How Inflation Turns Housing into an Intergenerational Battleground

Inflationary monetary policy pits Americans against themselves, with those benefitting from rising prices wielding state power to steal from those who bear the brunt of inflation. Nowhere is this clearer than in the housing sector, where decades of inflation essentially require Americans to pay ever-rising prices to get a home.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

Housing is not special. That is, real estate and houses are not outside the laws of economics (i.e., scarcity, etc.). That said, each economic good necessarily offers something unique (otherwise it would be indistinguishable from other goods) and therefore comes with its own benefits and challenges. For example, the laws of economics apply to land and bananas, however, while land and bananas may both be valued in the estimation of human actors, they not only offer different utilities, there are differences in the markets for land and bananas because of the nature of the goods. Put another way, banana markets have to concern themselves with perishability when considering bringing bananas to consumers while sellers of real estate have different concerns. Land is an originary factor of production and real estate and housing are usually durable consumer goods.

In a previous article, I examined how interventions and inflation—by creating imposed inequality and caste conflict where some benefit at the expense of others—contribute to intergenerational resentment, especially between older generations and younger generations. This is evident in the cross-purposes and rivalry an inflationary economy creates between the old and young when it comes to real estate and housing. Under a free market and sound money economy, real estate and housing would not likely be an ideal investment good, however, under an inflationary economy, the constant devaluation of the currency encourages the exchange of currency units for durable goods (like real estate), which tend to appreciate as assets in an inflationary environment. This tends to benefit the older and wealthier—who generally are more likely to already hold more real estate and financial titles—at the expense of the younger and poorer, who exchange their labor for depreciating currency and who thus must work and save much more to acquire real estate.…