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Thread: Is it time to invest in US real estate market?

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[quote=GEARBOX,344554]Not sure if I completely agree with your specific cultural statement.  I have had the opprotunity to work in 18 countries over the past 3 decades and have seen significant consumer habits change over that period of time in many different countries.  It seems to have more to do with increased education, exposure, consumer wealth and enviroment and the evolution thereof.  The US has a very strong and large middle class and now with both spouses working career jobs, they also have increased disposable income.  So even with the current financial crisis, retail sales are actually up by 3.6% over last year.  Naturally, with the large middle income population, we are a country of consumers.  If you look back on Japan, Europe, and may other countries, spending habits have increased exponetially, but because of population size and vast middle class, they cannot compare with the US.  China is also on the upswing and in 10 or so years, China will become the largest consumer country in the world as the better educated younger generartion enters into the market and China production becomes more efficient and technologically superior.  So it's more of wanting a better life and being in a position to attain it.  It's more human behavior rather cultural.

The economic engine for any capitalistic country is credit, I undersatnd China's larger business' are government run and funded, but all of the other private business' need credit to do business.  The lower the interest rate, the more money can be borrowed and the larger volume of sales can be achieved.  When Japan fell into it's economic problems, the Japanese treasury lowered its form of the prime rate to ZERO to stimulate economic growth from 2001 to 2006.  And if you investigate the problems that initiated the current financial downturn, it was due to the sudden lack of credit which stopped industry dead in its tracks.  So I do think it makes a difference to any country including Japan and China.

The way the Federal Reserve Bank regulates money supply is to set a targeted fed funds rate.  Without going into technicalities, what this does is cause a "Money Multiplier" effect, so one printed dollar can be circulated into the market multiple times, the lower the rate, the more money is in the market, the higher the less.  Should the rate be set at ZERO, additional monies can be injected through the re-purchase of T-bills and asset backed securities.  Yes, uncontrolled printing of money can cause inflation, but we are currently in a recession and additional funds is expected to stimulate the economy, so when the economy begins to heat up, rates will rise and monies will be removed from the market place.  It's a balancing act and every country with its own currency, controls it in this manner.[/quote]

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