| Did anyone out there ever coined the phrase | | | | workers earn income sufficient enough so that |
| ‘The New Era Of American Socialism' | | | | they can go to the bank, get a loan and go |
| yet? Well alright, that is unfair. After all | | | | shopping for real estate. Thus, it is going |
| Real Estate was sliding downwards even before | | | | to take equally long for demand to jump and |
| the Democrats took over the House and Senate, | | | | prices to increase as well. This is so |
| and Nancy Pelosi became the Speaker to be. | | | | because demand is in direct function of |
| However, it can be safely stated that the | | | | underlying personal income. An increase in |
| recent mid-term elections have not exactly | | | | personal income will encourage investment to |
| shed a ray of hope on the already faltering | | | | a higher degree, which, in turn, will spur |
| housing prices. So now, in light of the | | | | demand causing a proximate levitation of |
| entirely new and revolutionary political | | | | prices and subsequent economic expansion.A |
| landscape in Capitol Hill, what are mundane | | | | second but equally important flip side is how |
| folks like you and I supposed to do?Sure, the | | | | foreign investors and debt-holding nations |
| social agenda of the Democratic Party in | | | | are going to view this sudden shift to the |
| general, and the personal ‘socialist' | | | | left of the American behemoth, and whether |
| agenda of Congresswoman and Speaker of the | | | | emerging economies such as India and China |
| House Nancy Pelosi (D-Cal.) in particular | | | | will continue to finance America's spending |
| take somehow the breeze out of the investment | | | | habits. Confidence in the U.S. Treasury is |
| world, both as it relates to Real Estate and | | | | out of the question, but how convenient is it |
| the Stock Market. But when it comes to Real | | | | going to be for foreigners to continue |
| Estate, however, there are some positive | | | | investing in an America tilted definitely to |
| notes worth mentioning.Housing supply is | | | | the left?Many economists have long been |
| produced using land, labour, and various | | | | expecting America's widening current account |
| inputs such as electricity and building | | | | deficit to cause a financial meltdown in the |
| materials. The quantity of new supply is | | | | Dollar, and the main reason as to why this |
| determined by the cost of these inputs, the | | | | has not happened yet is that emerging |
| price of the existing stock of houses, and | | | | economies have been happy to finance the |
| the technology of production. Essentially, | | | | deficit. In 2005 India, China, South Korea |
| the production of real estate output depends | | | | and Japan (not an emerging economy but a very |
| on the accumulation of capital, which | | | | important debt-holder nonetheless) ran a |
| requires a constant supply of labour force | | | | combined current account surplus of about USD |
| that can conserve and add value to inputs and | | | | 2 trillions, a large chunk of which was |
| capital assets, thus creating a higher | | | | reinvested in American Treasury securities. |
| value.The rationale behind this is that | | | | It is all to be seen, however, whether the |
| labour adds value by satisfying demand | | | | Asian Tigers will continue to find the |
| through production, since when people work | | | | convenience in investing their foreign cash |
| and acquire income they tend to invest it, | | | | reserves in American securities or if instead |
| and the more people that work and acquire | | | | they are going to withdraw their support of |
| income the more people that tend to invest | | | | the American capitalistic system, especially |
| it. Therefore, there is a correlation between | | | | if such system will be perceived increasingly |
| capital and employment in real estate or, if | | | | as shifting much too much to the left.Buy |
| you will, between income and labour. An | | | | purchasing Dollar assets the Asian economies |
| increase in levels of consumption sets forth | | | | and Japan are subsidizing American consumers, |
| an increase in prices caused by a | | | | encouraging too little saving on our part and |
| corresponding increase in demand, in itself | | | | too much spending. But should they decide not |
| generated by a commensurate increase in the | | | | to buy anymore and in fact to cash in, the |
| income-employment factor.It follows, | | | | American economy is likely to suffer a real |
| therefore, that growth is derived by the | | | | hard landing. This is the reason why it is |
| equilibrium of capital and investment with | | | | important to monitor and understand how |
| labour and employment. And since, | | | | developments in the world economies affect |
| furthermore, production is in direct function | | | | the balance between domestic demand and |
