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No it is literally not making them poorer unless their income is housing speculation.
If you make $10k per month and have a $3k/month mortgage you consumption basket does not change if the value of the house is $1 or $10 million. Either way you have $7k/m for other consumption.
You are confusing the derivative of wealth with wealth itself.
There is a lot of human intuition for why these two quantities should be linked, but everyone else in this thread is assuming they are distinct quantities. That is why there is a disagreement.
Actually agree a lot. Wealth of nations and realistically for individuals is how much stuff you can buy. Things getting cheaper make you wealthier.
But we are past for the most part material wealth and people care a lot about status. Owning $10m home that’s 2k sq feet feels wealthier when everyone else you know lives in a 500 sq ft studio than having a 10k sq ft home but everyone has as a 10k sq home.
Status of course does matter. Girls will sleep with you because you are richer than others. And that makes people feel richer than if the can increase consumption 10x but others have more.
What I am teasing out by being autistic is status wealth versus material wealth. Most people if they had to choose between $50m in their background in today’s world versus being bottom quintile number in back account but they can afford anything they can dream of would choose the former.
I basically agree with a caveat -- I would take the future world if "anything they can dream of" includes health care so good that it allows you to live for thousands of years, the same way that -- in theory -- a car can be maintained indefinitely.
But anyway, as I suggested in another post, it seems that wealth might be inextricably linked to scarcity. For example, when it comes to food, the US in an age of abundance -- it's literally given away for free. So wealthy people eat steak in Michelin-starred restaurants while poor people eat MacDonald's hamburgers. I doubt that those poor people feel wealthy.
What's even more striking to me is that anyone in the United States can easily afford a drug store digital watch which is more accurate than a Rolex. But it's the same thing -- wealthy people wear fancy watches and non-wealthy people don't feel wealthy.
So yeah, I'm not optimistic about future abundance making everyone wealthy. In fact, I worry that we will end up with a kind of permanent aristocracy sort of like what existed in the Middle Ages. From what I understand, at that time, most of Europe's wealth was in the form of land which was passed down from generation to generation. From what I understand, there was a surplus of human labor so that it was very difficult to become wealthy by working. I worry that in a post-AGI world, something similar could happen.
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Poverty is not just a matter of monthly expenses, but of how much or how little leeway you have in case of an emergency - of how financially secure you are. If my house is worth $10 million, I know that worst comes to worst (say, if I get into a terrible accident and become permanently disabled), I could always sell the house, move someplace much smaller, and eke out a living for a good long while. This knowledge is a balm for the soul in moments of anxiety and I'm going to be very upset if you drastically shrink my safety net out from under me.
But in this scenario there are homeowners who are losers here - people with houses that are in the bottom 10% of price due to location and size. Their home "values" increased over the last decade, but they are unable to leverage that money towards liquid cash as easily.
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If the value of your house is literally one dollar and you have a 3k mortgage, you walk away from it and the bank can have your worthless house. This happened a lot in the 2008 crash. They call it being underwater in a mortgage. Obviously the value of your house is very important!
You're being a bit silly, aren't you? Do you use this logic for cars? Would you be okay me taking a sledgehammer to your vehicle's body work? Maybe I could go to your house and shit in the chimney. You wouldn't feel poorer, would you? You still have 7k a month to spend!
In this case you are actually losing real consumption. You are destroying my consumption good.
As far as being “underwater” on the mortgage your monthly payment doesn’t change. You can still have the same consumption basketball whether your house is worth $1 or $10 million. And of course you are wealthier if a new house costs $1. You could keep your current house and buy a vacation home because houses are cheap.
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That is not how wealth works.
If only we had infinite inflation. Then I can be a wealthy trillionaire.
Do you see the problem with your logic here?
The problem isn't with my logic, it's with your lack of math. If you make $10k per month and have a $3k mortgage, and inflation results in everything going up evenly by 10x, you will be making $100k per month... and still have a $3k mortgage, for a gain of $2700 for other consumption (in old dollars). Inflation straightforwardly helps those with dollar-denominated debt. But that's cash flow, not wealth.
Inflation also builds wealth for people with leveraged real assets (like mortgaged homeowners) because the price of the house increases and the mortgage balance doesn't. The resulting equity is real wealth that people can cash out or borrow against. This is how the "housing ladder" worked - in an era where the need for a downpayment was the binding constraint on how big a house you could buy, the easiest way to save a downpayment on a large house was the inflation-and-leverage-driven capital gain on a small house.
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How are you getting poorer if you make the same income but we invented some housing tech where housing has a lower asset value? Now you have an existing mortgage. Your job is very secure. You love your job. You love your community an never plan to leave.
Literally nothing changes in your consumption before or after we invented this new tech that causes massive asset value deflation in housing. It’s just that the new person buying a house pays less. You can actually not increase your consumption basket and buy a second home because they are much cheaper.
This happened with televisions. I am watching television right now on a 15 year old tv. It was expensive then. Now I could buy a 3x larger tv at 20% of the price. I still enjoy watching television on my old tv that is now cheap.
I am obviously wealthier today because we invented cheap tv technology. In my Milton Friedman permanent income hypothesis I likely thought I would spend $10k during the rest of my life on televisions. Now I expect to spend maybe $3k.
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I don't think I've ever had a job where my wages have actually increased with anything close to the level of inflation. I usually have to get a promotion (or job hop) to make that back.
It's a toy example, obviously. Nevertheless, median wages and median disposable (after tax) personal income have typically grown faster than inflation. Lately they've dropped to about par, but that's because we're in this almost-recession.
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