT Economics 014

In this episode, I talk about why people love inflating housing bubbles, why it is exceptionally dangerous, and how governments could deal with it.

People love housing bubbles for:
A.1 Imaginary “wealth effect”
A.2 Beautiful economics numbers (GDP, tax, revenue) that politicians / officials get
A.3 Housing bubbles are easy to sustain a long time

It is dangerous because:
B.1 Deflating housing bubble destroys real wealth
B.2 Large contagion means high resistance
B.3 Tempting to keep it inflated, at the cost of destroying a country’s economy

To deal with it:
C.1 Don’t allow housing bubble to inflate, using credit access, mortgage rate, and rent control as levers
C.2 Deflate early: if RE price growth outpaces GDP ex-RE in consecutive quarters...

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