| of consumer-spending which increases as | | | | supply. Exchange rate movements tell |
| unemployment falls, it follows that capital | | | | something about economic developments that |
| accumulation increases as employment rises | | | | may be having a direct impact on aggregate |
| and capital accumulation decreases as | | | | demand.By monitoring the fluctuations of the |
| employment falls.Therefore, seen from this | | | | Dollar in the forthcoming months it will be |
| perspective, the Democratic agenda of both | | | | possible, therefore, to anticipate whether |
| increasing minimum wages and put people at | | | | the Central Bank will ease or tighten |
| work through more direct governmental | | | | monetary policy by stimulating the economy |
| intervention than the Republicans otherwise | | | | through lower interest rates or by reducing |
| would like to see, finds in fact its | | | | the stimulus through higher interest rates. |
| long-term benefits in Real Estate. It is a | | | | And, therefore, it will be possible to |
| statement of fact that, in retrospective, | | | | predict the impact that anticipated shifts in |
| many workers in North America have missed out | | | | interest rates will have on demand for |
| and are missing out on the rewards of | | | | domestic real capital assets. Clearly, in the |
| globalization, so trumpeted about by both the | | | | eventuality that demand for U.S. Treasury |
| present Chairman of the Federal Reserve | | | | bonds will abate, the Federal Reserve will |
| System, Prof. Bernanke, as well as the former | | | | have no other choice under the present |
| Chairman, ‘Maestro' Alan Greenspan.Rich | | | | circumstances but to raise interest rates, so |
| countries have democratic governments, so | | | | as to continue to attract foreign capitals |
| continued support for the globalization | | | | and thus contributing to a further slowdown |
| process will depend in large part on how | | | | in the domestic housing markets.Should a |
| prosperous the average worker feels. Yet in | | | | forced rate increase actually take place in |
| the United States real wages have been flat | | | | 2007 to maintain the momentum with foreign |
| or even falling these past few years while, | | | | debt-holders, that would really fly in the |
| at the same time, capitalists and large | | | | face of all those analysts and commentators |
| corporations have never had it so good. In | | | | who have assumed that a vote for the |
| America specifically, profits as a share of | | | | Democrats would contribute to a rate |
| GDP are at an all-time high of about 15.5 | | | | settling.Certainly we are entering into a |
| percent, and Corporate America has increased | | | | period of financial uncertainty, all the more |
| its share of national income from seven | | | | remarked by what promises to be an economic - |
| percent in 2001 to thirteen percent this | | | | if not political - stalemate between a |
| year.In fact the primary culprit and cause of | | | | conservative White House and a liberal |
| the slowdown in Real Estate is the ratio | | | | Congress. And should this stalemate translate |
| between wages and real estate market values. | | | | into higher interest rates, the soft landing |
| This ratio is entirely skewed to values. | | | | that Chairman Bernanke was mentioning only |
| Whereas market values in metropolitan areas | | | | this past July may very well become in 2007 a |
| have appreciated an average of fifteen | | | | distant, wishful dream.Luigi FrascatiLuigi |
| percent per year through 2005 inclusive - or | | | | Frascati is a Real Estate Agent based in |
| a total of seventy-five percent since 2000 - | | | | Vancouver, British Columbia. He holds a |
| salaries have increased an average four | | | | Bachelor Degree in Economics and maintains a |
| percent per annum - or twenty percent total. | | | | weblog entitled the Real Estate Chronicle |
| There is, therefore, a fifty-five percent | | | | where you can find the full collection of his |
| gap, which accounts for the problem buyers | | | | articles on Real Estate Economics and |
| are facing today when it comes to go to the | | | | Finance. Luigi is associated with the Sutton |
| bank and qualifying for a loan. In this | | | | Group, the largest real estate organization |
| sense, therefore, a redistribution of income | | | | in Canada, and is based with Sutton-Centre |
| from capital to labour is now due.The flip | | | | Realty in Burnaby, BC.Luigi is very proud to |
| side of the Democratic agenda, however, is | | | | be an EzineArticles Platinum Expert Author. |
| that it is going to take a long time for | | | | Your rating at the footer of this Article is |
| government economic intervention to get a | | | | very much appreciated. Thank you. |
| foothold in the economy, in order to make | | | | |