The Austrian Business Cycle Explains the Bust in Housing

The Middle East Journal reports:

Over time, under a 100% gold standard, a house would gradually depreciate in value. A house, after all, is nothing more than a durable consumer good – it is a capital good if it is a rental property. However, when living under a fiat-currency regime, perceptions can be radically altered. For example, not only is a house believed to be an appreciating asset, it is considered to be an investment. Additionally, under conditions of rapid money and credit growth (which, for a period of time, leads to artificially low interest rates), people will come to think of themselves as real estate entrepreneurs – wisely "investing" in a house, to live in, with the confidence that a big payday looms ahead upon sale of same house. Presently, with lending standards so low – to keep credit flowing – the housing boom has become an outright speculative bubble in many parts of the U.S. I would argue, in fact, that a hyperreality has emerged in which real estate is perceived to be a one-way street to wealth. The bust will come, inevitably, and millions of Americans will be wiped out financially – and only the Austrian School of economics provides the correct explanation as to why the housing boom contains the seeds of its own destruction.

A world without the Fed would means less problems.You will not be learning that in many economics classes.