Huge cash flow to the global economy … soaring real estate prices are a fortune for owners and a dilemma for buyers


Increasing real estate prices is the most applicable solution for dealing with the expected increase in the money supply (Getty Images)

It is expected that the increase in the money supply in central banks will reach 75% during the current year, and economies need urgent solutions to deal with this increase, which may continue at the same pace next year, due to the economic repercussions caused by the emerging COVID19.

In an article published in the French newspaper Les Echos, writer and economist Patrick Artos said that with declining inflation, the best solution to absorbing cash liquidity is to increase real estate prices.

The writer affirms that the OECD countries, which include 37 members, most of them on the European continent, are currently experiencing a tremendous rise in the money supply, especially after the liquidation of public debts by central banks, which has been exacerbated by the Coronavirus crisis.

It is expected that the increase in supply will reach 75% this year and will continue during the next year at the same pace, which will lead to an increase in bank reserves at central banks, and the accumulation of cash assets and bank deposits.

In order to create balance, the writer says that the demand for money should increase, either by increasing the prices of goods and services, or by increasing the prices of assets and real estate.

In order to create a balance as the money supply increases, prices must rise (Getty Images)

Increasing real estate prices

Currency is necessary to purchase goods and services (consumption and investment), and in this case, in order to create equilibrium as the money supply increases, prices should rise.

However, the obstacle to the first trend, namely the increase in commodity prices, is that the traditional link between the money supply and inflation has disappeared in the OECD countries 30 years ago, due to several factors, including the digitalization of the economy and the flexibility that has become characteristic of financial markets.

The second type of solution to increase the demand for funds is to stimulate the demand for bonds, stocks and real estate, while increasing their prices and reducing interest rates in the long term.

The writer notes that the possibility of lowering interest rates again appears to be a difficult possibility after the record decline that they have witnessed in the last period, and that the rise in stock prices does not seem to be one of the practical solutions expected to deal with the current crisis due to the bad situation of companies that are suffering under the weight of debt and low profits.

The increase in real estate prices remains the closest solution to implementation in the coming stage, which will mainly benefit property owners whose fortunes will double, and will make those aspiring to own a home face a real dilemma.

Source: Les Echos

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2 years ago

Having read this I believed it was extremely enlightening.
I appreciate you finding the time and effort to put this
information together. I once again find myself spending a lot of time both
reading and posting comments. But so what, it was still worth it!

2 years ago

I think prices will keep rising, but until when?

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