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