Recently I wrote in Money Morning explaining how the world had turned topsy-turvy. How - thanks to easy credit and money-creating banks - the idea of working for reward had been replaced with the idea that you can have your reward now, and then work later to pay it off.
At other times we've argued that housing is not a productive item, that it's simply a very expensive consumer item.
Sure, it may be used multiple times but it is still a consumer item. It's just that it's “consumed” over a very long time frame. The fact is, a house doesn't produce anything, all it does is provide a dwelling and shelter.
Proof of that is in the size of houses. As we've pointed out before, a 50-square house that provides a dwelling for one person isn't more productive than a 15-square house that provides a dwelling for one person.
In fact, it's less productive as it has drawn resources away from other areas of the economy.
But somehow, in the weird and whacky world of the Lifestyle channel, and the equally whacky world of what can only be called “Lifestyle Channel” Economists, housing has taken on the guise of a productive good.
It has morphed from a consumer item into an item that is now seen as the lifeblood of an economy. Housing has been changed from being considered as a dwelling or as shelter, to becoming the fountain of wealth.
If you believe the “Lifestyle Channel” economists, housing is the ultimate barometer of the health of any developed nation.
But what we ask is, how can this be true?
The fact is it can't be true and it isn't true. Let me explain in a way that should dispel the myth of productive housing once and for all.
Let's imagine a village of 10 people (a butcher, a baker, a shoemaker, a tailor, a barber, a builder, a doctor, a farmer, a cook, and a carpenter). Each of whom owns their own home. Each home is worth the same - $100.
All of these people earn an income from making and/or selling consumable items or from providing a service to other people.
Kris Sayce is editor of Money Morning. He began his financial career in the City of London as a broker specializing in small cap stocks listed on London’s Alternative Investment Market (AIM). At one of Australia’s leading wealth management firms, Kris was a fully accredited adviser in Shares, Options and Warrants, and Foreign Exchange. Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. In late 2006, he joined the Melbourne team of the leading CFD provider in Australia.